“end of year” statuary accounts
October 27, 2023
8 reasons why statuary accounts impact the day-to-day running of your business
Most business owners and entrepreneurs are probably very familiar with the annual ‘End of Year’ statuary accounts process i.e.
- they are asked by their accountants for additional documentation and explanations on issues that happened 12 months ago
- there is a detailed review of the results for the previous financial year and a discussion on the ‘profits’ generated for the year
- the amount of Corporation that will need to be paid is agreed and a payment deadline is added to the diary
- the statutory accounts are submitted to Companies House and HMRC – by the relevant deadline!
Other than that, the business owner is not really interested in the statutory accounts and would probably rather avoid the whole process – if it was possible!
8 REASONS WHY THE STATUTORY ACCOUNTS IMPACT YOUR BUSINESS!
However, the preparation and submission of the ‘End of Year’ statutory accounts are MUCH more important to YOUR business – other than just fulfilling simple legal and tax requirements!
Many of the benefits of statuary accounts, which will impact are:
- business cashflow
- new business opportunities, and
- any ‘exit’ plans
often go ‘under the radar’ when business owners think about the end-of-year statutory accounts.
So what are statuary accounts?
- Credit rating – the submission of statutory accounts to Companies House impacts your credit rating (typically positively – unless the results themselves are poor). Also generally the sooner they are submitted each year the better the impact on your credit rating!
- Overdrafts & Loan Finance – where you are considering adding an overdraft facility to your ‘cash management/improvement’ processes, or even looking for loan finance of any type, the lender will request sight of the most recent accounts i.e. the less recent the accounts that are available, the more that will be required to satisfy their credit team to provide the funding!
- Suppliers – when starting a new relationship with a Supplier and looking for credit, in many cases they will request a copy of the most recent statutory accounts.
Additionally, some Suppliers will automatically carry out a review of your business’ credit report, in order to determine if, or how much, credit they can provide your business with!
- Tenders – when applying for and preparing a tender for a specific project or contract etc., a key part of the process will be providing recent statutory accounts (for one or more years) to meet the main criteria and/or as part of the competition with other applicants i.e. less recent statutory accounts compared to others are likely to impact your marks!
- Staff Bonuses and Incentives – for businesses with specific annual bonus structures in place for their employees – these will generally be based upon the results in the statutory accounts (subject to a few pre-agreed adjustments).
Therefore preparing the statutory accounts quickly and efficiently will be core to staff satisfaction and retention!
- Office leases / Finance Leases – as these both tend to include an element of ‘credit’ or the ‘ability to pay’, again the Landlord will request sight of the (most recent) statutory accounts for the business.
These will be used as they evaluate their willingness to take on your business as a client, along with your credit rating/credit report.
- Directors Personal mortgages – when obtaining personal mortgages most lenders will typically request sight of the most recent (or in some cases the last 3 years) statutory accounts for their business.
- Business ‘Exit’ or Sale of Business – a key part of ‘exiting’ or selling your business and benefiting financially from all those years of your hard work – at some point in the future – will be ensuring that the ‘due diligence’ process by the Purchaser is successful!
A key element of ‘due diligence’ is being able to review several years of statutory accounts, from the most recent back a number of years, to validate the information provided but also to understand the ‘journey’ and see your ‘track record’!
- So – If you thought that the ONLY value of your ‘End of Year’ statutory accounts was related to ‘having’ to file them at Companies House and pay tax to Companies House – then perhaps the above will ensure they are given a higher PRIORITY next year!