The Importance of Keeping Good Records
The Importance of Keeping Good Records
Business brokers will tell you that when it comes to selling your business, there are a number of factors are important to consider. While that is true, today we’ll be discussing the one that stands out above all others. If business brokers have gray hair and ulcers, it’s from dealing with…
Business Owners Who Have Poor Records
You no doubt have heard the expression “it was as clear as night and day”. Whoever invented that phrase may very well have been thinking of listing a business for sale. Business brokers are blessed or cursed depending on the quality of their client’s record keeping. Potential buyers will know early on whether or not the business under review enjoys good record keep or suffers from the lack thereof.
You have heard about business owners who hand off their sales and expense receipts to their accountant (probably six months late) in a shoe box. They haven’t kept tract of records throughout the year, just thrown all the elements of the paper trail in a desk drawer.
What’s Wrong With This Picture?
Forget for a moment about the ease or difficulty of selling the business. What we are really talking about is the fact that the owner has been operating with his eyes closed to key aspects of the business. The owner is not:
- Studying sales trends
- Examining expenses
- Knowing Cash Flow
- And so much more
Not only is the owner limited by not having timely and formal reports, he doesn’t even know what he doesn’t know.
So What Do Business Brokers Do First?
They ask for the records. Monthly reports, tax returns, balance sheets. Each business broker has a process and a checklist. Many top brokers will refuse to work with business owners who don’t maintain good records. They know from experience and previous heartbreak that transactions rise or fall on buyers and lenders trusting the bookkeeping.
Business brokers will look at what is available and make their decision to go forward. Or not.
Our advice to every business owner out there: Take a good look at your record keeping. Are you where you need to be?