Keep Your Accounting in Order

As we’ve often said, no one gets into business because he/she loves bookkeeping and accounting. But no one buys or sells a business (or gets financing along the way) without solid financial statements. So, what are some ways to keep ourselves on the straight and narrow?

Clean Books and Complete Tax Records

Broken record alert: have clean books. Every banker and buyer will want to look at a company’s books that are at least reasonably well organized (shoeboxes with receipts do not qualify) and have few to no errors (small mistakes, particularly those which do not dramatically affect valuation, are understandable and acceptable in small businesses). The best time to have clean books is today. The next best time is tomorrow. Get started. We can help you if you need.

The same is true of your taxes. By properly filing you not only offer a corroborating narrative to your books, but you also establish trust with potential bankers and buyers: this business plays by the rules.

Accurate Financial Statements

Clean books produce accurate financial statements. While such statements have great value to bankers and buyers, their primary value is to the people running the business. The balance sheet, income statement, and statement of cash flows. These documents tell the story of a business, past, present, and future. People who operate their businesses without these documents are either operating a sweet legacy business that probably still has a fax machine (can’t argue with success) or are clueless and heading for disaster.

Internal Controls

How many stories have you heard about a company getting phished and accidentally paying a bill to someone masquerading as a trusted vendor? If you haven’t heard any yet, take a look online and educate yourself, then get with your IT people to make sure you have controls in place to make sure that physical and digital access is properly distributed and monitored. While you’re having that conversation with IT, make sure that you have regular data backups for your accounting data, if not all of your data.

Bankers and buyers love businesses that have taken the time to minimize fraud.

Financial Projections

If you have solid financial statements, you’re going to be able to make better projections into the future. While you can’t account for changing conditions in the world and the market (no one can), the projections you make from solid financial statements tell a story that can lead to a bank offering you financing, or a buyer seeing what the payback ratio looks like.

A Manual

An accounting manual will probably be at the bottom of your list of projects to work on for your business, but it can only improve the value and curb appeal of your business. This manual should include your business’s:

• Accounting policies and procedures
• Cash flow management
• Budgeting
• Software
• Strategic planning
• Disclosures

Formal policies also lessen the possibility of fraud, something we already mentioned above.

Do you feel like you could use some help getting your accounts in order? We have a number of people who can help you if you need. Give us a call.