Be Taken Seriously

Financial Statements Mean Business.  

More than just entries of transactions, accurate financial records are critical to the health of your company.  Failure to maintain real-time financial statements in a business can be compared to driving your car on a one lane, winding road through the mountains, at night, without headlights, and no moon.  Though traveling, you’d not know where you are, where you’re going, and you would be at great peril continually.  In both events, you’re risking your life: Business or personal.  Don’t take the risk!

Good financial statements have these components: Balance Sheet, (the snapshot of all of your assets, liabilities, and net worth); Schedules, (the supporting itemization of each account on your Balance Sheet); Income Statement, aka Profit and Loss Statement, (summarizing your sales and expense activities); Journals, (recording the source of entry to each of your accounts); Cash Flow Statement, (reflecting cash in-flows, out-flows, and significantly, black holes where cash transforms from a productive to a wasting asset).  Cash black holes will be addressed in a future issue.

While well maintained financial statements are indispensable to the sound operation of your business, they will also be required by other parties: Banker, (when you seek a loan to expand or purchase real estate); Insurance Agent, (when you wish to buy disability or business overhead insurance); Tax Authorities, (should you be audited for Federal or State taxes); Prospective Outside Buyer, (should you receive outside interest); Prospective Employee Successor, when you, more likely, begin exploring succession planning discussions with your key employee; Probate Court, (if you don’t plan whatsoever).

We suggest hiring a staff accountant or outside vendor to service your accounting needs.  You will not have the time if you are working “on your business” rather than trying to do common administrative tasks yourself.  Outside services are quite efficient, with fees often ranging $500 - $2,000 a month.

Accurate financial statements indicate that you not only operate a business but also, “mean business” and are to be taken seriously.