Annual accounts – a milestone or a millstone?
Annual accounts are a key measure of performance both for your company and in the world beyond. Yet many companies get close to the deadline before they think about them.
Don’t wait for the deadline (nine months after the year-end for a private company) to file your annual accounts. There are several good reasons to file early – and to keep on doing so.
Annual accounts have an audience
A client called recently and said that a prospect had checked at Companies House and with a credit reference agency and the news was not very encouraging, partly because the available data was not very relevant – the latest accounts were more than a year old.
Worried about losing the sales opportunity, the client has asked us to draft the most recent annual accounts and has given us the data we need to get the job done.
It happens that the most recent financial year has better results than the year before so the new accounts filed will show another year of growth which should support the message conveyed by the numbers that our client is growing and has a sound financial base.
In this example we’re reacting to a market pressure, but what are the advantages of taking positive steps to file your accounts early?
Five reasons to file your annual accounts in good time
1. Customers, suppliers, prospects and banks can see up to date information
Your annual accounts are not only available at Companies House for all to see (for £1 from Companies House Direct) but also the credit reference agencies pick up your latest data and it feeds into their credit ratings and monitoring services. You might be surprised who is monitoring your company.
You may also want to send a copy of the annual accounts to your bank manager as well as key customers and suppliers. Can you leverage the new numbers to get a bigger lending facility or a better deal.
2. The accounts are easier (and probably cheaper) to prepare
Drafting the annual accounts while last year’s performance is still in everyone’s mind is easier to do than leaving it for several months and coming back to the task when the business has moved on.
The easier the job, the cheaper it should be. So, if it’s your accountant who is dragging their feet over your accounts, why not tell them to get a move on. Or move out!
3. When you know the numbers, you know the tax
Corporation tax is payable nine months after the year-end, but the amount payable is knowable way before then. So why not know it and then you can put the money aside.
And if you had a bad year and made a loss?
The sooner you submit your corporation tax return, the sooner you can claim any loss relief that might be available and get some tax back.
Remember, just because you have completed and signed your annual accounts, you don’t have to submit them at Companies House until the deadline (but see below).
4. Use your annual accounts as a marketing tool
Most companies that can file abbreviated accounts choose to do so. This is fine. In a competitive world, why give away more information than you need to?
But if you want to tell a bigger story, there is nothing to stop you filing the full accounts, which include the Profit & Loss account or filing abbreviated accounts but including an extra page or two of non-statutory notes where you talk about company performance, growth etc.
These days, many sets of accounts are filed online but some are still being filed manually. Increasingly the accounts sent in by post are looking tired and second-rate compared with those filed online.
Think about the image that users of your annual accounts are building up about your business. Do you want to be seen as up to date or not?
5. Be consistent
One of the reasons for not leaving it to the last-minute is that people can see your company on the Companies House website and wonder what you have got to hide by leaving it late. Even if the answer is nothing.
However, if you start to file accounts much earlier it pays to continue with this policy because three or four years down the line if you suddenly delay accounts filing, people might again ask whether there is something to worry about.
There is a wide range of benefits from preparing and filing your next set of annual accounts soon after your year-end. But once you start down this path, be sure to stay on it.
If you would like some help in preparing your accounts, please give us a call on 020 7384 6800.