In an effort to relieve micro businesses across Europe of administrative burden in these tough times, the EC plans to get rid of the need for businesses under 1 million Euro turnover p.a. to file accounts at registries like Companies House.According to Internal Market commissioner Charlie McCreevy, "this move could save micro businesses as much as 1200 euros a year"! Wow!!
I'm not the only commentator that thinks that this is another case of lawmakers having a complete lack of peripheral vision. They need to look at the bigger picture.Annual accounts are a valuable tool to banks, credit insurers, credit agencies in order to ascertain the financial solidity of a business. If these no longer exist, how will financial lenders, suppliers and insurers assess the risk of microbusinesses? Won't credit dry up even more? In a very uncertain economic world, what the EC seems to be wanting to inject is more uncertainty. In order to get the banks lending to small businesses again, we need more information - not less.
If this becomes law across Europe, it is yet one more step on the road to getting rid of all statutory accounts at Companies house. If this carries on, we will find ourselves following the USA example, where only publicly quoted companies file statutory accounts at registries. That is why in the States, commercial credit reports rely heavily on trade payment data to produce credit scores. CRAs in Britain will have to follow suit and increase their collection of trade payment data from clients' sales ledgers just to fill the gap caused by the absence of financials at Companies registry. Does anyone really want to wave goodbye to statutory accounts?