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07 Mar 2011
SHIFTING MORE companies away form requiring an audit will damage their ability to gain credit, rather than save them money, warns the Institute of Credit Management.
The institute has reacted angrily to plans announced by Vince Cable to remove the need for small business to have audited annual accounts, concerned that a lack of financial data will hinder SMEs' ability to operate.
Further reading
"The government needs to get away from this idea that reducing red tape will always mean reducing costs to small businesses," said institute chief executive King.
"Businesses extend credit to one another based on the trust that comes from knowing that the company is financially viable, and one of the essential proof points is a set of audited accounts. Banks too look to lend on the basis of sound financial data, so limiting the amount of financial information available will do more harm than good."
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Briefings
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An opportunity and wake-up call
Everybody knows that the audited accounts are only part of the picture - a snapshot in time and often meaningless in relation to the current trading strength or weakness of a business. The accounting industry should look at the change as an opportunity to provide clients with a management information and advisory service rather than a threat to audit income. Whether the changes deliver to businesses what Cable intends or not, the industry needs to treat it as a wake-up call and start to provide small businesses with what they really want –help to run a better and more profitable enterprise.
Posted by: Martin Pollins, 08 Mar 2011 | 12:15