In light of businesses being affected by the current Covid-19 pandemic, directors of SMEs are still required to assess whether their business is a going concern when finalising their accounts.
The ICAEW has published some excellent, free guidance to help with this.
Two importants factors for directors assessing a going concern are 1) forecasting cashflow and 2) reflecting the effects of Covid-19. Both of these have been made complicated by the pandemic as there are a lot of 'unknowns' to factor in - especially as the economic landscape is changing almost daily.
The ICAEW guidance suggests making a list of all of your financial considerations in order to make a sensible judgement of your business cashflow for the next 12 months - and suggests a few obvious headings.
"They should consider issues specific to their sector or business (for example, any threats to the supply chain and the timing and manner in which the business emerges from lockdown) as well as the broader economic environment"
ICAEW, 19 May 2020.
Additionally, the guidance provides suggestions on how to work with auditors and accountants during the pandemic, including the need to provide evidence which shows that conclusions reached regarding going concern are reasonable.
It is just 5 pages long so it's well worth a read through so you know where you stand.
Download the guide here
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