Catch Up & Clean Up for Mergers & Acquisitions

Catch Up & Clean Up for Mergers & Acquisitions

If you’ve ever gone through the process of selling a house, you probably know about that in-between season that lies between living normally in your house and handing the keys over to the new owner. It’s a season of cleaning up and making necessary improvements so that when you eventually do put your house on the market, it’s being presented in its absolute best light. 

The same is true when you’ve made the enormous decision to sell your business! Even if you are confident in its value, a season of catching up and cleaning up your financial operations is essential to getting the most value out of the sale of your company. 

Of course, like haphazard cleaning and cheap improvements to your house before selling won’t add value to its sale, making last minute improvements in your business’ financial operations won’t pay out – in fact, the opposite may be true. Savvy buyers are on guard for unorganized, sloppy bookkeeping. If your books don’t add up, or there are expenses that can’t be categorized correctly, you’re going to lose value in the sale.

There’s also the matter of reputation to consider here. You’ve invested years into creating what your business is today. What do you want the sale of it to say about your company? What do you want it to say about you? 

You could be seen by potential buyers as an “old-school” unprofessional, or you could be seen as someone whose confidence in the value of their business shows clearly in the way you pay attention to even the most minute detail in your business’ bookkeeping

The choices you make in this in-between season before selling will not only impact the value you get out of the sale, but will also affect your legacy.

We’ve honed in on three specific areas that should be top priorities as you get your business’ books cleaned up and ready for a sale.

Every dollar needs to be accounted for in as much detail as possible.

When you’re preparing to sell your company, there is a ton of information you will need to have ready to show potential buyers. These include your financial records, a minimum of three years worth of profit/loss statements, net income statements, tax returns…the list goes on. 

It may seem obvious, perhaps, that all these numbers need to be properly balanced and accounted for. What may be less obvious is the value of breaking down these numbers in greater detail than you might assume necessary. 

You may be used to using one Quickbooks entry for your company’s “expenses,” but breaking those expenses down into specific, detailed categories (such as regular salaries vs. overtime pay, differentiating travel and entertainment expenses from regular expenses, highlighting parts and labor, etc,) will give potential buyers a lot more confidence in the true profits and expenses of the business. 

Identify and remove personal expenses you’ve been running through your business.

Sometimes business owners try to “add back” the value of the personal expenses that they’ve written off through the company, such as family health insurance or personal travel expenses. Problems arise, however, if you have insufficient data to prove to your buyer that these expenses were truly personal. 

We recommend identifying and removing these personal expenses from your books, ideally 18 months to a couple of years before putting your business up for sale. This protects your reputation as being transparent and honest, and lessens unnecessary confusion when it’s time to show your statements to potential buyers.

Identify and stop occasional expenses that aren’t recurring.

In that same vein, identifying random, occasional expenses will go a long way in helping clean up your bookkeeping. Perhaps you paid a large, one time payment for a marketing campaign, or sank some money into updating your company’s website. These aren’t recurring expenses for your company, but it can be hard to prove that to potential buyers as they’re looking over your books. We recommend starting to identify and stop spending money in these one-off categories at least two years in advance of selling your business. This will increase your profitability, which will help you sell for a higher value!

Is the reward worth the extra effort?

It’s a simple yes. With clean books, you’ll be a more trusted and therefore desirable target for buyers. 

But, don’t just spend time ahead of your sale simply cleaning up your books. The next buyer is likely going to come in and implement updated, efficient systems to the business’ financial operations when they take over. This saves them time and money and therefore increases the value of the business right from the start. They’ll make sure you’re using the latest accounting software, and leveraging good third party tools for efficient bill pay and payroll processing. 

Why leave this work for the next buyer? While you are cleaning up your books, also take the time to modernize your financial operations, thereby saving you time and money and increasing the value of your business.

The value you gain will be more than worth the extra effort – and you don’t have to do it alone.

