PracticeAccounting FirmsSince when did small mean worthless?

Since when did small mean worthless?

Latest change to accounting requirements could see many professionals wiped out argues David Grunberg

Since when did small mean worthless?

WHY IS THE ICAEW standing by as 40% of UK companies are put beyond reach of professional accountants?

If you go online right now you’ll find that 51,817 of your fellow Britons signed up to stop Harrods selling a rare coffee made from beans that had been partially digested by a wild Indonesian cat. They succeeded! Hooray for us; in this country we see a problem and we get involved. But hold on; when the Department for Business Innovation & Skills asked the nation if it was OK to let Britain’s key micro-entity sector downgrade the information in their statutory accounts, how many responses did they get? Hold on to your hat – just thirty three. Not so great, Britain.

Thirty three views on a proposal which could end up with accounts potentially not worth the paper they’re written on, a whole tranche of companies that no bank could sensibly lend to, a world of pain and mess when it comes to taxation and a tsunami of work, confusion and business uncertainty heading straight towards the already overburdened HMRC.

Indeed you can only believe that it is safe for these micro entities (1.2m of Britain’s 2.8m companies.) to have all their accounts and tax computations prepared without any involvement of a professional accountant, if you view the value of professional accountancy as negligible. On the other hand you could feel that small companies just don’t deliver the scale of fees you’re targeting. Either way, this isn’t something to which we should be indifferent.

So why do the accounting bodies just stand by and watch as the amateurs move in?

I think micro entities need us professional accountants – and we need them – and this is a matter that should have the nation’s attention. Sometimes a topic seems so dry and tedious that the broader public find it hard to get excited – the topic of vast subprime mortgage books was just such a one only a decade ago.

Sometimes when professionals complain about some alteration to their trade, the rest of the world just hears a self interested moan – and rolls its collective eyes. But this is a deadly serious matter for a sector which I believe is as emblematic of our economy as the Mittelstand is of Germany’s.

I love the micro-entity sector. And they are not all start ups, they are a fabulously diverse mix of new and established businesses – doctors, journalists, corner shops, foodies, designers, family businesses – you name it. Not only do we see the great rise of entrepreneurialism and the emergence of brand new areas in the economy and hundreds of thousands of new jobs, we see so much that is vibrant and energetic and optimistic about this country. And though you might argue that far bigger sums are involved when PLCs prepare their financial statements, the energy, the potential for growth and the impact of risk-mismanagement are just as great at least, when you’re talking about micro-entities.

This is the key point. The risks to a business at micro-entity scale of poor accountancy practice are far greater – they are far less resilient and far less capable of withstanding the problems that can arise. One part of my job that I get a huge kick out of is from helping micro-entities feel comfortable that these risks are managed. The value of what we do is simply enormous. Having a good, solid relationship with a professional accountant seems to me to be one of the most valuable things a micro entity can have.

But what about ‘red tape’? Surely this exercise is all about making things easier for small companies – and that must be a good thing? There cannot be a single small business owner that wants to be bound by more rules and regulations? Of course that’s true, but equally, which business proposition without a decent business plan would receive anything beyond laughter and rejection in the Dragon’s Den? You need a plan, you need proper financial planning, you need proper advice on taxation from someone who is professionally qualified to deliver that. And that is not because I am a qualified accountant – it is because these are each substantial areas of business risk. Anything else is unacceptable.

Next time you’re delighted by the quality of service or product you get from one of Britain’s wonderful smaller businesses, ask yourself whether that business will be best placed to grow with or without our professional support over the years. Can we walk on by? I really don’t see how we can.

David Grunberg, is co-founder and senior partner at Top 50+50 firm Gruberg & Co Ltd

Related Articles

Leader: Law firms should heed accountancy's listing mistakes

Accounting Firms Leader: Law firms should heed accountancy's listing mistakes

2y Kevin Reed, Writer
Investors slam FRC going concern proposals

Accounting Firms Investors slam FRC going concern proposals

3y Naomi Rainey, Writer
Baker Tilly blames “low-balling” for decline in profits

Accounting Firms Baker Tilly blames “low-balling” for decline in profits

4y Rachael Singh, Writer
Turnover falls at BDO

Accounting Firms Turnover falls at BDO

6y Rachael Singh, Writer
Grant Thornton 'strong' as revenues drop 0.7%

Accounting Firms Grant Thornton 'strong' as revenues drop 0.7%

6y Rose Orlik
Mazars calls for human rights reporting and assurance

Accounting Firms Mazars calls for human rights reporting and assurance

4y Richard Crump, Writer
Companies failing to disclose gender pay gap

Accounting Firms Companies failing to disclose gender pay gap

5y Richard Crump, Writer
Whistle-blowing Olympus CEO seeks new board

Accounting Firms Whistle-blowing Olympus CEO seeks new board

6y Rose Orlik