Insight Associates provide outsourced accounting and Finance Director services to ambitious and growing businesses. We work as your only resource or with existing staff to give you complete financial support including monthly management accounts, high level financial advice, robust controls and financial systems, funding and business planning, payroll & compliance, VAT returns and statutory compliance.

Successful business leaders have all the information they need to make good decisions…Do You?

Tuesday, April 27, 2010

Mind your own credit status

Our continuing advice to businesses is to ensure they thoroughly and continually credit check their customers (and major suppliers and partners for that matter!) and monitor their exposure to ensure they are managing their credit risk not just letting it happen. Often the failure of a major customer (or supplier) can be devastating for a business, not only with the resulting bad debt but the loss of future business.

One thing though most business owners often forget to consider is there businesses own credit rating. If their suppliers are doing their due diligence the consequences of a decision based on a poor rating could be disastrous!

It is important therefore to check your own rating regularly with the major agencies and always consider the impact of any information that is published or how your business conducts itself in its market. Filing poor accounts, getting a reputation as a bad payer, and general poor conduct will all serve to work against you in building a good credit status.

One of the constant grips when trying to find out about a potential customer is the lack of information available. The option to file abbreviated accounts at Companies House can be a doubled edged sword. Whilst the desire to be a little secretive about your businesses finances might be understandable, surely disclosure is the price you pay for limited liability? It can also help others better understand you and therefore by being better informed reach the right conclusions (hopefully good ones!).

In recent years the ability to disclose less and less on the public record has become quite marked. The ability to file abbreviated accounts and the huge increases in the audit threshold I do not believe is in the public interest. Less information is available and it is less valuable through potentially lower quality. To add further to this there are now rumblings from the EU that may exempt small firms (the vast majority of businesses!) from filing accounts at all! This really is a ridiculous step and cannot be anyone’s interest.

The reasoning out forward is that it will help business grow by reducing red tape! How absurd is that! All businesses must produce accounts, preferably monthly for internal purposes and annually if for no other reason than to account for Corporation Tax. Where is the saving? The same logic was put forward when abbreviated accounts were introduced, yet full accounts still have to be provided to shareholders and the tax man! The world is going mad.

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Insight Associates, Insight House, Riverside Business Park, Stoney Common Road, Stansted Mountfitchet, Essex, CM24 8PL, UK
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