Whilst it is not a legal requirement, most well run businesses prepare and operate under an annual business plan.
A business plan sets out the forecast trading performance of the business for the next 12 months but may, of course, extend for a longer period, albeit with an obligation to continually update.
There is no magic formula for a business plan but it would typically set out the basic assumptions being applied and then forecast the amount of cash (i.e “investment”) the business needs in order to grow (i.e a break down of the cost of operating the business including leases, staff, marketing, stock etc) and how that investment will be allocated (i.e. on a seasonal basis for instance) as well as the expected cash (or “turnover”) that the business will hopefully generate.
Do I need to prepare accounts?
This is a complex area and generally speaking legal or accounting input is required.
However, in general, the news is good if you are a small company as the Government has decided that given the cost of compliance as against the perceived benefit, some smaller and medium sized companies are exempted from the requirement to (i) have to prepare and lodge full audited statutory accounts with Companies House each year, and (ii) retain an auditor.
In most cases, small and medium-sized companies are entitled to submit abbreviated accounts to Companies House - which means they have to provide less information. A small company must meet at least two of the following conditions:
- annual turnover must be no more than £6.5 million
- balance sheet total must be no more than £3.26 million
- average number of employees must be no more than 50
A medium-sized company, must meet at least two of the following conditions:
- annual turnover must be no more than £25.9 million
- balance sheet total must be no more than £12.9 million
- average number of employees must be no more than 250
Further, small companies can also be relieved from the requirement under the Companies Act 2006 to have their accounts audited at all and thus do not need to appoint an auditor.
Even if a small company meets the criteria, it must still have its accounts audited if any of the following ask for an audit a member or members holding at least 10 per cent of the value of issued share capital or 10 per cent of any class of shares.
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