Every Spring, some people set aside a weekend or two to “clean up” the place by sorting through all of the junk in their house. Typically, this requires climbing into the attic or crawling down into the basement. The process is usually dirty, hot, smelly, and not a lot of fun. However, the result is positive. A lot of junk is sold, donated, or thrown away leaving the house a much nicer, cleaner place to live and entertain family and friends.
Sometimes, the financial records of a business can get “messy” as well and you need to do a little spring cleaning. Many times, this is not realized until an employee leaves the company. Only then is it discovered that maybe that employee was not performing all of the tasks required for the job. Perhaps the employee knew what to do, but since he was planning to leave anyway, his performance got lax. Perhaps the employee was overwhelmed and not able to handle the workload. Whatever the reason, you did not know but your financial records are a mess. You are not sure of anything now. Investors, board members, and bankers are not pleased, and you are left explaining what did or did not happen. Maybe you feel angry or embarrassed about the situation. Nevertheless, you have lost credibility with your stakeholders and need to get it back quickly.
We have worked with customers on several occasions to help “clean up” the books. Some examples of this are:
Customer #1: Bank statements had not been reconciled in five months. Upon learning of this, the CEO was upset, to put it mildly. We were brought in to “clean up the books” and get everything reconciled. An assignment like this is much like putting together a large puzzle. First, you start with reconciling cash. If cash is not reconciled, then it is highly likely that other areas are not reconciled either. After reconciling cash, then you move to accounts receivable, inventory, and accounts payable. Once working capital is reconciled, the rest is much easier to correct, if needed.
This assignment took two or three months. However, once the financials were correct, and processes put in place to keep them correct, the CEO was much happier. That business is well over $100 million in revenue now.
Customer #2: We started a new engagement and had good reason to believe that the company had the assets to increase its line of credit with the bank. However, upon meeting with the bank, we quickly learned that the company had not reported its financial results in several months so the bank was not interested in increasing its exposure. We were quickly thrown into “damage control” mode. We asked, “What do you need and when do you need it?” The bank gave us a list of reports needed with applicable due dates. We asked again, “If we can correct the situation and provide you with accurate and timely information, would you be willing to consider increasing the line of credit?” The bank replied yes, they would consider it.
Within about 3 months, we were able to get the financial statements accurate and timely. Once we re-established credibility with the bank, they were willing to discuss our needs. This resulted in the bank increasing the line of credit from $1.5 million to about $6 million.
Take a moment and ask yourself if your financial house is in order.
Crosslin Accounting and Business Solutions (ABS) is here to free you up to spend time doing what you do best. Outsource your accounting and CFO needs to someone that has been doing this for years. We have the experience and expertise to help you make your business more profitable. Let us do what we do best, so you are free to do what you do best.
Please contact us to help you find cash in your business.