Why is it important to assess your accounts during COVID-19?

assess your accounts

Why is it important to assess your accounts during COVID-19?

It’s not just the past, but the future you have to consider.

Owners and directors of small and medium-sized businesses have come under threat by the COVID-19 pandemic, with many companies having to change the way their business may operate.

The Institute of Chartered Accountants (ICAS) and ICAEW (the Institute of Chartered Accountants in England and Wales) have collaborated to create a short guide that outlines the importance of assessing the viability of your business for your accounts.

ICAS and ICAEW outline some specific factors to consider, such as:

  • Revenue and debtors
  • Staff costs
  • Rent and rates
  • Payments to suppliers and utility providers
  • Taxes
  • Loan repayments
  • Bank covenants
  • Inability to fulfil contracts and potential penalties
  • Lack of funds
  • Business strategy in the short & medium term

However, as every business is different, the necessary actions to mitigate risks will be explicit to the individual.

Why?

ICAS and ICAEW focus on the importance of considering the prospects of your business when preparing last year’s accounts. Your accounts are a record of the previous year’s transactions and they provide a ‘snapshot of what the business owns and what it owes at the end of the year’.

Several items that are measured in the accounts are based on the assumption that the business will be trading for the foreseeable future. However, with Coronavirus potentially changing the businesses circumstances dramatically and some companies having to cease trading, then these factors may need to be considered.

The guide goes on to explain how businesses should reflect COVID-19 in cash flow forecasts, why it’s a directors responsibility to ascertain whether a company is a ‘going concern’ and that accounts must always give a ‘true and fair view’ of the financial position of the business.

Work with your accountant

With COVID-19 changing the world around us, it will also impact the way you interact with your accountant. They can provide in-depth planning and assistance, which is essential for the efficiency and cost control of your business during this increased level of uncertainty.

You can find the COVID-19 and going concern guide available on the ICAEW website.

Wilder Coe can support producing forecasts to help identify critical decisions for businesses, as well as providing accounts preparation and full audit & assurance services. If you wish to discuss your accounts and the options available for your business, then please contact us.

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Caryl King
Partner at Wilder Coe
Caryl is experienced in the fields of Audit and the preparation of financial statements, having worked with a variety of businesses across a large portfolio of clients.