Government action to save small firms audit and accountancy fees will fundamentally change the face of the profession

Business Secretary Vince Cable announced on Friday that from 2012, no small firm will have to have independently audited accounts, thus saving 42,000 businesses £40 million per year.

Business Secretary Vince Cable said: "It is important that we free small firms up so they can grow and drive the economy. The changes I have announced today mean that small firms will be able to concentrate on growing and taking on more people instead of paperwork."

The UK's small company audit and account rules are stricter in the UK than is required by EU law, so action is being taken in three areas:

  • For very small businesses (with less than 10 employees), the Government will push for exemptions to remove the requirement to produce two sets of accounts;
  • For medium sized businesses, the Government will push for EU restrictions to be lifted so that they no longer need their accounts to be independently audited, and finally; 
  •  For subsidiaries, the Government will look at relaxing the audit and accounts rules:
  1. Dormant subsidiaries with parent company guarantees could be exempted from the requirement to prepare and publish annual accounts. This would benefit up to 23,000 dormant companies, including those set up to hold assets or intellectual property, or in preparation for transactions at a future date.
  2. Wholly owned non-financial subsidiaries with parent company guarantees could also be exempted from audit. This would benefit around 139,000 companies set up within groups, including for transactions, property, brand or asset management, as part of organisational structures and restructuring or for internal financial arrangements.
     

Martin Pollins, Managing Director of Bizezia said: "These developments will strike at the heart of the core business of accountancy firms up and down the country.

"The role of the accountant will have to change from being a producer of the statutory numbers to a true business adviser, able to help businesses understand and manage profit and loss, liquidity and tax. Good financial management will, of course, still be critical to business success."

Referring back to an announcement earlier in the week by the Forum of Private Business that the banks were using the paucity of financial information from small businesses as a reason not to lend, Martin went on to say:

"The Banks are likely to be more demanding of small and medium sized businesses in the absence of detailed or audited accountants. Amongst other things, they are likely to want accountant-verified management information from small businesses if the tax accounts are overly simplified.

"The writing has been on the wall for the Accounting industry for some time.  Accountants need to have the skills and tools to do the new job that will be asked of them by clients who want help to survive and prosper."

Bizezia's comprehensive range of web-based applications for the accountancy profession has been designed with these changes in mind.  For example, it provides more than 50 calculators and evaluators and the UK's largest online Business Library to attract website traffic and generate fee earning opportunities.  Bizezia also provides cutting edge industry news feeds to keep the websites of accountancy firms up to date and of interest to clients and prospects.

Martin concluded: "Perhaps the one thing that will make partners take notice more than any other is the affect these changes could have on the sales value of their firms.

"Historically, goodwill values on exit have been based on a number of factors including "gross recurring fees". The consultancy/advisory fees that accountants might seek to replace lost audit fees are nowhere near as certain as the audit fees.  This will inevitably lead to lower goodwill and sales values".
 
Source: BIS re audit relaxation, 4/3/2011

Ends This announcement was featured in EziaNews on 4 March

Notes:

  • Bizezia provides high quality, unique website marketing apps and practice management tools. Bizezia's products are designed to make business easier, encourage people to to visit your website and to keep them coming back.
     
  • Bizezia's EziaNews is an ideal example of how to keep your website current and informative. It's a daily round-up of business news that can be placed on to your website with no effort on your part and gives your clients, prospects and staff instant access to the latest business news.
     
  • Bizezia can trace its roots back to 1986, at a time when accountants were beginning to develop innovative marketing strategies for the first time. Then, with the launch of the Internet, Martin Pollins, founder of Bizezia, saw a new business opportunity to provide marketing and administrative products specifically for professionals serving SMEs, which would be available on their own websites with the aim of attracting potential clients and improving the level of service to existing clients.
     
  • Martin Pollins, chairman and founder of Bizezia, is a Chartered Accountant with wide experience in corporate finance and business management. He ran his own accountancy firm in Sussex and was the first accountancy firm in the UK to advertise on television. Martin went on to create and launch the CharterGroup Partnership (the UK's first accountancy network) and then LawGroup UK, one of the largest networks of lawyers in the country. He also served on the ICAEW Council for several years.
     
  • Operations director, Iman Rouane, is an honours journalism graduate, who has worked on a number of magazines, including Marie Claire and BBC Eve and was also a freelance newsreader for several radio stations across the south east. She joined Bizezia in 2005.