Preparing for the year ahead with watertight financial reporting

Monday February 10, 2020

Preparing clear and timely financial reports is an important duty for business leaders

Each new year brings a different set of challenges and opportunities, and 2020 will be no different. So, if you’re a business owner, now’s the time to make plans and set goals to help ensure this year brings maximum growth for your business.

The start of a new year is the time company directors are turning their thoughts to financial reporting, so it’s important to get your house in order, making sure your financial reporting is timely and meets legal requirements.

Why is it so important to prepare financial statements?

To avoid any liability, company directors must ensure that they meet their legal reporting obligations. Filing accounts on time is a statutory requirement for all public and private limited companies in the UK, and its significance should never be underestimated. But what are the consequences of failing to file your company accounts on time?

Well one thing is indisputable – it’s very easy for stakeholders and customers to lose confidence in a company that doesn’t meet their accounts filing deadline. Not only will your business incur a financial penalty, filing accounts late can have serious consequences for the company’s ongoing trading activities and access to finance. It can mean a long-standing black mark against your company’s record for credit rating purposes or for future bank loans.

For a public company, the implications can be more far-reaching. Late accounts will almost certainly cause uncertainty amongst the firm’s shareholder base, which is likely to have a negative impact on the company’s share price. This may also have a wider reputational impact through unwelcome speculation and media attention, and it could even stop a potential investor from putting money into your company or deter a new or existing customer from handing you a new contract.

For many, a business filing accounts late is a red flag, which could suggest poor management, worse than expected financials or could indicate they have something to hide. But there are numerous reasons why company accounts are not filed on time which may not be grounds for undue concern. It may be something as simple as a shortfall in resources or time.

Businesses experiencing distress often struggle with a lack of resource, so being proactive and getting clarity around what’s needed to ensure you file your company accounts on time and accurately is crucial.

How can 2019’s lessons help businesses prepare this year?

2019 was a turbulent year for UK businesses and although the outcome of the General Election brought some initial stability to the UK economy, there is still uncertainty around the terms of Brexit and how this could affect investment and disrupt supply chains.

According to our research, almost a third (30 per cent) of the South East’s large retailers are showing signs of distress or are already in administration – just one example of a sector under pressure. Figures from the Centre of Retail Research have shown nearly 6,000 stores were closed by major retailers across the UK last year, and the struggles continued over the festive period, with retail analysts reporting the largest drop in footfall to the boxing day sales since 2010, with numbers down by 10.6 per cent.

2019 laid claim to the collapse of a number of high street retailers and restaurant chains, to name just a couple of problem-struck sectors. Against this backdrop, all business owners can take effective steps to prevent their company from getting into difficulties.

One such area is risk management – especially in these uncertain times. Accurately assessing risk and put appropriate contingency plans in place can help identify any first warning signs, or issues that can impact on a business, such as a large customer going under. Developing effective risk management plans could prevent against damage to a business’s reputation, which can in turn impact upon shareholder confidence and sales price.

For those businesses that are using the new year as a marker in the sand to embark on the next phase of their growth strategy, there is also the option to seek external investment to help drive ambitious plans. There are numerous routes open for businesses looking to grow, including: undertaking a merger or acquisition of a complementary business; seeking the backing of private equity or venture capital investors; securing asset finance or bank loans, or floating on the stock market. Funding options will vary depending on the maturity and growth strategy of each business, and such backing can give businesses the financial boost they need to achieve their goal, but an investor will need evidence that the business has achieved growth in the past and that performance has mirrored forecasts.

Consistent performance evidences a strong management team and this should be at the forefront of any management teams’ mind to ensure they secure a deal that sets them up for growth in 2020.

First published in the Essex Chronicle in January 2020


Related team

Glyn Mummery

Glyn Mummery

Glyn Mummery

  • Partner
  • Restructuring Advisory
  • Brentwood