Why accountants need to keep looking over their clients’ shoulders

May 18th, 2018
18 May

OK, nobody likes a smart Alec. But there is more than a hint of “I told you so” about this blog entry. To make matters worse, I am not particularly happy about the fact that my forecasts have proved to be accurate because they were – and are – about the jitters being experienced by the UK economy.

On November 6th my blog entry was headlined “The figures that show we may be heading for a tough time”. That blog was about the quarter three 2017 insolvency statistics for England and Wales which went pretty unremarked by civic leaders and national commentators at the time. But I didn’t like the smell of them.

On the face of it they did not look too bad. But digging down to inspect the figures more closely – particularly in businesses which are prevalent in the North Midlands – I found underlying trends which I did not like the look of. At the same time, personal insolvencies among young people were on the rise. Young people spend money in local businesses so, again, I thought this was a worrying sign.

Now, the Insolvency Service has released the latest figures for Q1 2018 (here)– and I’m sorry to say “I told you so”. Those trends that I identified seven months ago are rising to the surface.

The spikes for Q1 2018 are due to bulk insolvencies (e.g. Carillion) but the graph tells its own story and the figures themselves are bleak – the general trend is upwards. The underlying number of company insolvencies rose to a four-year high (and 13% up on the previous quarter). At the same time there was a rise in underlying creditors’ voluntary liquidations (7.8% up on the previous quarter)

Drilling down into figures, identifying trends and making sense of the data is what IPD does for a living so this is not an unexpected development for us.

I will be writing more about these insolvency figures for England and Wales in a future blog but the fact that the clouds are a little darker over the UK economy should act as a flag to my accountancy colleagues out there who have businesses of all sizes under their wing, businesses that seem to be happily barreling along. But, directors and business owners are often too caught up in the day-to-day running of their companies to look over their shoulders at what might be creeping up behind them.

The best accountants are already looking over their clients’ shoulders for them and looking for any danger signals that may be out there.  We also provide specialist backup to accountants and their clients with our financial and options review services (here). Despite the recent sunny weather in Staffordshire, I think things are going to get a little bit gloomier on the business front.

And I would be very happy to be proved wrong this time.