31 Mar 2014

Financial red tape cut for SMEs

10:02 am on 31 March 2014

From this week small and medium sized businesses (SMEs) will no longer have to produce general purpose financial statements.

The new Financial Reporting Act comes into force on Tuesday and is expected to reduce some of the costs faced by SMEs.

But it is also hoped it will help such businesses focus more on tangible matters like managing cash flows and improving profitability.

General manager of technical and quality assurance at New Zealand Institute of Chartered Accountants, John Hodge, says the new legislation will provide relief for almost 95 percent of businesses which must currently prepare general practice financial reports.

"For the last decade at least we've had international reporting standards, these are reporting standards that are complex and quite expensive for companies to use.

"They're really important for the international markets and so it's essential our big business continues to do it. But for small business it indicates that one size doesn't fit all."

He says the Inland Revenue will continue to require at least a minimal level of reporting and so at a small business level believes any cost savings will be small.

But he says the legislation removes the need for SMEs to prepare information that is not really needed and so chartered accountants can now focus on more value-adding advisory work, rather than unnecessary compliance work.