A L Bean & Company

October 5, 2018

Are Your Finances In Order?

Filed under: Accounting,General,Tax — artlbean @ 1:20 am

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.

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

September 9, 2014

Growth Opportunities

Filed under: General — artlbean @ 6:12 am

Whether you are an executive at a stock company or privately held organization, many challenges of creating business value through strategic partnerships are prevalent.

Determining the best avenue for business growth is a constant challenge for many executives and board members. It is most challenging in mature and declining industries, but can be a daunting task in any environment. The questions of risk versus reward, as well as maximizing shareholder value often challenge the most proficient executives.

To assure that solid growth opportunities exist, developing relationships with potential strategic partners is important. It is not always enough to come up with a great idea. The best ideas often require partners that are willing to assist and can see the value in it for them. Mergers and Acquisitions (M&A) can be a great avenue for significant business growth in the U.S. This article explores the challenges and benefits of mergers and acquisitions, and how M&A can grow your company.

Some of the challenges to M&A and strategic alliances are:

  • Finding the right partners
  • Structuring the deal
  • Selling the idea to shareholders and stakeholders
  • Assuring value creation

Finding the right partners and Satisfying all Parties

Cultivating lasting relationships with potential business partners is a big challenge to a successful merger or acquisition. Many potential business marriages end before they really get started. This can be due to the lack of cultivating a meaningful relationship, and making sure all parties are happy with the agreed result of the merger. Skepticism is human nature and the parties involved reevaluate closely whether they are making the right decision. Sometimes skepticism leads to the deal being called off. The parties that had to work with each other post-merger were nervous that they weren’t going to get the treatment that had been promised. Let’s face it; many things can be put into writing, but not all. When a new management team is formed, not all parties get what they were promised.

To get a copy of this entire article, please email us at admin@albeancompany.com. If you would like assistance, please contact A.L.BEAN & Company at 512-244-4912 or email us at admin@albeancompany.com.

September 7, 2011

Hurricane Season – Lessons for Businesses

Filed under: Consulting,General,News
— artlbean @ 8:12 am

Businesses are constantly faced with the challenges of simply meeting monthly business goals and ensuring there is sufficient cash on hand. Planning for your success can be fun but also comes with challenges. How do you make credible financial forecasts and reasonable new customer projections? That being said, what about planning for the possibility that some low probability event will occur that totally disrupts the business? I would bet that many businesses that were impacted by Hurricane Irene had planned for a lot of things, but didn’t plan for the likely event that they could not operate for days or even weeks. Disasters like Hurricanes and other events often kill businesses.

Business Continuity Planning
We have seen businesses that have lost critical data, equipment, inventory and facilities due to disasters such as tornadoes, fires, power losses and others. In most cases, planning for businesses should also involve disaster recovery planning or business continuity planning. Though these terms are sometimes used interchangeably; the term Disaster recovery planning involves recovering your business or IT systems quickly after a disaster occurs. Business continuity planning involves identifying your organization’s exposure to internal and external threats and planning how you will operate if one or more of these threats become reality.

Insurance can help make businesses whole after a disaster, but it may not solve the real issue. The real issue is that customers did not receive their products or services. If an insurance company writes you a check for the loss, what about the fact that customers may have found an alternative, and may no longer see your business as the best solution? Yes, insurance should be bought, but plans should be put in place to ensure the business is still viable after a disaster.

This is where a business continuity plan (BCP) comes into play. A business continuity plan addresses how the business will operate if critical resources have been lost; such as IT systems, facilities, power and others. Businesses should be able to address these issues to ensure survival regardless of the situation.

A recent story regarding how Waffle House prepares for these events discusses this issue. Restaurants are often open quickly after a disaster. Waffle House has plans and resources to address these issues, which allows the stores to often be the only restaurant open after a Hurricane or other storm occurs. The company decided to beef up its crisis-management processes after Hurricane Katrina. Senior executives developed a manual for opening after a disaster, brought in portable generators, bought a mobile command center and gave employees key fobs with emergency contacts. A BCP addresses these items and more. Subsequent articles addressing BCP will be posted shortly. If you have questions regarding BCP for your business, please contact A. L. BEAN & Company.

