Your accounts are not just needed for compliance purposes. You may also be asked about your business’s finances when applying for loans or entering business awards.
I’m always surprised to come across business owners who see bookkeeping as an administrative burden that they have to endure to keep Revenue happy. This is because successful businesses understand that to make good business decisions, you have to have access to accurate accounts.
Effective financial processes are the basis of sound management and are more important than ever in the current climate where inflation is rising. If you don’t keep tabs on your costs, you can’t rely on your forecasts.
But decision making and compliance are not the only reasons to keep your books in order. Set out below are a few examples of common situations where you need to produce your accounts.
5 situations where business accounts are required
1. Bank loans
If you are applying for a bank loan, financial institutions will generally request certain documentation to support your application. Financial and management accounts, cash flow projections, and an up-to-date list of your debtors and creditors are typical examples of the information they are likely to request.
2. Raising Finance
If you’ve ever watched Dragons’ Den, you’ll have a good sense of the importance of financial information to potential investors. Before putting cash into your business, an investor will want to feel confident that you understand your business finances and have effective management and financial procedures in place.
When you’re self-employed, you’ll need to produce your business accounts if are applying for a mortgage as the lender will want to see evidence that you have a stable income.
4. Business Awards
Winning or being short-listed for a business award can be a great way to build profile and network with other business owners. Awards also enhance customer and investor confidence in your business and can even help you attract and retain employees. Generally, the awards application process will require that you provide documentation to support your entry. Your accounts are be a good way to show evidence of growth, trends over time, and so on. Applying for an award forces you to think about how you compare to competitors. This can be a great way to identify areas for improvement in your business.
5. Merging or Selling your Business
If you intend to merge or sell your business, it’s important to begin planning a couple of years in advance. Potential purchasers or merger partners will want to see how your business is performing. Typically, financial accounts for the last few years will be needed along with management accounting information such as forecasts, cashflow projections and information on creditors and debtors.
Today’s cloud accounting systems make it relatively easy record transactions and manage your accounts. However, these systems are only effective if you keep your data entry accurate and up-to-date. Often, business owners complain that accounting tasks take too much time away from more productive aspects of running the business. If you are in this situation and require support, GroForth’s bookkeeping team would love to help. For details of our services, please visit www.groforth.com/bookkeeping/