Credit where it's due

EU rules that may exempt small firms from filing annual accounts have been condemned as ‘utterly absurd’ by a leading figure in the credit industry.

At a time when the supply of credit is needed more than ever, and yet harder than ever to get, the suggestion that exempting small companies from filing accounts will help businesses grow is perverse, according to Philip King, Chief Executive of the Institute of Credit Management (ICM). “It will have exactly the opposite effect,” says Mr King. “Less information means less credit will be extended, and as a consequence, growth will be impaired rather than encouraged.The accounting exemptions already extended to SMEs do nothing to help facilitate trade, and that these latest plans will make a difficult situation worse: The British Government are not obliged to adopt this proposal, and must not do so.” .

MEPs approved changes to EU rules to waive usual reporting requirements for so-called ‘micro entities’ (firms with less than 500,000 euros on their balance sheet, a net turnover of less than one million euros, and employing an average of 10 people or less). An estimated 75% of companies in the EU are designated as micro entities. They argued, successfully, that this would free up firms from red tape, allowing them to grow more quickly and be more competitive.

“Whereas it is laudable to want to help small businesses, this is not the way to do it,” Mr King insists. “If the last 12 months have taught us anything, it is that businesses must provide more information for credit to be extended, not less.”

Gareth Osborne, APA Director General and a former member of the Small Business Council, the panel of 23 advisors to Government on matters relevant to small business, strongly supports the call for less red tape for smaller firms but recognises that some reporting is necessary for operational purposes, like credit checking. Gareth added, “APA supports ICM’s claim that this is a bad move. Annual accounts are not prepared for Government; they are prepared for business owners to ensure the company is trading legitimately and achieving its ambitions or for proving to others it can support its financial responsibilities. Many businesses would take this change as a signal to avoid the realities of [financially] health checking their enterprise and thereby frustrating their own ability to attract the credit essential to trade.”

APA