June 11, 2011

Managing Small Business Cost Structure

Filed under: Accounting,Consulting,General,News,Tax — Tags:
A. L. Bean
, , — artlbean @ 9:48 am

Business owners have to wear several hats, and all are important to running a successful enterprise. The Finance hat should be given a considerable amount of time, considering that cash flow kills businesses more than any other reason. For many small business owners, managing costs is arguably at the very top of the priority list. There are two types of costs to consider and we discuss them in this article.

When considering managing costs, there are two primary types of costs that should be given attention: Fixed costs and variable costs.

Variable Costs
Variable costs are the expenses that go into making a product or providing services. For example, variable costs for a restaurant are food items purchased for resell. Variable costs include inventory items, hourly direct labor, shipping expenses and others. These costs will go up when sales are high and down when sales are low. Business owners should take a lot of care in managing variable costs, because they directly impact the quality of your product or service. Simply finding the lowest cost may not be the best strategy though. For example, a high-end retailer like Saks Fifth Avenue can’t sell low quality items and expect to stay in business. The items cost less, but will have an inferior quality. Therefore, a higher cost can be justified. Wal-Mart can sell low cost items, because its business strategy is to offer low priced items. We don’t go to Wal-Mart to purchase an Armani shirt. Companies spend a great effort managing their supply chains to balance cost with quality.

Fixed Costs
Fixed costs are expenses that are stable over time. These are costs that are generally the same or similar every month. Examples include rent, lease, interest, certain utilities, internet, etc. Business owners should keep these expenses as low as possible. High fixed costs can destroy a business quickly. These costs do not fluctuate with your level of sales, so they are there whether you have banner year or a horrible year. Your business has to cover these costs regardless of how well business is going. Keeping these costs at the lowest possible level will allow you to weather a storm such as the current slow economy. Many companies with high fixed costs are really struggling right now, as they have really high expenses and few sales. Some businesses have high fixed costs, as this is the nature of the business. Businesses that require large and expensive equipment to make a product would be an example. Businesses in this category should still attempt to keep fixed costs as low as possible, though they may be higher than many other businesses

Gross Margin
Of course, sales pay for expenses. As long as variable costs are lower than the sales price of items, a business has cash left over to pay for fixed costs. Will a business have enough though? This is why getting fixed costs to an optimal level is extremely important. Many companies have cost variabilization strategies for their cost structure. In essence, the idea is to increase the percentage of costs that are variable versus fixed. This allows them to weather a long period of low sales. It also may be the best strategy to compete in their market.

June 3, 2011

The Business Credit Dilemma

Filed under: Accounting,Consulting,General — Tags: , , — artlbean @ 7:29 pm

Banks are still holding tight to their purses, and many small business owners are feeling the pain. At issue is the fact that many banks have increased their credit standards. While a 650 credit score was fine before the economic downturn, a score well over 700 is best now.

According to Experian, the average VantageScore (a tri-bureau credit scoring model that has a range from 501 to 990) is 736. If you have a 500+ credit score, as many consumers do, it may be difficult to get a business loan.

The Myth
I have talked to several business owners who do not realize that personal credit is what many banks use to make a business lending decision, especially with loans under $500,000. In fact, many banks will look at your ability to repay the loan based on your personal income, when loans are in the several thousand dollar range. It may not sound fair, but that’s the way it works. Keep your personal house in order and your business house in order if you need a bank loan.

Business owners that need financing of $1 million or more should certainly manage their credit score, though your company’s financials begin to hold a great deal of weight as well.

When business financials come into play, make sure you have an accountant develop your financial statements. Banks need to feel comfortable with your numbers, and numbers that that don’t make sense will certainly impact your chances of getting a loan.

Please contact A. L. Bean & Company for your accounting / bookkeeping needs.

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