“Of the millions of registered companies in the UK more than 99% are not listed or quoted on tradable equity markets. These companies, which are mostly SMEs or start-ups, make a huge contribution to the economy and are vital to a competitive post Brexit Britain.” – Institute of Directors
Unlike many of their larger counterparts, SMEs in the UK are under no obligation to implement any type of formal corporate governance process beyond the requirements of the standard Companies Act 2006.
The business landscape is riddled with organisational failure and company distress due to neglect or solid corporate governance structures. Debate abounds as to whether a new corporate governance code may have been the golden ticket to save Carillion, while others report on a non-compliance to UK corporate governance code by Ocado’s board. The scandals surrounding Sports Direct and the collapse of BHS has contributed to the a public outcry driving for the reform of corporate governance for both public and private companies.
It’s quite a big thing. And it’s not agnostic of SMEs – in any means.
Corporate governance refers to the way a company is managed and controlled, and the systems and processes that support that. And in many founder-owned businesses, the lines between ownership and management blur into one as they become the same function, responsible for the same outcomes. But before putting the notion of corporate governance into a nice-to-have-but-not-for-me bucket, perhaps you should consider the benefits that corporate governance offers to SMEs.
Establishing solid internal controls that mitigate risk is probably the most important step a SME can take. Protecting yourself, as far as possible, against things like fraud, theft and other spiralling financial costs is critical to building sustainable businesses and long-term growth for all stakeholders involved.
According to a report published by the Association of Chartered Certified Accountants (“ACCA”), a “one-size-fits-all” approach for SMEs will simply not work. And, as a result, SMEs realise the importance of having a solid practice in situ, but have no idea how to get there, or how to find the right mentors to direct them.
ACCA also went on to highlight some of the benefits of SMEs opting in to corporate governance that underpins long-term growth, some of which included:
- less risk of conflict between family members or other owners who are actively managing the business and those who are not
- enhanced access to credit
- faster business growth
- greater resilience to fraud, theft or other financial costs
Our team has worked with businesses of all sizes – and have helped them establish and manage their own corporate governance structures. We work with your key stakeholders to facilitate effective communication, we ensure accurate reporting, we keep you compliant, but most of all, we are focussed on helping your business growth. So if you’re not aware that your business needs a corporate governance structure, or whether you’re worry about a lack of standardisation within your business operations; whether you’re unsure of just how much change would be required, or whether your concerns are cost-related – why not have a chat with us to establish the best solution for your business.