Home » Articles » Accounting Outsourcing | Can Banks Loan Money On Notice To Reader Statements
Accounting Outsourcing | Can Banks Loan Money On Notice To Reader Statements
Businesses used to have to provide reviewed or audited financial statements in order to qualify for bank loans says accounting outsourcing. However, thatís becoming less and less commonplace, with many financial institutions loaning up to several million dollars based on notice to reader financial statements. The reason for this, is mostly because banks are discovering that not only do they like to have financial statements on the previous year, they are able to get a better idea of how financially secure the business is by reviewing interim statements. Itís more important for banks to get a picture of the financial health of the business currently rather than in the previous year, so they are relaxing their rules to accept notice to reader financial statements as well as interim financial statements which both replace the reviewed or audited financial statements from before.
Because banks are moving away from requiring reviewed or audited statements in favor of notice to reader financial statements, business owners should be aware of when it is they would need to provide audited statements says accounting outsourcing. For the most part, the only time that entrepreneurs would need to provide audited financial statements is when they are qualifying for extremely large loans, and certain nonprofits still require audited or reviewed statements. For the most part, most small businesses and entrepreneurs are going to require notice to reader statements, often coupled with interim statements, both prepared by their chartered professional accountant.
Not only are noticed reader financial statements a lot more cost-effective to prepare, they take less time, and accounting outsourcing says that it allows the accountant to work a lot more closely with the business owner. Because an accountant must remain at arms length of the customer when providing reviewed or audited financial statements, if the business owner does not require anything more significant than notice to reader, an accountant will be able to offer advice and tax planning strategies for business owners with the notice to reader financial statements. This is always in the business ownerís best interest, to be able to accept advice and strategies from their accountant, so unless itís absolutely required that a business owner has to provide something more substantial, they should always default with a notice to reader financial statement whenever possible.
Banks have relaxed the rules, but many business owners arenít aware of this, or the loan applications still have old information on them. So if the business owner is applying for a loan at a financial institution, they should double check with the bank that this is absolutely necessary. often, chartered professional accountant can approach the bank on behalf of their client, and verify what the bank requires. Accounting outsourcing says several million dollars of loans have been granted on notice to reader financial statements, that business owners should always be extremely sure that thatís what they need to provide before they go through the expense of providing it.
The reason why a business owner would require reviewed or audited financial statements says accounting outsourcing, is because an external source has required it of them. Typically, notice to reader financial statements are all that business owners are required to provide When preparing their year-end statements. These financial statements are arithmetically correct and their numbers are plausible. Reviewed and audited financial statements take more time in preparing, because the accountant must go through deeper layers of testing to verify the numbers are accurate. The only time a business owner would be asked to verify the numbers to higher level, is typically if they are applying for a loan.
However, candy banks are relaxing their rules on what a business owner needs to provide in order to qualify for a loan. The reason for this is accounting outsourcing, is because banks are discovering that theyíre getting a better picture of the financial health of the business through interim statements, rather than the year-end financial statements. Spending additional time and money to confirm the numbers in the financial statement are accurate is becoming less important than looking at the current members in the business.
Part of the reason why banks are relaxing their rules, is because it is counterproductive and often difficult to ask businesses to give reviewed or audited financial statements in addition to accountant prepared interim statements says accounting outsourcing. The reason for that is because when chartered professional accountants are preparing reviewed or audited financial statements, they must be impartial, with their fiduciary responsibility being to the bank and not their client. Because they must remain impartial, they are not able to provide the interest statements. Expecting small business owners to have two accountants, one to do the audit and one to the interim statements, is difficult, costly, and sometimes impossible. Many accountants arenít able, or willing to provide interim statements on a one-off basis to clients who already have another accountant. Because of this difficulty, businesses are being asked less to provide audited or reviewed financial statements so that they can provide both notice to reader and interim statements.
Even though banks are relaxing their rules, many nonprofits are still being asked to provide audited financial statements for their year end says accounting outsourcing. The reason for this is because board of directors havenít changed their bylaws to reflect the trend and what the banks are accepting. This is difficult, because reviewed and audited financial statements are becoming extremely costly to prepare, due to the sheer volume of work involved in confirming the numbers. So for many small nonprofits is accounting outsourcing, it may be cost prohibitive for them to provide. Since the trend is moving towards providing notice to reader statements, Board of Directors for nonprofits should review their bylaws and request opinions from chartered professional accountants to see if their charity absolutely needs to prepare audited financial statements.
Understanding the difference between noticed reader, reviewed, and audited financial statements, business owners and charities alike can find out what is absolutely needed, so that they can provide documentation that they need, without any additional undue cost.