Are Your Finances In Order?

March 5, 2016

Are Your Finances In Order?

Are Your Business Finances In Order?

We recently had a conversation with a client about buying a business. He wanted to buy an existing business and had found a seller. At first this sounded great: a buyer found a seller and vice versa. If you own a business and need to sell the business, this sounds like a perfect situation.

Unfortunately after probing, we found that the person wanting to sell did not have their financial statements in order. They did not have any evidence of how profitable the business had been. They gave vague numbers on sales and expenses, but that helps very little. A business has to have credible financial statements, preferably prepared by an Accountant. The owner could not produce this information and we walked.

Get Your Business Finances In Order
There are a great number of reasons to get your finances in order. This is only one example, but there are many examples of businesses missing out on opportunities because they didn’t have their books in order. Small business owners wear many hats and often times the accounting hat is neglected. The results can be horrific. Below is a list of a few items that we see small business owners face when they don’t’ have their books in order.

  • IRS Problems
    Taxes are based on the income your company generates. The IRS requires business owners to maintain proof of transactions and keep sound accounting records. If you are audited by the IRS and you can’t provide proof, you may find yourself in a trouble with the IRS. Keeping good records can help avoid some of these issues. Keep in mind there are specific IRS guidelines in how you account for expenses and income. If you keep records, but do not account properly, you still may have problem.
  • Loss of Contracts
    Some business owners have tried to acquire contracts (Government or Private) and have had to submit financial information about their business in order to get the contract. Due to the lack of proper accounting, they could not get the contract. Some potential clients need to feel comfortable your business can provide the product or service. There may be information you need to provide to assure the potential client you have the resources. If a business can’t provide the information, they may lose the contract.
  • State and Federal Penalties
    Your business may be required to pay various taxes, which are determined by your financial transactions. For example, payroll taxes, franchises taxes and sales taxes are required by federal and state governments. Improper accounting for these taxes could cost a business owner stiff penalties. Filing late can result in penalties as well. If you finally get your books in order, but it is after the deadline, your business could face stiff penalties.
  • Unable to Sell (Exit the Business)
    This is the example that we gave initially. There are various reasons a business owner may want to exit a business. Family issues, health concerns, a desire to do something different are a few examples. If you can’t provide a potential buyer good financial information, you may not be able to sell the business.

There are multiple reasons to keep your books in order. These are only a few. Don’t hesitate to ask for help, as part of being a successful business owner, is accounting properly for your business transactions.

If you would like assistance, please contact A.L.BEAN & Company at 512-244-4912 or email at admin@albeancompany.com.

ABOUT A.L.BEAN & COMPANY
A.L.BEAN & Company is a consulting, tax and accounting firm that specializes in serving small-to-medium sized businesses. We help businesses by offering the following primary services:
• Accounting Services
• Tax Services
• Business Plans
• Budgeting and Financial Planning
• Business Process Improvement

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