CFO Outsourcing

A must-have checklist for buying a business

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Fulling_Management_Buying_a_Business_large Have you ever gone grocery shopping without some type of shopping list? Maybe it’s written or memorized, or if you are like me, your list is typed out and organized by grocery aisle (this is not recommended for those of you who are “right brained”). While we may have some flexibility when doing grocery shopping, there is little room for error when it comes to buying a business.

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Fulling_Management_Buying_a_Business_small [/column] [column col="1/2"]Buying a business is obviously an important decision with many moving parts. When considering whether or not to purchase a business there are many things to consider. Our due diligence checklist shown below can start you on the path to buying and operating a successful business.


Checklist for buying a business

Company Tax Returns - last 4 years • Profit & Loss Statements - last 4 years • Current Balance Sheet and Profit & Loss StatementBank Statements - Last 2 years • General Ledger Detail - Past 2 years • Copy of current contracts (i.e. leases, supply agreements, jobs, etc.) • 940's & 941's payroll tax - last 4 years • Employee list, job functions, salaries and benefitsCopy of insurance policiesList of equipment that you will be purchasing


[/column] It is important that you find out all you can about the company you are buying. Depending on your industry and the nature of the purchase, there may be additional items to add to your checklist. In many cases a business purchaser will use the services of an accountant and an attorney for some due diligence process. By identifying issues in advance you will be better prepared to negotiate the final purchase contract and less likely to have disputes after the transaction has been completed.

[message_box title="Considering buying a business?" color="gray"] Our management and accounting services may be a perfect fit for helping your purchase turn into a profitable business. Let me help you review the documents from the checklist! Give me a call at (913) 254-7300 or email me at rusty@fullingmgmt.com. [/message_box]

Top 10 Steps in Starting a Successful New Business?

Many new business owners start with good intentions.  Entrepreneurs typically have great business ideas, potential customer lists and sometimes even adequate funding to get their company off the ground.   But before the first sales are generated, office space is chosen and the doors are open, they need to ensure their accounting processes are in place to capitalize on all their hard work and investment.

10 Steps towards setting up a successful business

1.  Setup a Budget - Although a budget can sound restrictive it can actually prove to be freeing and a great management tool to help you identify possible income and expense areas that you haven’t thought of.   Using industry comparisons as benchmarks for developing your budget can be a great value.    Keep in mind benchmarks are just a starting point as your company will have unique features to consider.  Sample benchmarks can be found at: www.bizstats.com

2. Apply for Federal and State ID numbers–To establish your new company with the Internal Revenue Service and local State authorities you need to apply for the appropriate identification numbers.  Most authorities require completing a simple form and most can be done online or via phone for a quicker response.  These applications can be found at:

 

3. Incorporate - Whether you choose the S corporation, C Corporation, or LLC, setting up a corporation for your business gives you a layer of liability protection. This extra layer of protection can protect business claims from getting through to your personal assets.  If using an attorney, a basic for-profit corporation setup should typically cost $500-$1,000.

4. Shop for your business bank account– All banks are not alike.  Many banks offer no cost accounts or free online checking. Remember a good relationship with your banker can help you when it comes to borrowing needs down the road.

5. Choose appropriate accounting software – There are a number of software choices for tracking your bookkeeping and accounting.  Your industry may dictate the software required but many small and mid-size companies can easily and efficiently use off the shelf product QuickBooks by Intuit www.quickbooks.com

 6.  Invoice for your work –In the midst of getting your company up and running, don’t forget to invoice your customers for the work that you are performing for them.  This may sound like a no brainier but many business owners have learned this the hard way.  Consistent invoicing will help with consistent cash flow.

7.  Reconcile your bank account - Reconciling monthly can catch mistakes made by both you and your bank.  It can also alert you to fraudulent activity regarding your account.  If setup properly, many of the accounting software packages make the reconciliation process a fairly easy task.

8.  Compare actual income and expenses to your budget - – Once you are up and running, compare your actual sales and expenses to your budget.   Identify areas that are not inline.  Consider whether you need to adjust your budget or focus on your sales and spending.

9.  Review your company financial statements consistently - Each business should produce, at a minimum, a quarterly Balance Sheet and a quarterly Income (profit and loss) Statement.  The Balance Sheet should reflect what you own (cash, accounts receivable, equipment, building, etc.), what you owe (payables, loans, etc.), and your equity (money you have put into the company).  The Income Statement should reflect your sales, cost of goods sold, expenses and your profit or loss for that period of time.

 10.  Develop a mentor or advisory board– Many business owners feel like they are on their own when it comes to business challenges.  Look for strategic alliances with other business owners or advisors.  In Kansas City, the Kauffman Foundation www.kauffman.org  is a great resource for building your advisory team.  Remember don’t be afraid to ask questions.

Top 3 Problem Signs in your Accounting Process

Investigative Accounting - Undercover FBI Agent

I remember in undergraduate school being recruited as an accounting student for the FBI (Federal Bureau of Investigation). Now before you become too impressed with my credentials, I wasn't the only one, they were actually speaking to the entire class. I did not pursue the opportunity because, at the time, I did not see how a "bean counter" could actually help in crime solving.

Since my recruiting "brush with the law", I have seen first hand how businesses can be exposed to theft and criminal activities and how many times company owners are unaware of what is happening. An example of this was a real estate management company with several properties and with individual checking accounts for each property. The owners were unaware that their weekend janitorial service had been stealing blank checks from some of their property accounts and had been writing the checks for several thousand dollars.

Once we began reconciling the accounts to the bank statements at the end of the month, we discovered that the crime had been committed and immediately reported it to the unsuspecting business owner. I can't imagine how long this could have gone on if we had not had the proper accounting procedures in place.

Here are some potential problem signs to look for in your accounting processing:

1.

Untimely bank reconciliations

Reconciling should be a top priority for your accountant. If proper systems are in place, a bank reconciliation should be accomplished within a day or two of receiving the bank statement.

2.

Untimely financial statements

For most small to medium size companies a draft financial statement should be available by the 15th of the month following the reporting month end. Operating account balances should be available to the owner at all times.

3.

Limited checks and balances

As your company grows, it is important that you separate employees duties. This could look like having one person approve invoices and the second sign checks and maybe a third reconcile the bank statements. It is important to build in procedures that lessen the likelihood of theft and to help lessen your employees fiduciary exposure.

Reduce your financial exposure by applying proper accounting procedures. Ensure your accounting processing discourages unlawful activity.