Getting the most from abbreviated accounts
Published on: 28/10/2016
Within the UK many small companies have the option to submit abbreviated accounts to Companies House. This means smaller firms do not need to publicly disclose all of their financial accounts – namely their turnover and profit numbers. Abbreviated accounts, therefore, simply consist of the balance sheet from the accounts along with any notes.
To qualify as a small company, you will need to comply with two of the following:
- Your turnover equates to £6.5 million or less
- Your balance sheet totals £3.26 million or less
- Your company employs 50 people or less
In order to help our customers gain a better understanding of small companies, Plimsoll provides an “estimated turnover” for those who file limited information to Companies House. This allows our customers to glean invaluable insight into smaller businesses as well as using the estimated turnover to make informed decisions.
A quick guide into how we calculate estimated sales is outlined below:
HOW THEY ARE CALCULATED
Estimated sales: This is calculated by taking the companies with full information and calculating average ratios for the various assets and liabilities. These ratios are then worked backwards to arrive at an estimated sales figure. In testing this method we found that 80% of estimated sales were within 20% of the actual turnover.
Retained profit: In the cases where pre-tax is not available, we focus heavily on retained profit. This is the actual profit the company retains on the balance sheet after taking into account any dividends, tax or any post tax liabilities. Any company showing a loss here is seeing a decline in their shareholders funds in the year.
GETTING THE MOST FROM ESTIMATED ACCOUNTS
By adding these estimates it allows us to produce a full Plimsoll Analysis and enables the customer to gather a fuller view on the overall financial health of a company. This is particularly useful when trying to understand change at a main competitor or influences within the sector. When using the Analysis for acquisitions, the estimates help uncover companies that would otherwise be overlooked.
WHAT TO LOOK FOR WHEN ANALYSING SMALLER COMPANIES.
- Check the general trend in sales. Is the company getting bigger or smaller?
- Check the assets and liabilities. Are they increasing or declining?
- Check all the charts on the Plimsoll Model. Are the lines moving up or down?
- Check the retained profit figure. Is it changing each year?
- Is the company retaining enough profit to strengthen the balance sheet?
HOW WE CAN HELP
Within the Plimsoll Analysis, all companies who have an estimated turnover are highlighted in purple and are clearly marked. However If you’re a customer and would like to send in your full financial numbers to get an updated view on your company then please email Chris Glancey on firstname.lastname@example.org. All submissions will be confidential and the report can be altered to ensure no-one has access to your accounts. If you have any questions on how the Plimsoll Analysis can help you then please contact us on 01642 626400.