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

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Business Bootcamp | Reviews Need to Be Important

Business bootcamp often comments to clients not to necessarily be concerned if banks have not necessarily reviewed and updated their paperwork. Sometimes just a matter of bringing it to the attention of the bank itself. That can be taken care of by your charter professional accountant. As a matter fact that will be one of the deals that your charter professional accountant will be able to take care of and you may never even realize that it’s a concern. If they think it is reasonable and the numbers are just fine, they’re going to leave it altogether. Better not to rock the boat. However, sometimes we have to challenge the banks. Sometimes used charter professional accountant will press them that a review doesn’t necessarily have to be reviewed on something as unnecessary as a 5000 are loan. Make sure that the charter professional accountant knows and acquires and challenges the bank. Sometimes it takes a little bit of prodding in terms of inconsistency. The banks deal with a lot of clients and inconsistency could potentially be happening all the time.

Audits, says business bootcamp, can also technically and in some scenarios be very counterproductive, and particularly for not-for-profit organizations. The reason for this is potentially because the sheer scope of them. Consider the fact, is it worth dispensing 10% of the entire charity simply to do an audit? Probably not, as there will have to be provided some benefit to that charity. Often times what the charter professional accountant will advise charities is if you have less then $250,000, it’s not worth doing it.

Consider the fact that in the last five years, or even in the last six months, potentially businesses and banks change their procedures and policies all the time. The business may in fact have been locked in five years ago but the banks have changed their rules and their stance on certain specifics. This could be one of the main reasons why you potentially need to review. Owners still think that they will need a review engagement. But that can potentially be true if it does happen longer than five years ago and there have happen to be a few banks changes. However if there’s only been one bank change in the last five years, it’s not necessarily worth worrying about getting a review. Only after a few years and a few changes does it have to be reviewed.

Business bootcamp says consider large loans and when the business needs to raise a significant amount of money, that level is of significance and often underestimated by business owners. When you think in terms of auditing a private company and a large company, they will need to be audited the financial statements for their board of governors sometimes there clients, etc.

Often times what happens is the term audit comes with a negative connotation. Consider the fact with clients under your wing and under your care, that it is not necessarily such a good idea to mention the fact of auditing to the client.

Bear in mind, says business bootcamp, that 50% of small businesses fail within the initial five years of its inception. If you turn it around, and if you think that 50% of small businesses will succeed and continue on long after the five years.

Look to Warren Buffett, as he says “accounting is the language of business.”

What happens is a very good idea for a small business owner is just to get comfortable or at least understand and potentially summarize the difference between certain business terms. In fact, there was a poll done by into it, the makers of QuickBooks, that says about 70% of small business owners don’t know simple financial terms. It might be a good idea for you, and for the strength and success of your business in order to maybe understand little bit what the charter professional accountant is talking about so as you may be able to help them.

Continuing on with financial lexicon, and comprehension, there are three particular financial statements that you should have a broad idea of what they mean.

The first financial statements called the noticed to reader. This is the statement that need to be considered to be arithmetically correct. It needs to be a plausible statement although, it is the lowest level of assurance.

If you look to a line, explains business bootcamp, expect or a spectrum, the next financial statement will be the bull’s-eye financial statement, one right in the middle. This is called the reviewed financial statement and is testing the reason abilities of the business. For example, they’re going to need analysis and they will be determining if those statements are actually reasonable. For that your charter professional accountant will in fact have to do testing.

The last financial statement, which will be found at completely the opposite and end of the spectrum to the reader financial statement is called the audited financial statement. The audited financial statement usually involves confirmations of balances, says business bootcamp. Consider the questions, has your charter professional accountant confirmed the balances with the bank? Has the CPA confirm the receivables with the people that actually owe that money question mark and have they tested that money which has come in, subsequent to year and?

So, again talking with the and about the spectrum, the notice to reader financial statement will be on one end, the reviewed financial statement will be in the middle and the audited financial statement will be on the complete opposite and of the notice to reader financial statement.

Charter professional accounts are often very prepared for owners questions and concerns. Sometimes owners will say that they will need a significant amount of money to borrow, to the owner, this could be $200,000, $300,000, up to $1 million for their business. In that, the owner will often think that they will need a review before they get the money. If it’s not up to a $10 million loan, don’t worry about it.