Sometimes small mistakes can have devastating consequences, as WH Smith recently discovered.<\/p>\n
<\/p>\n
An accounting error caused the share value of the retailer to plunge by 42 per cent and serves as a costly reminder to other businesses to keep an eye on their financial records.<\/p>\n
Given the devastating impact of financial mismanagement, we want to highlight why seeking professional accounting services is a vital safeguard for your business.<\/p>\n
WH Smith misreported profits, and this resulted in a domino effect that caused its value to plummet.<\/p>\n
Due to calculations that had previously been made, financial markets had been expecting the retailer to report profits of \u00a3140 million, but the real profits were closer to \u00a3110 million.<\/p>\n
The origin of the \u00a330 million mistake seems to be an incorrect recording of income, with some having been logged too early.<\/p>\n
Income that should have been logged for the next financial year was incorrectly ascribed to the financial year for which the accounts were being compiled.<\/p>\n
This would have resulted in outside observers believing the business was doing better than expected, as that income would still be expected to appear in the next set of accounts.<\/p>\n
This betrayal of investor confidence is what caused the share price to fall dramatically.<\/p>\n
Disturbingly, this is not the first big business to make the same accounting error.<\/p>\n
In 2014, Tesco also incorrectly booked payments from suppliers, resulting in the company overstating profits by \u00a3326 million.<\/p>\n
As Tesco is a FTSE 100 company, and WH Smith used to be one, the fact that this problem afflicted them both shows how imperative it is that businesses learn from these examples.<\/p>\n
Seeking professional advice is always the best place to start when engaging with your accounts.<\/p>\n
Many smaller businesses attempt to file their own accounts without engaging with professional oversight, and this can be an incredibly perilous thing to do.<\/p>\n
There is also a suggestion that in both cases that a more thorough audit could have and should have identified the error before it became problematic.<\/p>\n
This is vitally important for any business that is below the threshold for mandatory audits, as it provides a searing example of how audits can prevent financial issues from escalating.<\/p>\n
Fundamentally, the story reveals a greater need for businesses to understand their accounts alongside those who compile them.<\/p>\n
As a business owner, you should come to learn when it is appropriate to record income and expenditure and to which financial year it must be ascribed.<\/p>\n
Our expert accountants work alongside business owners like yourself to increase financial literacy so that you can understand the financial mechanisms of your business.<\/p>\n
Only by understanding the way that money works can businesses more effectively plan for the future.<\/p>\n
No business is inherently safe from making mistakes, so it is always best to get professional support and guidance to make the most of your finances.<\/p>\n
Keep your business from making a costly mistake by speaking to our team today!<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" Sometimes small mistakes can have devastating consequences, as WH Smith recently discovered.<\/p>\n","protected":false},"author":2,"featured_media":6562,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[24,125],"tags":[],"_links":{"self":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/6559"}],"collection":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=6559"}],"version-history":[{"count":1,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/6559\/revisions"}],"predecessor-version":[{"id":6560,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/6559\/revisions\/6560"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/media\/6562"}],"wp:attachment":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=6559"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=6559"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=6559"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}