Is this the dawning of the Age of Transparency?
Since the last recession in the early 90’s, European and subsequent UK company legislation has succeeded in whittling away at the completeness and quality of statutory financial information at Companies Registry. Small businesses, it was argued, would benefit from the removal of the administrative cost and burden of such “onerous” tasks as auditing their books each year.
Others, including the credit management profession, warned the government that these law changes may prove counter productive- in the absence of reliable data, credit lenders credit insurers etc may find it difficult to make decisions, and that could mean SMEs being starved of credit. Of course, this counter argument was not a vote winner, and fell on deaf government ears.
Now a deep recession is upon us, Credit insurers and banks are turning increasingly to up to date management accounts demanded from clients in order to make credit decisions, saying at the same time that Companies House information is insufficient for their needs. And they’re not budging from this position.
To get Britain out of the economic downturn, it looks like we’re going to have to enter a new era of financial transparency. According to the ABI and other bodies, SMEs will just have to get used to these requests for monthly financials that hitherto have been kept very much “in house” and bring them out into the open. If their credit lines from suppliers are improved, why not? .
I sincerely hope in future, the government, whatever its political colour, will look at the broader picture when considering any steps to degrade Companies House data still further