Page 101 - DCOM409_CONTEMPORARY_ACCOUNTING

Contemporary Accounting

Notes The financial institutions mentioned above include banks, discount houses and factors. Banks
usually provide overdraft and other flexible fund management facilities to companies, provided
they have a strong financial performance backing. Discount houses provide invoice discounting
facilities but require a proper debtor management system running in the company that ensures
that debtors are not let loose or have a habit of defaulting. Factoring companies help in recovering
the amount due by debtors but ask for a service charge, which varies with each situation and
company status.

Suppliers

Suppliers of products and services to the company would like their investments—sales made on
credit terms—received with surety. A creditor would be reluctant to trade any further if s/he is
not guaranteed a timely payment against the issued invoice.

Employees

Many would consider employees the least affected of all when it comes to analyzing the company’s
accounts. The employees will be first to feel the change in circumstances as they may be promoted,
demoted or fired. They would be very much interested in finding out if the company exhibits
any points in their favor, mainly job security and facilities.

Government Bodies

As a rule, Companies House requires each company, private or public, to submit their financial
statements and accounts annually. The list of registered companies and their most recent accounts
are published in the Companies House official publication, which informs the public of their
performance for the year or period ended. In addition, the government has the responsibility to
ensure that the information is not delusive and the rights of the public are protected. Furthermore,
it bears the responsibility of prosecuting any offender of the law, including corporate and
consumer law. For example, a director of a PLC can be prosecuted for a criminal offence if the
accounts have not been delivered to the Companies House.

Competitors

It may seem odd, but existing competitors and new entrants have to consider the likelihood of
their success or failure in trying to conquer the market. Their primary interest lies in the business
ratios of efficiency/productivity and cash, debtor and credit management. For the industry, it
acts as a comparative for better performance of firms and companies of varying sizes. They also
help in establishing a trend of the industry that is normally a guide to new entrants to study,
analyze and perform.

Self Assessment

Fill in the blanks:
3. …………… fall into two categories, existing and potential.
4. A ………… would be reluctant to trade any further if s/he is not guaranteed a timely
payment against the issued invoice.

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