Accounting Outsourcing | When Do Businesses Need To Prepare Audited Financial Statements
Itís becoming less important for entrepreneurs to prepare audited financial statements in order to qualify for loans says accounting outsourcing. There are several reasons for this, but mostly itís because banks are starting to recognize the importance of business owners providing good interim ban financial statements business owners should be aware of this before they apply for loans, so that they can ensure that they are providing the correct financial statements the bank is going to require. Many business owners who have qualified for loans just a few years ago may make the assumption that they still need to provide reviewed engagements or audited financial statements, but this is not the case. Any time a business owner is applying for a loan, they should verify with the bank on months required.
One of the reasons why banks are relaxing their positions on what is required when they are owning money, even large sums of money, up to several million dollars says accounting outsourcing is because theyíre recognizing the value of finding out the financial state of the business currently. While reviewed engagements or audited financial statements allowed a financial institution to verify the accuracy of the financial statements, through additional due diligence, the notice to reader financial statements are often extremely accurate, and spending additional money on reviewed or audited financial statements didnít make a lot of sense. It was becoming a barrier to granting loans for businesses. Since 50% of all entrepreneurs fail before they have been a business for five years, and that 29% of the entrepreneurs who fail say that the reason they fail is because they ran out of money. Being a financial barrier to granting them loans in order to help their business or grow their business was considered bad business practice.
Another reason why banks started relaxing their requirements on no longer requiring businesses to prepare reviewed or audited financial statements, is because banks are starting to understand the value of finding out how financially viable the business currently is says accounting outsourcing. A lot can happen in a business in just a few months, and extremely good financial statements showing the health of the business in its last year, wasnít accurately reflecting the state of the business as it was currently. And banks were granting loans to businesses that looked great on paper in their last year, but were in extreme financial distress this year. Also, accounting outsourcing says that many businesses may have been turned down for loans based on terrible previous year financials, but have work significantly to turn their business around, and when banks get accountant. Interim statements that showed that, they are more likely to loan money to those businesses.
As far more important for banks to determine the current financial health of the business, instead of spending additional money on verifying the accuracy of the financials from the previous year. Accounting outsourcing says that because of this, banks have relaxed their positions on what businesses need.
Or audited financial statements generally are necessary when large amounts of money are being loaned, and for nonprofits says accounting outsourcing. Banks used to require reviewed engagements or audited financial statements a lot more often than they do now. There are many reasons why that has changed, and business owners should understand why itís changed, and what they now need to provide if they are approaching banks in order to get loans in their business.
One of the first things that business owners need to understand when they are preparing reviewed engagements or audited financial statements says accounting outsourcing, is that the accountant that is preparing the statements, as a fiduciary responsibility to the external source that is requiring that statement. Itís to a bank, the business owner needs it to qualify for a bank loan. If itís a nonprofit, external source is the Board of Directors. Because of this, the accountant is not technically working for the business owner at that time, in order to remain objective and impartial.
Many business owners believe that simply because the reviewed engagements or audited financial statements take more due diligence to prepare, and cost more money, that they are inherently better financial statements. This is not true, and in fact, even though the notice to reader statement takes the least amount of time to prepare and cost the least amount of money, itís often the best financial statement for business owners to ask their accountant to prepare. The reason for that, is because accountants will be able to advise their clients, as well as strategize with them on tax planning if theyíre preparing a notice to reader financial statement says accounting outsourcing. This is far better for a business owner to get, instead of paying additional money in order for their accountant to not be able to advise them
Business owners should also be aware, that since accountant must remain unbiased and impartial will creating a reviewed engagement ring audited financial statement, that if they also require their accountant to provide interim financial statements, that they will be unable to do so because of the reviewed engagement or audited financial statement. Because of this, the business owner requires accountant to pair reviewed engagements or audited financial statements says accounting outsourcing as well as statements, they will have to see two different accountants. This may be difficult to find, especially accountants who may not be willing to accept a one-off client to work on a file that they are not familiar with. If a business owner requires a reviewed engagement or an audited financial statement as well as good interim financial statements in order to qualify for a loan, they should ask their chartered professional accountant if they are familiar with her work with another chartered professional accountant will be willing to work with them on getting there in terms financial statement for their bank, instead of having to find a new accountant on their own.