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CLS’s owner Andrew Miller offers his thoughts on the importance of knowing your numbers as a business owner, and explains why it may make the most sense to hire a professional to handle your books.

Andrew Miller’s The Golden Rule in Business - Know Your #’s

Once of my favorite programs to watch on TV is “The Profit” with Marcus Lemonis on CNBC. Marcus has a saying “If you do not know your numbers, then you do not know your business.” What this means is that as a business owner, you need to know your financials (balance sheet, income statement, profit margins, etc.). If you want to be a successful business owner, you need to know your numbers or have your financials in order.

     In today’s lending market, I have recently seen many business owners fail (or not get approved for a loan) because their financials were not in order. Their financials did not balance, had errors, were incomplete, or their internal financials did not match company tax returns, etc. Many business owners do their own books and taxes. As a business owner, doing your own books and taxes is a huge mistake. I can tell you as a small business owner myself, I did my own books and taxes for years. I even have a tax, accounting, and finance background. So, I think I know what I am doing when it comes to financials. However, I need to run my business/company and make money by not doing my own books. It is better to hire a third-party (aka a bookkeeper and CPA) to do your financials. I believe my value per hour is a lot more than what I pay the third-party to do my books and taxes. Also, they are the experts in bookkeeping and tax laws. I do not have the time to keep up with all the changes in tax laws and ways to do books.

    Also, another reason to know your numbers is that lenders are more focused on the accuracy of the financials than ever. Banks and Credit Unions must comply with federal guidelines and compliance. Part of this compliance is the analysis of the financials of the business owners they are providing the financing to. The business owner only has one shot to make a first impression with a lender. If the financials of the company are not in perfect order then there is a significant chance the lender will pass on the loan altogether even if the company is making money, has tons of experience, and plenty of money in the bank. The repayment of the loan is the primary factor a lender focuses on when determining if they can do the loan or not. When the financials of the company are not in order or the lender cannot trust the accuracy of the financials, the lender will have to pass on the deal.

    Right now, Commercial Loan Solutions (“CLS”) is working with 3 different clients that have been in business for five (5) or more years that are wanting a loan. During our underwriting process, CLS discovered discrepancies in the company financials. When CLS asked who did their books, all 3 business owners responded that they did their books themselves. CLS was then pressured to present the loan package to the lender for approval and all 3 loans are now on hold. CLS then had the clients hire a third-party bookkeeper and CPA. Once the books were cleaned up, the lenders were ready to move forward again. So, if you want a loan make sure you know your #’s and your financials are in order (aka balance) and match your tax returns.

   By the way, more and more lenders are requiring business owners who wants large loans ($2 million plus) to have their books and taxes be done by a licensed third-party. So, it is better to start engaging third-party experts now versus later in the year or you might have to pay a rush fee. It can cost a business owner a lot of money later if you have to get your #’s in order fast.

-Andrew Miller

Article by Andrew Miller. You can check out their website for more information on CLS, or subscribe to their Newsletter for more articles.