Statutory accounts

Which companies should file statutory accounts?

In the UK, all public limited companies (Plc), private limited companies (Ltd), and limited liability partnerships (LLP) must file these accounts with Companies House following the last day of the financial year.

HMRC provides a list of companies which must prepare an audit each financial year:

• a public company

• a subsidiary company (unless it qualifies for an exemption)

• an authorised insurance company or carrying out insurance market activity

• involved in banking or an issuer of electronic money (e-money)

• a Markets in Financial Instruments Directive (MiFID) investment firm

• an Undertakings for Collective Investment in Transferable Securities (UCITS) management company

• a corporate body and its shares have been traded on a regulated market

• a funder of a master trust pensions scheme

• a special register body

• a pensions or labour relations body

Timeline for statutory accounts

Most companies submit annual accounts based on a 12-month reporting period. They may also choose to shorten the reporting period, or request an extension up to 18 months. But best practice is to establish a consistent annual routine and prepare year-end accounts for both internal reporting and as required by law.

The deadline for filing is nine months after the close of your company’s financial year.

One exemption: Newly founded companies will always file statutory accounts 12 months after the date of incorporation. For this first set of accounts, the expectation is the same for all new businesses.

Which documents are included?

While every country or jurisdiction will likely have its own requirements, the following financial statements are almost certainly included:

Company information note

This includes your company’s name, registration number, registered address, directors names, and the accountant or accounting practice who prepared these documents.

Balance sheet

The balance sheet sets out your assets and liabilities at the end of the company’s financial year. It also includes outstanding loans and the equity held by various stakeholders.

In a nutshell, it shows the company’s financial position at the end of the year.

Income statement

The income statement (also known as Profit & Loss) shows what the company has earned in the accounting period compared with what you lost or spent. It’s essentially a highly detailed bank statement for the business.

This can be highly detailed - showing different product lines and expense categories - or less granular. The most important line is at the bottom, showing your net profit (or loss) for the period.

Cashflow statement

The cashflow statement isn’t typically required for smaller companies, but will be necessary for most others.

This statement shows money coming in and out of the business on an actual cash basis. Unlike the profit and loss statement, it doesn’t include future payments - only what’s really flowed through your company accounts.

Directors’ report

This note helps to tell the story of the past 12 months, as evidenced by the numbers in the accounting documents. This is also an opportunity to show how wider economic conditions played a part in your performance. Based on financial data and broader context, you can project the company’s prospects for the future.

The report should list all directors’ names and be signed by at least one director, with a statement that it has been approved by the board.

Are there any exceptions or exemptions?

Depending on the size of your company, you may not need to file the full list of documents listed above, and can instead file abridged accounts. The criteria for small businesses is:

• Fewer than 50 employees; and

• Turnover of less than £10.2 million; and

• Total balance sheet of less than £5.1 million

If you meet these requirements, you most notably may not have to produce a directors’ report. You may also not need to disclose the company’s net profit or give a full breakdown of balance sheet items.

Crucially, all shareholders must explicitly consent to filing abridged accounts.

How does this relate to the company tax return?

These two filings are separate, and don’t necessarily include the same information or documents. Tax returns are filed with HM Revenue and Customs (HMRC), with the IRS in the United States, or with the local tax authority in any other jurisdiction.

Statutory accounts are filed with Companies House in the UK to ensure that business owners are meeting the financial reporting standards required.

Note: The UK government does allow certain private limited companies to file corporation tax returns and accounts through the same service, as long as you don’t also need an auditor’s report.

Read this guide to filing company tax returns with HMRC.

How do they compare with management accounts?

While both management accounts and their statutory cousins are important, there’s one clear difference between the two: the intended audience. Statutory accounts are prepared specifically for the authorities (and investors or shareholders), and are a legal requirement. While they certainly can be used to inform company strategy, this isn’t the chief goal.

Management accounts are entirely optional, and are for internal use only. For this reason, many small businesses and sole traders either don’t have the need or the resources to prepare them. For growing and larger businesses, they’re a crucial part of the decision-making process, and ensure that company strategy is informed by financial data. But they’re not required by law.

How to prepare statutory accounts efficiently

To make your accounting and financial reporting processes more efficient, there are a few simple but crucial considerations.

Embrace technology

Most businesses already know the value of cloud platforms like Xero and QuickBooks for bookkeeping. With the right data, these prepare the majority of your financial statements for you instantly.

But to get the best performance from these tools, your surrounding processes also need to be upgraded:

• Digitize invoices and receipts by default, rather than copying data from paper to the cloud for each transaction.

• Integrate platforms effectively. Do your bank statements feed directly into the accounting platform? What about expense claims and subscription payments? The less payment reconciliation you do by hand, the better.

• Consolidate processes where possible. Avoid the temptation to create a huge, sparse accounting and finance stack. Where possible, choose tools that improve multiple processes at once. This also makes the integration step above far simpler.

Choose automation

Despite great technical advances, many companies rely on slow, manual accounting processes. Which of course makes preparing financial records harder than it needs to be.

Consider automating the following:

• Invoice and receipt collection. Accountants don’t need to spend days chasing down missing documents just to close the books.

• Purchase approvals where managers need to sign off on a transaction. This doesn’t need to be an email chain, and finance teams shouldn’t need to search for proof.

• Account reconciliation. Your tools should instantly compare payments booked against the bank or card statement.

• Expense claims and reimbursements. Teams should be able to submit claims quickly and digitally, with no need for manual data entry by the finance team.

Communicate on impact

Your accounts rely heavily on data and collaboration with the entire company. But most team members don’t truly understand how they contribute.

Communicate fully the reasons why data quality matters, and what happens when certain information or documents are missing. Show the business impact that comes from delays and mistakes, and ensure the whole company buys into the goal of efficient reporting.