At Real Books, we always say that a business’s financial statements are like a score board in sports. Not just the profit & loss statement, but also the balance sheet, statement of cash flows, and general ledger (amongst others depending on the business type). Just like in sports, the numbers do matter to see who is winning or losing. They also matter to benchmark which team is performing best, and which teams have room for improvement.
Without these statements being accurate, it is nearly impossible for business owners to have the data they need make good financial decisions, or for advisors to implement savvy financial strategies. Often overlooked, financial statements play a pivotal role in driving the success of any business. In this article, we'll delve into 4 reasons why having awesome financial statements is crucial for the future success or any organization.
Tax Savings
While 1098 mortgage interest statements, property tax bills, and management reports can provide enough information to report to the IRS, it does not paint the full picture. To maximize tax savings and provide the most effective personalized tax plan, ALL transactions need to be counted and considered.
Financial clarity
Building on the tax savings, with all transactions being accounted for, you will have better insight into your numbers to make important decisions about business segments and/or property performance and your cash position for future investment opportunities or upcoming liabilities.
Increased loan approval
Lenders want to see tax returns, financial statements, and financial data that shows your ability to pay back the loan. The lending industry is under more regulatory pressure than ever and considers these factors heavily when making decisions. Simply "having" a tax return or set of financial statements is no longer enough. They need to be professional, accurate, and provide key performance indicators.
Increased value
If you plan to sell your business or property, how would a potential buyer or investor make an informed decision and pay maximum value if there is not clear and accurate insight into the business's performance? Professional financial statements provides this level of insight, and thus can increase the value of your business.
Conclusion
We have not been impressed with the quality of do-it-yourself (DIY) bookkeeping, virtual assistant bookkeeping, AI bookkeeping, or “bookkeeping firms.” We believe the problem is one of incentives. No one wants to build a great bookkeeping business because business owners do not want to pay for good bookkeeping.
It is important for business owners to recognize that high quality bookkeeping and financial statement preparation is extremely valuable for the future success of your business. Many accounting firms, including Real Books, require bookkeeping services to work with clients and not because it is profitable. They do this because it provides reliable data needed to advise clients at the highest level.
By Matt Cervoni, CPA
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