While you might think the way owner-managers use accounts is obvious, it is easy to make unjustified assumptions. For example, a recent study carried out by a team from Kingston University on owner-managers produced some solid facts to provide a sound foundation for decisions by accountants, regulators, lenders and so on.
The research looked at small-incorporated businesses in a wide range of industries and the usefulness of statutory audited accounts to their managers.
It found that the directors of small companies see the main benefit of financial reporting as the confirmation and verification of financial results.
The main disadvantage of financial reporting is the cost, in monetary terms and in terms of time and inconvenience. The disclosure of information which may be useful to competitors does not feature as a perceived disadvantage.
Whether they choose to file full or abbreviated accounts, a significant proportion of directors do so on their accountant’s advice. The majority of owner-managers are uncertain about whether to adopt the FRSSE and intend to seek their accountant’s advice before deciding.
Accountants may be relieved to hear that the majority of directors perceive sufficient benefits in having their accounts audited to do so on a voluntary basis.
Only a small number of respondents offered opinions on current levels of disclosure in the statutory company accounts and the most common view was that more detailed financial information should be given in them.
The average time lag from year-end to receipt of the accounts was 17 weeks for statutory accounts and 15 weeks for any additional detailed accounts. But there is no indication that increased timeliness would improve the usefulness of the statutory accounts to directors.
The statutory financial statements are usually received as part of a package of annual information, and most directors receive advice or further analysis at the same time.
Finally, the most useful sources of information for managers are the periodic management accounts, cash-flow information, bank statements and budgets.
In the light of these findings accountants would be well advised to find out from their clients what they really value.
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