Going Concern

Going concern is a fundamental accounting assumption that a business will continue to operate for at least the next 12 months. When preparing accounts under this assumption, assets are valued based on their use in the ongoing business rather than their liquidation value. If an auditor qualifies accounts with a going concern doubt, it is a serious red flag for lenders.

Lenders pay close attention to going concern status when assessing credit applications. Auditor qualifications on the most recent accounts, material losses, significant net liabilities, or reliance on a single customer are all factors that may trigger going concern assessments. A clean audit with no going concern doubt significantly strengthens a credit application.

For businesses with recent losses or balance sheet challenges, proactively addressing the going concern narrative - with up-to-date management accounts, a clear explanation of what has changed, and evidence of forward order book - is important in any finance application.

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