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Benefits from an Audited Financial Statement

August 22, 2017

One of my clients generously gave me his take on the benefits he received from the audited financial statements we issued for him. I was appreciative of this and want to share his views with you.

He began with an introduction explaining how he started his business and shepherded its growth by concentrating on developing his services and delivering them quickly and on time to his clients. The business grew rapidly and little time was spent on the record keeping except for getting invoices to the clients, and making payroll while keeping the back office as lean as he could. At the same time there were legal, regulatory, HR, occupancy and tax issues from operating in multiple states and countries and he was spending quite a lot of time and fees on these activities, because he had to, while pushing aside and neglecting the accounting work.

Because of his company’s success, a dire need developed for additional capital and no one would speak to him without the appropriate financial statements. That is when he reached out to us. We assessed the situation, developed a plan and time table and sent in a team to organize his system and get him what he needed. We did and he reaped the expected benefits. The benefits also came because of his business model, client base and delivery of his services.

He told me about the many users of his financial statement and how it helped him.

  • Management: He and his management group now had credible information about the operations and their financial position. In addition to the basic financial statements there were many supporting and ancillary schedules and analyses that helped them in managing the business and creating usable budgets and projected statements including a reasonable five year forecast that served as a viable benchmark for targeted goals.
  • Early Stage Investors now had reports on how their funds were used and where the company stood.
  • Prospective investors were able to assess the current operations and developing trends and along with the projections they were able to take positions in the company providing needed funds for growth. The financial statement was also useful in establishing a beginning point for valuing the business.
  • Employees gained comfort that the company had a clear direction where it was headed.
  • The Board of Directors were given materials they were able to use to better advise management and were able to be much more effective. The time they previously spent chastising management for the lack of reliable financials and current information was converted to time better spent on positive guidance. The financial statement also provided insights that the company’s resources were being used wisely.
  • Customers were assured that the company was on a solid ground to be able to continue the great service they have become accustomed to and were relying on.
  • Suppliers are creditors. Some were provided with the financial statement to support increased credit limits and assurance that the company had the ability to pay its bills on time.
  • Bankers were not previously providing any funding because of the lack of financial statements. They were now able to participate reducing the need to give up equity to investors for those funds.
  • The accountants were better able to provide tax strategies that increased cash flow and to provide additional services that tightened controls, improved systems and to have delivered timely and more relevant financial data.
  • Government regulatory bodies in this client’s case do not receive audited financial statements to determine if the company is operating within prescribed guidelines. However, we explained that while taxing agencies typically do not receive audited reports they could be helpful in income tax audits should one arise.

Financial accountability mattered. Besides the above benefits it provided a broader landscape, greater controls and more effective procedures, and set in motion a pattern of solutions based recognition. It also put the company in a position to attract key personnel, possible merger candidates, a presentation to potential acquirers [which they were not considering but kept the door open to dialogues], companies they could collaborate with, technology and marketing consultants who could suggest systems that could move the company forward, and a strategy to achieve better client service, organic growth and customer referrals.

He called us in because he needed the reports and got so much more; he got control over his company. Audited statements do matter and provide benefits far more extensive than what appears from the 25 or 30 page report. If you are a growing business, discuss with your accountant the advisability of an audit.

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