audit

Audit… hear, hear

I never liked auditing… but I like audits

Way I see it there are only two reasons not to have an one… cost & hassle… but here’s a few thoughts on why having an audit can be a good thing

Credit Ratings…

… the agencies love audits… it means a pro has checked your systems to make sure the numbers produced are solid & that they class you as a Going Concern (likely to continue in business for the next year)… and that gets you a better credit rating…

Funders…

… bankers, shareholders et al get comfort from an audit… wouldn’t you, if you were them?

Buyers…

… you’d be happier buying a company whose numbers have been audited, right?

Hassle is good…

… the systems checks auditors do can help improve business processes, introduce best practice, and prevent fraud & cock-ups

 

The Government keeps lifting the limits and reducing the number of companies who MUST have an audit… but for companies looking to really scale-up that may not be doing them any favours…

I’m with the Norwegians… this ‘let’s exempt smaller companies’ has gone too far… they’re looking to introduce a Nordic audit for smaller businesses… but I won’t be holding my breath here in the UK…

Yet I’m not the only one to say hear hear to an Audit

Just over a quarter of respondents to an ICAEW survey of small businesses carried out in 2014 felt it would be better for the economy if businesses like theirs were required to have an audit. Nearly half of businesses with between 10 and 50 employees said they would have an audit even if this were not compulsory.

For financial years beginning 1st January 2016, a company is exempt from needing an audit if they meet 2 of the following :

Turnover over £10.2m

Total assets greater than £5.1m

More than 50 employees

That’ll stop another 10,000 companies needing an audit 🙁

banks data share

Banks to share your company data?

Later this year the big banks will start sharing the data they have on your company with 3 Credit Rating Agencies…

… who will then package it up with their existing data and pass it on to whoever’ll pay for it…

Obviously you have to agree… but equally obviously your agreement will be buried in your bank’s Ts & Cs… that you never read…

Good Thing?

Hell yeah…

The Credit Ratings of Owner Managed Businesses rarely reflect reality… and that’s because of the dearth of info out there for the agencies to use…

Agencies & the financial community aren’t firemen… they don’t rush to danger… they step back in the face of little or no information… and SME credit ratings suffer as a result…

So the more data they’ve got to work with the better… and Experian are pretty clear that commercial data from banks… “tend to be predominantly positive rather than negative”

A perfect market needs perfect information… so information asymmetry is a perfect place for some Government supply-side intervention…

Here’s their thinking

The control of credit information by existing providers is a barrier to entry in the market for lending to smaller businesses.

Opening up access to credit data held by the big banks will increase the reliability of credit scores, enabling alternative finance providers to make better-informed decisions about finance provision to smaller businesses.

But this is about much more than financing decisions…

Most of you aren’t looking for funding… but better Credit Scores do so much more than help raise money…

… they can help Owner Managed Businesses attract new Customers and get better terms from Suppliers too…

… so what’s not to like?

 

Sources

Government Announcement on the Credit Data Sharing

Right now they’re testing the security of the sharing system between the banks & the Credit Agencies… expect it to be live later this year

Banks that’ll be sharing the Information on their SME customers

Banks can’t share info on companies that are no longer their customers… so if you’re sensitive to this data-sharing… time to find a bank that’s not on the list and move?

Who they’ll be sharing Info with (the 3 Credit Agencies… scroll down)

Expect more agencies to apply to become involved when the Government re-open applications, probably later this year

The actual Regulations… for Geeks who like going to the actual source… like me 

Interesting to note this in the Regs

3.—(1) A designated bank must provide credit information that it holds about each customer of the bank which is a small or medium sized business to a designated credit reference agency

My underlining… hopefully this loose wording means it’ll not just apply to Limited Companies… but partnerships too…  the Credit Agencies really do struggle to rate them… because Partnerships don’t have to file accounts etc at Companies House ?

 

Bank Appeal

Bank turned you down?… Is Appealing Appealing?

