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E-Myth – “Why most small businesses don’t work & what to do about it”

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Accounting Outsourcing | When Our Audited Financial Statements Required

Itís very important that business owners know what is needed when they apply for loans says accounting outsourcing. The reason is, banks require certain reports and information when they are deciding whether or not to grant businesses loans, and if business owners donít know what type of report to pull, they could make their application much more difficult. By talking to the banks ahead of time, as well as consulting their chartered professional accountants, business owners can ensure they pulled the appropriate reports when applying for loans, so that they can get their loan faster, and without complications.

Generally, when banks are granting loans, they will require one of three financial statements. Accounting outsourcing says that the three financial reports contain the same information, the biggest difference between the three is how much to diligence goes into each one. The first and most common one is the notice to reader financial statement, which is prepared by a chartered professional accountants, that has verified that the month is and it is the quickest financial statement to prepare, and is the most economical for business owners.

The second financial statements that accountants can prepare is reviewed financial statements. Reviewed financial statements have been tested to ensure the reasonability of the numbers, so that the report is believable. Because it takes more time to prepare, it is more expensive says outsourcing.

The third financial statement is the audited financial statement, and rather than testing the reasonability of it, chartered professional accountants actually confirm all of the numbers as accurate, by confirming Accounts Receivable numbers with clients, confirming accounts payable numbers with vendors, and verifying all totals with the bank. Audited financial statements have been verified as accurate, and takes a significant amount of time to prepare. Because of the significant amount of time, it also is the most cost prohibitive for business owners.

The reason why itís important for business owners to know which one of the financial statements banks require, is because if they start preparing reviewed or audited financial statements, and the banks donít require it, they could put themselves into a difficult situation. If banks donít require reviewed or audited financial statements, they usually require a chartered accountant prepared interim statements instead in addition to noticed reader financial statements. However, accounting outsourcing says that if accountants are already preparing reviewed or audited financial statements, their chartered professional accountants will not eligible to prepare good statements for the business owner. The reason is, the accountants fiduciary duty preparing reviewed or audited financial statements is to the bank, and accounting outsourcing says that this means they cannot be impartial enough to create interim statements. This would force a business owner to hiring two separate accountants in order to complete the as the bank needs to grant the loan, which could cause difficulties in hardship to find.

If business owners are diligent in figuring out what the bank needs in terms of financial statements, they will be able to work with their loan application quickly and easily.

There are several situations where a business owner would be required to prepare reviewed or audited financial statements says accounting outsourcing. However, for the most part noticed reader financial statements are adequate for almost all purposes, one of the exceptions would be if business owners are planning for loans.

Although business owners used to always be required to prepare reviewed or audited financial statements in order to qualify for a loan, banks are now realizing that they would rather have good interim financial statements, in order to find out how financially sound the business currently is. Because of this, banks are now asking business owners to prepare notice to reader financial statements instead of reviewed or audited financial statements, along with accountant prepared interim statements says accounting outsourcing. The business is significant, is because if accountant is already preparing reviewed or audited financial statements for business over the last remain unbiased and objective, which means they are not eligible to also prepare good statements for the same business owner. The reason is important for business owners to find out ahead of time, is if the bank only requires noticed reader financial statements and good interim statements, they will be able to get both reports prepared by their accountant.

Business owners who have been asked to prepare reviewed audited financial statements of those statements, should double check with their bank, or request their accountant checks with their bank to verify this. The reason why this is a potential problem is same accountant to prepare reviewed are on financial statements is because it may be very difficult for business or to find a second accountant who is willing to provide good statements for clients they are not familiar with. Not only is it difficult for business owners to find, it can be financially prohibitive as well. However, if this is what banks require says accounting outsourcing, then business owners can check with their accountant and asked them if they have an accountant in mind that they are comfortable working with, to help prepare the statement is business owner, in order to provide the means they need in order to qualify for a loan. If thereís an accountant that is willing to work closely with businesses primary accountant, that may help them significantly.

Even though some things may require reviewed or audited financial statements in order to qualify for a loan, most banks are changing their process to only require notice to reader financial statements, and even the size of the loan doesnít appear to be making a difference says accounting outsourcing, as large loans in excess of several million are being granted based loan on the notice to reader financial statements that business owners are providing. So anytime a business owner is applying for a loan, they should assume the bank requires a noticed reader financial statement, is that of reviewed or audited financial statements, and save themselves money in the loan application process.