SMEs are undervaluing the financial worth that customer databases play in their companies and they must address this to protect their business before the implementation of GDPR on May 25th according to ACCA.
The value attributed to many SMEs does not account for intangible products like brands, databases and relationships. Stored customer data falls into this category and if these databases are not compliant with the new regulation they could become worthless to any potential investor and in many cases illegal for marketing purposes.
A survey by IAASA showed that in 2015/16, over €1,966m in ‘customer relationships’ were acquired by 10 Irish quoted companies, making them the single largest category of intangible assets bought that year.
If client agreement is not attained when using their data, or if a company does not illustrate how their lists are GDPR compliant, then old lists and customer information may be unusable post-May to a buyer – leaving the business and its assets less valuable.
Michelle Hourican, ACCA Ireland spokesperson on GDPR advises, 'Businesses need to protect their most valuable business assets and these include their customer lists. Accounting rules mean that customer relationships do not normally appear on the small company balance sheet and can be overlooked in relation to financial worth – but these relationships are assets and should be protected accordingly.'
Michelle continued, 'A buyer of a business is more interested in future profits and these profits will derive from customers. If they can’t contact the customers or if the customer lists are unusable due to lack of compliance with GDPR, the business has no value other than the assets on a break up basis.
'GDPR is an opportunity for small businesses to attach a value to these assets and begin protecting them properly. Failure to do this will result, not only in fines from the ICO (Information Commissioner’s Office) but also a loss in real worth to the company’s assets,' concluded Michelle.
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