Audited accounts – and the procurement manager
Audited accounts have not been a requirement for small companies for several years in the UK, all part of reducing costs and red tape for business owners.
But often if you are pitching for a piece of work, the procurement process will ask to see audited accounts. What do you do?
Do I need audited accounts?
If yours is a small company (broadly turnover under £6.5m, fewer than 50 staff) then you do not need to have your company’s accounts audited unless more than 10% of the shareholders request it.
In most owner-managed businesses this will mean that the accounts do not need to be audited and in practice it is very rare to see a company being audited when it does not need to be.
Click here for a summary of the rules on audit exemptions.
Why do people ask for audited accounts?
We come across people asking for audited accounts as part of a procurement process or an official process such as a work permit application.
Of course, if you have audited accounts and can make them available, then that’s fine.
Often the request is borne of ignorance because many people simply do not realise that most companies do not need to be audited.
When you point out that quite legally and in common with thousands of other companies, your company does not need and so does not have audited accounts, the conversation can move on to how you can provide an alternative that satisfies the request.
This might simply be a copy of the accounts you have filed at Companies House.
Sometimes, perhaps more so in a procurement context, the request is trying also to transfer risk. The procurement manager can point to audited accounts if something goes wrong with the relationship and cover his backside.
Also, in a procurement context, asking for audited accounts can simply be a way of weeding out smaller companies.
What are the alternatives?
It is always worth talking to the person who is asking for audited accounts to find out why they want them and whether unavailability is a show-stopper.
Assuming you do not actually need audited accounts, three alternatives spring to mind:
- A copy of the accounts filed at Companies House, which may well be the abbreviated accounts with no sales or profit information.
- A copy of the full accounts including the profit & loss statement (but never the detailed profit & loss account from the back of the document). Bear in mind that this document may not be in the public domain and ensure that it is treated confidentially if you do make it available.
- Make your own Financial Summary. This might be a good solution because you have complete control over its contents and can include graphs, commentary and data for more than the two years that appear in your accounts.
If the request for audited accounts is a way to weed out smaller businesses then that is unfortunate but so be it.
Otherwise, there are usually alternative solutions and talking to the person making the request will help you to find the one that works.