Selling your business on the open market requires showing its best face. You may be running a successful business and have an attractive an inspiring product or service with tremendous upside. If someone were to ask you about your business you’d probably have a great story to tell and plenty of success to brag about. While the history of your business and its future prospects may tell a great narrative, what do your financial statements say? At some point during the process of selling your business, you’ll have to show your books, and it will go well beyond a simple profit & loss statement. When the time comes, will your books back up your boasts? Sloppy financials can ruin a deal, so it’s best to be prepared by keeping up with them on a regular basis.
Poor financials can come in the form of declining sales and low earnings, or they can be in the form of disorganization. It can be extremely difficult to hide or overcome poor sales, but disorganized financials can definitely be overcome. Your goal should be as simple as making sure that you can pull financial reports on demand, not just at the end of the year, or during a sale or acquisition. This requires year-round diligence, not just saving it for a rainy day. It is essentially that you are regularly tracking money going in and out of your business and not just for year-end purposes or tax filing. Solid bookkeeping can be used to make better financial decisions about your business throughout the course of the year, improve cash flow and increase the value of your business. If you’re attempting to sell your company, getting your books in order should be at the top of your priority list, as many businesses don’t sell because of poor financials.
As important as keeping up with your books is, this doesn’t mean you should drop everything and start shoring up your financials on your own. However, even if you have the accounting skills to do it, outsourcing would be a much better business decision. A professional accountant or bookkeeper keeps up with changing tax laws and other details that can affect your business. They will make sure every penny is accounted for, and keep up with it on a regular basis, so that you can dedicate your time to your business without spreading yourself too thin. They will also use accounting software, such as Quickbooks that is universally used and can create on-demand reports that are easy to read and understand and are trustworthy.
When looking for someone to take over your bookkeeping, find someone with several years of experience in the industry who specializes in small business accounting and has a good system of tracking financial transactions and generating reports. Make sure that they offer reconciliation of your bank accounts and that they categorize expenses. Doing this in house increases the chances of overlooking small transactions, becoming disorganized, falling behind or making other critical errors. Even a seemingly small mistake can cause a domino effect that impacts your business or future books. If these errors show up when a buyer interested in your business requests them, it could be a red flag that changes the story of your business from a good one to a bad one. In the end, paying a third party to manage your financials will probably pay for itself, and you will benefit in more ways than just achieving your asking price when it’s time to sell.
Are you are getting ready to sell your company and need help finding the right accountant to get your books in order? Are you looking for other sound advice that can help close the deal on your business sale? Contact Corporate Investment Business Brokers and see how we can help you achieve the highest sale price possible.