Adrian pearson is A VETERAN UK CHARTERED ACCOUNTANT AND the founder of ledgerscope - A SOFTWARE COMPANY MAking great tools for accountants in practice.

New deregulation to cost small accountancy firms up to £1 billion?

The EC this week agreed to exempt "very" small companies from accounting and financial reporting obligations. This ratified proposals aired in the spring of 2011 and created the new concept of the "micro-company".

In August 2011 the UK's Department for Business Innovation and Skills (BIS) produced its discussion paper "Simpler financial reporting for the smallest businesses". It is important to note that this paper widened the scope of the proposed deregulation to include non-incorporated "micro-businesses": incorporated businesses and their non-incorporated cousins together being referred to as "micro-entities".

Based on the prescribed turnover, balance sheet and employee number criteria (and the increase in the thresholds between the date of the BIS paper and the new EC directive) it seems that around 5 million UK businesses will quaify as micro-entities - that's almost all of them.

The numbers on pages 8 and 9 don't add-up for me, but the paper suggests savings in accounts production costs of between £60 and £235 per micro-entity per year. I suggest those are conservative numbers, but if we use, say, £200 as the typical saving that's £1 billion per year saved by small businesses - and therefore lost revenue to the small accountancy firms that service them.

Can this be correct? Have I (or the BIS) got the numbers wrong somewhere?

If not, this must be a wake-up call for the profession. Firms must make sure that they re-position themselves to offer alternative services to make sure they retain the £200 per client spend they will otherwise be losing.

It's bookkeeping Jim, but not as we know it

Professional accounts production the Xero way