This is the third in a series of three blogs looking at the different types of essential financial information for a landscape gardening and design business owner.
In this blog we will explore statutory accounts and cover what they are, who they are for and their purpose. Most landscaping business owners will know ‘statutory accounts’ as year end accounts or company accounts. They are also known as financial statements.
So, what are statutory accounts? Statutory accounts are a set of financial reports prepared at the end of every financial year and are a legal requirement of business director/s. These accounts must meet the requirement of the reporting standards and a copy must be sent to the shareholders, Companies House and HMRC.
The size of a business will dictate the content of the statutory accounts. Normally, they contain a balance sheet which the director is legally required to sign, a profit and loss statement, and notes about the accounts. Depending on the size of the business, they may also need to include a director’s report and an auditor’s report.
A business is considered small if at least two of the following three conditions apply:
- A turnover of less than £10.2 million
- £5.1 million or less on the balance sheet
- 50 employees or less
Small businesses can send abridged statutory accounts to Companies House, meaning that they contain a simplified balance sheet. In this instance, there will be less information about the business available publicly.
These are very small businesses. The same exemptions that apply to small businesses also apply to micro-entities. The requirements of micro-entities are even less than that of a small business as a micro-entity has the choice of whether to send a profit and loss report. A business is considered micro-entity if at least two of the following three conditions apply:
- Turnover of £632,000 or less
- £316,000 or less on the balance sheet
- 10 employees or less as an average over the course of the year
Finally, statutory accounts must be filed no later than nine months after the business’s year end otherwise late filing penalties will be issued by Companies House. They must be prepared and submitted via third party software.
If a business is not currently trading, they still have an obligation to report to Companies House, but they can submit dormant accounts. Dormant accounts are the only accounts which can be submitted directly to the Companies House website.
This all sounds very daunting, doesn’t it?! Well, the good news is that preparing and filing statutory accounts doesn’t have to cause headaches and take up lots of time. By working with a professional bookkeeper, business owners can make the process less stressful and time-consuming and could eliminate making costly mistakes!