Financials...how important are they?

Not to offend anyone reading this, but here I am coming in to do a business plan and when I ask for financials I am told that there are none other than a tax return. Ok tax returns work, however your managerial skills will look even better if you were actually doing the bookkeeping or paying a qualified bookkeeper to keep your books.

There are many people who start businesses based on their experience as in working knowledge and never had to do the behind the scenes bookkeeping. There is nothing wrong with that, however keeping the books current is important if you want to run an efficient and strategic business.

When you are looking for money because you want to expand your business, if you go the bank route, they will ask for atleast 2 years of past tax returns. Which is good, however if you have an accountant that is very efficient and is dwindling away your profit with deductions or showing your business at a loss for the past 2 years this will make it harder for you to qualify. On the other side of it, think of all the receipts that never made it to their destination and are forever lost because in the daily task of running a business most business owners are prone to lapse in memory.

This is between you and your accountant, but it is not always smart to take all deductions possible, it should be strategically and legally planned. If you are actually keeping the books and not taking in a shoe box filled with receipts to your accountant, then you will have a credible profit & loss and balance sheet that will show a proper picture on how your business is doing. You will probably pay less money to your accountant because he or she does not have to add up receipts; instead it will enable your accountant to be both efficient and strategic because he or she has the time to do it. Remember it is crunch time for your tax accountant, the easier you make it for him or her the less money you will spend and it could possibly lead to a better end result.

The last thing to discuss is that if you are keeping books, what better way to know throughout the year how your business is doing. You can make goals, budgets, use tracking metrics; all of which will help you when you are looking to be funded through a bank or investor(s) to expand your business. Better yet wouldn't it be useful if you discover that there are cost cutting strategies you could implement or be enabled to eliminate unnecessary spending and employee theft. In 2 years time it might even be possible to fund your own expansion without the help of a bank or investor(s).