Accounting for Small Businesses

The Companies Act defines a small business as one with no more than 50 employees, annual turnover of no more than £6.5million and a balance sheet total of no higher than £3.26 million.

Accordingly, a small business is not legally required to have an audit as the annual turnover threshold for this is £10.2 million. However, some small businesses may choose to have an audit as it can help when applying for finance or seeking to attract investors.

Small businesses however, generally have fewer finance specialists on the payroll and therefore, don’t benefit from expert knowledge and up-to-the minute insight into changing legislation and accounting best practice. This is especially true of owner-managed firms as the focus of senior management will be on the business’s core activity.

A company is defined as medium size by the Companies Act if its turnover is higher than £6.5 million but no more than £36 million, its balance sheet total is not more than £18 million and has no more than 250 employees.

For this reason, many SMEs will require an annual audit and in many cases have more layers of technical complexity to their finances and accounting requirements.



Accounting for Medium Size Businesses

A company is defined as medium size by the Companies Act if its turnover is higher than £6.5 million but no more than £36 million, its balance sheet total is not more than £18 million and has no more than 250 employees.

For this reason, many SMEs will require an annual audit and in many cases have more layers of technical complexity to their finances and accounting requirements.

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