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Will Cable break under pressure?
Business Secretary Vince Cable survived last week’s reshuffle and SMEs must be asking themselves why. After all, what has he done to help them gain access to finance? SMEs remain starved of cash and, as a result, they’re unable to provide the growth the government, and our economy, so desperately needs.
Now, Cable has said new rules over auditing and reporting requirements will help more than 100,000 SMEs in the UK to save millions of pounds every year in accountancy costs. Following a consultation on Audit Exemptions and the Change of Accounting Framework, the government has said it will allow more businesses to make their own decisions over whether or not to undergo a statutory audit.
Nothing wrong with that I hear you say. Consider then the view of the Institute of Chartered Accountants in England and Wales (ICAEW) who say: “Credit is more likely to be available to well managed businesses that present their case well.” And guess what the foundation stone of a well managed business is? A good set of financials of course!
But don’t take my word for it. Listen instead to the Institute of Credit Management, where Chief Executive Phillip King says: “Credit is the fuel that drives the economic engine, but it requires more not less financial information to be disclosed. The Business Secretary may just have starved that engine of the vital fuel that it needs.”
So, whether SMEs seek bank finance or trade credit terms, the informed view is that filed accounts at Companies House are fundamental to proving business efficiency. Reducing the need to file accounts won’t reduce administration for SMEs. Lenders, and creditors, will (quite understandably) demand other forms of proof instead. Monthly management accounts and cash flow forecasts will surely feature in that requirement. That sounds like more administration, rather than less, to me.
Could we see another government U turn? Let’s hope so.
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