ACCOUNTS
Q.I have just started a new business and want to adopt the best practices for filing my accounts. Do you have any advice?
A.Each private company has to file its accounts at Companies House, the official government register of UK private companies. The deadline is nine months after the company’s financial year-end, so if that is 31 December, you have to get your accounts to Companies House no later than 31 September the following year. The key thing is to get the basics right, says Sarah Shillingford, a partner in Deloitte’s entrepreneurial business group. “The first thing to do is to make sure that you file them on time. When you are busy running a business, nine months can pass by very quickly. Penalties for late submission are modest, but overall, if you have a history of filing accounts late, it won’t look good.” A bad track record could come back to haunt you if you decide you want to list on a stock exchange or if you want to attract investors. It’s also worth noting that there can be an element of choice to the GAAP accounting rules, for example the rule for when you book revenues and the timing of booking revenues. Shillington’s advice is clear: stick to the crowd. “Make sure you benchmark your accounts with your peers or other companies in your sector. You need to make sure that you are aligned with the best practice in order to give the best impression.”
Q.I would eventually like to list, how does the accounting process differ for listed companies?
A.All private companies have to use UK Generally Accepted Accounting Principles (GAAP) accounting rules, says Shillingford. However, all companies listed on a publicly traded exchange have to use the International Financial Reporting Standards (IRFS) when compiling their accounts. So any company that is listing should be familiar with IFRS rules. If you are planning to list then you will need at least two years of past accounts that comply with IFRS accounting rules. It is important to prepare for this, says Shillingford: “You need to know what your accounts will look like under IFRS rules and if there will be any differences between them and your GAAP accounts.” Getting your financial house in order is imperative before a listing. It’s not just accounts that you need to consider when you are planning a listing; you also need to provide extra financial and non-financial information for your company prospectus. “You need robust systems to make sure you can get that information, so you’ll need to start planning at least a year in advance. It will be a painful process if you do it three months before.”
Q.If I want to attract investors, what information should I reveal to Companies House?
A.The only information required by Companies House is fairly basic financial information. You can include more detail, however Shillingford says you must be aware that once the information is made public you can’t take it private again. “If you want to attract investors, it can be wiser to produce a separate document – coupled with a confidentiality clause – that includes information about your future strategy or revenue projections.” Make sure you comply with Companies House rules, but, equally, don’t leave yourself exposed.