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What Keeps You Awake At Night?
– November 9, 2011
The answer to that question depends on who’s asking. A small child would say the monsters in the closet. The high school student might say their college options. However, if you are a small business owner chances are the answer involves the financial health of your business. What keeps you awake at night are probably those issues critical to the future of your business that need to be addressed now.
As a small business owner, how many times have you asked yourself the question, "My business seems to be doing well, why is there never enough cash?" Or, "We’re growing quickly – how much capital should I have?" Or even, "How does my business compare to my competition?"
If your accounting services are limited to income tax return preparation, you may not have all the current information you need to answer these questions. Of course, many small businesses now keep their accounting records on Quickbooks, Peachtree or other accounting software that will generate financial statements easily, but how often do you look at them and do you really understand how to analyze what the numbers are telling you?
The process of gathering information necessary to prepare monthly, quarterly or annual financial statements can bring to light both positive and negative trends in your business enabling you to address them in a timely fashion. Too often, business owners get so caught up in the day-to-day issues of running their business they don’t take the time to review financial information, maybe just a quick check of the bank balance periodically. Many small businesses do not have a controller on staff to oversee financial matters and provide the business owner with critical financial information. By having financial statements prepared by a CPA, you have a fresh set of eyes trained to look objectively at your financial records to help you better analyze and monitor your current business situation. The CPA can discuss the financial statements with you and address areas of concern before those areas become a much bigger concern.
There are three levels of financial statement services – compilation, review and audit. At each level of service, the CPA must have a general understanding of your business and its records; however each level requires different procedures to be performed. Compilations are the lowest level of service, requiring substantially few procedures to be performed, while audits require much more detailed procedures and testing. Often banks and other lenders will require reviewed or audited statements from businesses seeking loans. Rather than waiting until you must have financial statements prepared, consider if you could obtain vital information about your business by having them prepared now.
The highest level of service, audited financial statements, involves not only looking at the numbers, but understanding the areas of risk in your business and helping you determine cost-effective ways of improving the controls you have in place to mitigate this risk. As part of audit procedures, a CPA gains an understanding of how your business works – how you make money, who your competition is, and the processes you use for operating your business. Often clients feel going through the process of understanding what controls they have in place is the most helpful part of an audit as there are often areas to improve efficiency and effectiveness.
If questions about your business are keeping you awake at night, consider adding financial statements to the services you request from your CPA. You may be surprised how much you can learn about your business that will help you become more profitable, and get more rest.
We believe in a team approach of providing professional accounting services to you and your business, with each team member vital to overall success. Whether your needs are for income tax planning and preparation, financial statement services, or business valuation services, we have personnel trained in each of these areas to help your business succeed.
Connie K. Smallwood, CPA
Partner
Heard, McElroy & Vestal, LLC
318-807-3031
csmallwood@hmvcpa.com
With over 30 years of experience in the accounting industry, Connie has a strong background in audit and assurance services, specifically those pertaining to financial institutions and employee benefit plans. A former partner of Martin, Harrison & Smallwood in Monroe, Connie became a partner at Heard, McElroy & Vestal when the two firms merged in 2009.
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