Accounting Outsourcing | Are Reviewed Audited Statements Necessary
If entrepreneurs are asked to provide financial statements in order to qualify for a loan, they should understand the difference between the three types that are available, so that they can understand which one is needed says accounting outsourcing. The most common financial statement that business owners will be asked to provide is the notice to reader financial statement. This is the most common because it is the one thatís most often prepared for small businesses. And accountants will ensure that it is arithmetically cracked and the numbers are plausible. The reviewed financial statement, will have the same information in it but will undergo various tests to ensure the reasonability of the numbers. Finally, the audited financial statement has the same information in it, but the accountant has actually confirmed that the numbers are accurate by speaking to the bank and confirming amounts with the bank as well as checked the accounts receivable to ensure that the amounts their are accurate as well.
While banks used to request entrepreneurs prepare reviewed or audited financial statements in order to qualify for loans, that is becoming less and less the cases accounting outsourcing. One of the reasons for that, is because banks are discovering that it is more important for business owners to provide interim statements, so that the bank can see the current financial health of the business. Because the reviewed or audited financial statements only showed the help of the business in its last year, banks understand that a lot can go on with the business that isnít necessarily reflected in last yearís financial statements.
Because banks are also requesting interim statements in addition to the last yearís financial statements, accounting outsourcing says they have relaxed their requirements to allow notice to reader financial statements as well is good interim statements. There are a couple reasons for that, since there is more emphasis placed on the interim statements, banks are less concerned with getting extremely well tested financial statements from the previous year. But mostly, banks have relaxed their positions on this simply because it is extremely difficult for business owners to provide reviewed or audited financial statements as well as interim statements. Since accountants must remain impartial during the audit procedure, in order to be unbiased, accounting outsourcing says that accountants are then not allowed to provide interim statements as well. By insisting a business owner provide both of you and interim financial statements, means that business owners would have to hire two different accountants, in order to prepare the statements. Not only is that costly, but is also difficult for business owners to find an accountant who is not familiar with their file to work on their financial statements.
Once business owners understand what banks require and why, they will be able to work with their accountant in order to get appropriate financial statements in order to qualify for the loans that they need to grow their business says accounting outsourcing.
There are many things that business owners have to do in order to qualify for loans says accounting outsourcing. Banks always require business owners to provide financial statements, but there are three different types of financial statements that business owners can choose from. Understanding the difference between the three of them, and understanding when each one is most appropriate they can work with their accountant to ensure that they have the best financial statement to submit to the bank in order to secure their loan.
Three different types of financial statements are notice to reader, reviewed, and audited. All of the information in each financial statement is the same, but how itís verified as accurate is what is different. For the notice to reader financial statement, accountants will ensure the balance sheet balances, and that the numbers are arithmetically correct. Theyíre just verifying the plausibility of the numbers not that they are believable or accurate. In the reviewed financial statement, accounting outsourcing says accountants will test for the reasonability of the numbers. Ensuring that the numbers are believable, rather than just plausible. In the audited financial statements, chartered professional accountant will actually confirm the numbers are correct. They will do this by confirming amounts with the banks, running the Accounts Receivable report, and calling all of the customers that owe money to verify the amounts are correct, and that the money is actually still coming in.
Many banks had previously requested reviewed or audited financial statements in order to qualify for bank loans. Thanks want to ensure the correctness of those financial statements in order to loan money. But, more and more banks are discovering that itís less important to verify the numbers of a previous year in the business, and it is more important to have a gauge of the current financial health of the business. Because of this, accounting outsourcing says that banks are now requesting good interim statements. Business owners used to be able to provide their own interim financial statements, but banks are requesting more that accountants provide these interim statements, to ensure their correctness. If a bank is requesting year end financials as well as interim statements, they are relaxing the rules on ensuring they are reviewed or audited year-end financial statements.
The main reason that banks are no longer requiring businesses supply reviewed or audited financial statements in addition to interim statements, is simply because accountants that are already working on reviewed or audited financial statements are responsible to the bank, and must remain impartial during the audit process, that they cannot provide the interim statements. Business owners being expected to find a new accountant who is not familiar with their files to work on interim statements is extremely difficult if not impossible. Banks have relaxed their requirements, allowing business owners to provide notice to reader financial statements in addition to interim statements that are provided by their accountant.
When entrepreneurs are approaching the banks for loans, they should verify what is absolutely needed in order to provide what the bank requires, without having to go through unnecessary steps with their accountant, or be forced to find a new accountant to work on interim statements.