Throughout the year, businesses like yours need to be able to provide verified financial results to others. This may be your tax preparer, a lender or investor, a potential purchaser of your business -- should you decide to sell -- or another interested party. Not to mention that you, as the company owner should know your books are being done with accuracy and completeness. For all of these reasons, you should consider having your accountant prepare certified financial statements for your business, rather than always relying on internally generated reports.
Certified financial statements come in three "flavors:" compilations, reviews and audits. Each of these flavors offers a progressive level of assurance. This deeper verification process lets users of your statements (including you) have greater confidence in the accuracy of the numbers.
Here are eight good reasons why.
1. Banks Love Them. Banks give lower interest rates, greater loan balances, higher lines of credit and better approval ratings to firms which have an outside accountant preparing certified financial statements. Loan applications generally ask who prepares your firm's financial statements, and what level of assurance is provided. There's a reason for that.
The greater usefulness of certified financial statements comes from independence; an outside accountant has his or her own judgment, and is not bound by the employment relationship which can influence how an in-house bookkeeper would prepare those statements. Independence carries with it a high degree of assurance, which can translate into value for your firm.
2. Bonding Underwriters Love Them. Bonding underwriters also place a higher value on financial statements that have passed the scrutiny of an accountant, and they may add that value on to your firm in the form of higher bonding limits for individual projects and aggregate, more favorable bonding terms such as lower collateral and better bonding approval ratings.
3. It's Easier to Do it Now, than a Year or Two Down the Road. The longer you wait between instances of having your financial information verified, the more work is required. Not only will that raise the cost of the engagement, but it will be harder for you to remember what happened, when questions arise. Also, any changes which need to be made will affect the years which follow, so don't sweep them under the rug. Get your financial statements done now. Contact your accounting and tax adviser for rates and what's required. You'll be glad you did.
4. It's Inexpensive. Some people see certified financial statements as too expensive, so they avoid the subject. However, after you recoup the bank interest rate cash savings, the extra bonding capacity, and the new business you will receive, the cost of the financial statements will seem affordable. The level of professionalism you will project will more than compensate your firm for the cost you will pay to your accounting adviser.
Note: A compilation may be all that your firm needs, and that service is very reasonably priced.
5. It Leads to Better Relationships. You'd be surprised at who is interested in seeing your certified financial statements, and what they can do to help you grow your business. You will meet other executives in sister-disciplines, who will want to compare notes. When you become close friends with other trade leaders in associations you belong to, showing them your certified financial statements can lead to strategic partnerships, joint ventures and even revenue-growing mergers and acquisitions.
6. It Marks Your Firm's Progress. You will find that many times, securing financing such as loans requires financial statements two and three years back. Without certified financial statements produced by your accounting adviser, your books and records are always subject to accidental change by your accounting staff.
In fact, most small- to mid-sized construction businesses lack the internal controls necessary to keep financial information totally consistent from one year to the next.
7. It's a Step Up in Credibility. Dun & Bradstreet and other business credit agencies publish certified financial statements. And even if you don't publish your firm's financial statements, the credibility which comes with having them certified by your accounting and tax professional will be noticed by your employees and other constituents. Whoever you show your company financials to, the mere fact they are certified will stand out and give them that extra edge so your company shines in the best light.
8. They Carry More Weight. When you get certified financial statements from your accounting adviser, you place the backing of a professional in accounting and taxation behind your work. The results of your firm's operations are the fruits of your labors. Do you want to hold them up like the silver cup of victory? Having them certified by your accounting professional or tax adviser will do just that.
Whatever level of assurance you choose, you will be better off certifying your financial statements through your accounting adviser than just having your in-house bookkeeper prepare them, or not preparing them at all.
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