Here are the top 5 things you should consider now:
- Stop co-mingling personal expenses into the business.
There are 2 culprits commonly co-mingled: auto expenses and meal expenses. Autos that are not titled in the company name should not have gas, oil changes or repair expenses paid for by the business. The business should only pay for expenses for autos titled in the company name. For autos personally owned, the business can pay the owner or employees for the business mileage driven at the standard mileage rate.
If the company pays for meals, keep the receipts and include the names of the people at the meal and the business purpose of the meal. All other meal expenses should be paid with personal funds.
By properly segregating these two expenses, you will be able to show a true picture of your business’ net income and this is what you want your prospective buyer to see. Also, if you are ever audited by the IRS, you will be prepared and should pass with flying colors!
- Review your products or services and keep selling the higher grossing items. Phase out the lower grossing items (unless you need those sales to attract customers to your business so that you can sell higher grossing items).
- Hire a CPA to compile, review or audit your annual financial statements. This gives a prospective buyer comfort that an independent professional has been involved in preparing your financial statements.
- Maintain and prepare consistent and accurate monthly financial statements utilizing accounting software. Reconcile bank accounts and credit card accounts monthly. If you stay on top of this process, you can ensure that your Income Statements show steady pace of growth in sales and net profit annually. If your financials show decreases in profits, be prepared to explain why.
- Ensure your annual financial statements match your annual tax returns. Keep all back up in an easy-to-access and organized manner to refer to if necessary for 3 to 5 years.
All prospective buyers look at the financial side of the business to see if they are interested in learning more. If you make a good first impression from the start by having your finances in good order, you are likely to peak your prospect’s interest to move forward. To learn more about getting your company finances in order, please contact Donna Rayburn at firstname.lastname@example.org or (813)404-6991.