If your company’s been turned down for funding by your bank is it worth appealing?

Yes !

Roughly a third of appeals succeed… and for some banks it’s higher…

There are a few reasons why appeals work… (e.g. you might supply more or better info on your company during the process)… but I suspect a fair bit of it is having someone else within the bank take a look at your application… someone at a higher pay grade and with greater authority & capacity to take a risk…

Who cares why… appealing works for a third of applicants

Simply follow your bank’s appeals process… or do it totally foc through Better Business Finance 

… but act quickly… there’s a 30 day limit from the day you’re turned down…

… and then within 30 days of your appeal you’ll know if you’re one of the one in three who get what they want…

… and if you’re not… the banks are now supposed to recommend you on to another funder who may well give you the money you need (something I’ll blog about soon)

So why do they turn down companies in the first place?

Bank Appealing reasons for refusal

The single biggest reason for refusal is a poor Credit Score…

… but frankly there’s no reason to let your Credit Score get in the way… if you ‘manage’ it in the month or so before you apply for funding you can get it up where you need it to be…

… it can be easily done (sign up in the sidebar for a free book on understanding UK Company Credit Ratings and boosting them)

… and nobody dies…

My 2p worth… Here’s Hoping the Successful Appeal Rate Falls ???

Professor Russell Griggs OBE  independently monitors and reports on the banking sectors’ appeals process…  and like him I’m hoping the % of successful appeals keeps falling as it has done for several years…

… because I’d take it as a sign that the banks’ appetite for lending to SMEs is improving… so fewer companies that should get funded don’t…

… and those SMEs that get refused & then appeal will increasingly only be those that don’t play the game when it comes to tidying up their Credit Score and fail to prove the affordability of the funding they’re seeking…

.. basic stuff to get right before you apply imo

Sources :

Better Business Finance 

 

SIC Code

Quick SIC Code stuff

SIC CodeHere’s a fun site to help you find the right SIC code… SIC code Wiki

And here’s a blog post explaining why you should check it out… because Standard Industry Classifications matter..

Is your SIC code making your company credit rating sick?

You get to pick the SIC code that best describes your company’s activities… in fact you can pick 4… the Credit Agencies use the first one to pigeon-hole you & compare you against other companies with the same code… so make sure the first one of the four works for you?

SIC Code

Is your SIC code making your company credit rating sick?

Company credit ratings are affected by lots of things… but one of the major ‘unknown’ factors is a company’s SIC code… and in my experience most company’s don’t know what their’s is.

SIC stands for Standard Industrial Classification… it’s used to classify your business by type of economic activity…

Some can be very very specific… e.g. if you’re into ‘scaffold erection’ there’s a special SIC code just for that… some can be very general e.g. ‘other business support services’

And what code you have really matters…  Because agencies use it to compare your performance with others in same SIC code as part of their rating process.

If you’ve got the wrong one, or don’t look good in the one you’ve got, it can really hurt your credit ratings.

So who decides what SIC code you should have?

Believe it or not…You pick your company’s code and put it on your Annual Return which gets filed at Companies House (you can put up to 4 codes on the return, but the agencies will use the first one as the primary code).

I find that most companies leave this to their accountants, but I encourage owners to take an interest in their SIC code… and change it if necessary…

Because wrong SIC code = wrong rating?

The list of SIC codes can be viewed at Companies House SIC list

It may be useful to identify several companies like yours (or even your direct competitors) and see what SIC codes they’re using.

You can see any company’s Annual Return and therefore their SIC code for £1 at Companies House

(this is a brief excerpt from the book ‘Credit Ratings for Companies… 101 things your mother should have told you’… available free if you sign up for my newsletter)

HAT TIP to Caroline White who runs Liverpool University’s Growth Catalyst programme… not only did she make sure my session at the Uni the other night went smoothly… she even walked this old Manc back through the dark depths of Liverpool to the train station… AND she gave me the great title for this post…  (‘How your SIC can make you sick!’)