New Jersey Business Brokers: Article About Properly Maintaining Your Financial Records
A business adviser is going to want to work with a seller who has clean financial books. If the books are currently disorganized or don't show all income earned, your adviser will want you to recast your financial statements to better reflect your business's true income potential. If you've modified your books in order to avoid paying taxes, you will need to fix that. You will also need to record all income from every source and not leave any cash transactions unreported.
Your New Jersey business brokers request for clean books isn't just because it is the ethical and legal thing to do. Clean books can ultimately land you a higher price when you sell.
Every buyer wants to invest in a profitable business, and one way you prove your business worth is by showing buyers your financial statements or books. It's important to have clean books when running a business, because buyers who are unsure about your financial numbers will run from a deal. During the due diligence process, the buyer looks at a few years worth of financial statements and decides whether or not the company is worth buying.
If you haphazardly throw your financial information together and present it to buyers, it is easy for them to spot inconsistencies or question the information. But if you prepare your books ahead of time and have them reviewed by an accountant and your business adviser, you can fix any mistakes. It's important that all reported information is backed up with documentation. This can be income statements, graphs, sales sheets, and expense reports. This means no unreported income and no tax evasion methods should be on your books. For a successful sale, your books need to be clean.
For a number of reasons, a buyer may decide that he doesn't believe the books he's being shown and may question their factuality or want more proof behind the numbers.
The business brokers from Selby Associates of New Jersey would be happy to answer any question you have about buying a business or business mergers.
A business adviser is important to the business selling process because they can perform a professional valuation and organize your books for you. Even if you have a accountant who has handled your books for years, an adviser can spot inconsistencies or information that is harmful to a successful closing.
If your books can be disputed by an accountant, attorney, or bank, you can end up losing a promising deal. Poorly kept financial records are one of the top reasons a business sale does not close. Plus, a banker and the buyer want to see that you've earned enough money to pay income taxes. By trying to avoid taxes, you can't prove that your business has been profitable and a lender may refuse to lend to the buyer.
When the buyer performs due diligence, he's looking to see that the business is profitable and it's worth the purchase price. A business owner should not mix business and non-business assets together. For example, if you own a boat or other recreational item and record it as an operating expense on the business, you are reducing income from the business. Your adviser will want you to separate business and non-business items in your books.
Properly maintained books is the best preparation for a quick sale. If your books don't show accurate income and profit statements, you may lose out on the opportunity to sell your business. By having accurate books ready to show at a moment's notice, you increase your selling opportunities. Your adviser will work with you on restructuring your books and making sure that all information accurately reflects your real business income and profit.