Irish SMEs undervaluing their business

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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About ACCA

ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants, offering business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management. 

ACCA supports its 200,000 members and 486,000 students in 180 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. ACCA works through a network of 101 offices and centres and more than 7,200 Approved Employers worldwide, who provide high standards of employee learning and development. Through its public interest remit, ACCA promotes appropriate regulation of accounting and conducts relevant research to ensure accountancy continues to grow in reputation and influence.

ACCA is currently introducing major innovations to its flagship qualification to ensure its members and future members continue to be the most valued, up to date and sought-after accountancy professionals globally. 

Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. 

"GDPR is an opportunity for small businesses to attach a value to (client lists)..and begin protecting them properly"

Michelle Hourican - ACCA Ireland