Institute of Credit Management slams proposal to save SME red tape

A leading business organisation has slammed the latest news from the Government that hopes to save small businesses around £40 million per year by doing away with the need to produce audited accounts.

According to some, far from helping small businesses, the move is more likely to damage a company’s access to credit therefore restricting growth and in fact adding to their costs.

One counter argument from some credit experts is that the new proposals will benefit some firms as many will have an improved current trading position compared to a poor cumulative performance over their last accounting period and that many bank lending teams rely on software which may not be adaptive enough or reactive enough to review current (unaudited) data. With accounting reference dates and the actual submission dates for audited accounts being in some cases, several months apart, there is indeed some disparity and room for improvement.

Philip King, Chief Executive of the Institute of Credit Management (ICM) was quoted as saying in response to the announcement:

“The Government needs to get away from this idea that reducing red tape will always mean reducing costs to small businesses,” he says. “Businesses extend credit to one another based on the trust that comes from knowing that the company is financially viable, and one of the essential proof points is a set of audited accounts.”

Mr King also believes the new proposals will lead to increases in fraud yet a press release from the Department of Business, Innovation and Skills (BIS), was supportive of the measures nonetheless: “It’s important that we free small firms up so they can grow and drive the economy. The changes mean that small firms will be able to concentrate on growing and taking on more people instead of paperwork.”

The Government said that it was looking to take action in certain areas where audit and account rules were stricter in the UK than required by EU law.

Credit scores do greatly affect traditional forms of bank borrowing, and in turn the rates offered and security required. Invoice Finance is more concerned with the current trading position and were many businesses had a dip last year, and many business start-ups haven’t yet got audited accounts available, invoice finance and other asset based finance suppliers look more on the debtors book and the level of outstanding customer invoices.

For more info on how Factoring Finance can help you fund you business via your sales invoices simply get in touch and we can discuss the best facility to help you manage your cash flow and avoid late payment problems, or use the facility to grow.

Whatever the need, Factoring Finance has a UK wide, independent finance  broker network able to source the best invoice discounting and invoice factoring deals from numerous small business finance providers.

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