At System Six, we are here to help. Day in and day out, we are helping businesses manage their financial operations and bookkeeping efficiently and accurately. And we love helping organizations get to that point – nothing gives us more joy than sitting back with a client after a few years of hard work and seeing decreased stress and increased profitability as a result of improved bookkeeping.   

Are you looking towards the future, and considering what you can be doing right now to get the most value out of your company when it comes time to sell? Consider letting us help you improve your bookkeeping and the overall efficiency of your financial operations.

5 Reasons Your Small Business Needs a Bookkeeper

5 Reasons Your Small Business Needs a Bookkeeper

We believe you started your business out of a place of passion and to meet a need in your community. As a small business owner, you likely wear many hats, juggling your time between owner, human resources director, marketing manager, and accountant, to name a few. Your time is valuable, but in light of all of your job titles, time never seems to be in abundance. Due dates loom, tasks pile up, details are overlooked, and stress begins to consume you. The solution? Delegate. Here are five signs it’s time to look for an outsourced bookkeeper so you can get back to dreaming and growing your business.

1. Receipts and bills are stacking up 

Is your desk becoming overgrown with bills and receipts? Does the paperwork feel like it never ends? Organizing your books can be discouraging when you are drowning in financial data. It becomes even more difficult if your business did not set up a proper system for bookkeeping from the beginning. Without a standardized approach, maintaining your books can be burdensome. Your employees rely on you for accurate and timely payroll and budgeting.

Organized books are critical for profit-loss statements, financial planning, and budgeting. Cloud-based tools like Quickbooks will make it easy to keep tabs on your finances without the mountain of papers on your desk. Don’t let those receipts get the best of you; hiring a professional bookkeeper can help. 

2. Tax-prep is stressful and overwhelming 

Does tax season stimulate anxiety? You took the right step in hiring a Certified Public Accountant to file your taxes, but tax preparation is still required. Someone needs to run reports, apply updated tax codes, and categorize paperwork. Doing this on your own can be intimidating. While financially savvy and experienced, your CPA is not involved in the ins and outs of daily business and doesn’t know what papers you filed where or how your business runs cash-flow through the weeks and years.

CPAs don’t typically do tax preparation, and it will require much more time, money, and communication to find all of the documents and data they need. Outsourcing all your business’s tax prep to a bookkeeper can alleviate the oppressiveness of tax season by streamlining communication with your CPA and increasing your confidence that your taxes will be filed correctly.

3. Financing is necessary for growth

Is your company looking to grow? Do you need additional financing options? For more financing, you must have organized and accurate financial data. Banks will evaluate your business on the organization of its financial records, debt repayment history, and reputation. By hiring a bookkeeper to execute financial tasks, your business will have a greater opportunity for increased lending. In doing so, you can know your profit and loss statements will be timely and accurate when submitting paperwork to a bank. If you need additional documentation, your bookkeeper is a call away. Don’t let approvals get in the way of your organization’s growth.

4. Every penny counts 

If you’re a small business owner, you know that every penny matters. Unanticipated fees and additional expenses are simply not an option. Avoiding unwanted costs is a must, and cash flow management is essential to running a successful business. By hiring a bookkeeper, your company avoids the risk of audits and late fees. In addition, bookkeepers can facilitate a more efficient business on your behalf by appropriately entering all information for your taxes, which saves money in the long run. Get back to looking at the big financial picture, let the bookkeepers handle the pennies. 

5. Dreaming for your business has become stagnant  

You didn’t go into business for the endless bills, crinkled receipts, and math homework. You became a business owner because you had a dream: a desire to change and serve your community and to build time and financial freedom. We believe you deserve to have the time and energy to focus on your goals and see them come to fruition. A professional bookkeeper grants you the mental space to be inspired again by maintaining the areas of your business that drag you down. Get back to dreaming, hire a bookkeeper.

You are one of your business’s most valuable assets.

By delegating the bookkeeping to a professional team like System Six, you regain time, energy, money, and most importantly, the space to grow your business. Are you interested in taking the next step to finding a trustworthy and dependable bookkeeper? Let’s chat. At System Six, we help business owners get back to what’s important, one line item at a time.

Call us now!