by Debi Enders
With 2017 just around the corner, now is the time to pause, give your business a quick financial checkup and make sure your current strategies will get you where you are headed next. In other words, it’s a good time to schedule an appointment with your banker, accountant or other financial adviser. The discussion should cover both your immediate needs and your long-term goals and whether they are adequately reflected in your current business strategies.
Consider taxes, for example. Many small businesses expect their accountants to focus on depreciation and other strategies that reduce taxable income as much as possible. And that could be all well and good – as long as the end goal is to minimize potential tax liability.
However, minimizing net income is not always the best long-term strategy, particularly if you are planning to purchase new equipment, add new products or make other investments with the intention of growing your business.
Instead, you may be in the market for financing. And if there’s one primary consideration bankers look at when assessing a loan application, it is your ability to repay the funds they lend you. Business owners whose tax returns show little or no income could have a difficult time making the case that they have the ability to repay.
Remember, bankers make loan decisions based on the income you report to the government. Efforts to minimize revenue and assets for tax purposes can have the unintended consequence of hurting your ability to gain credit and financing for your business.
Thus, if your business plan includes applying for a loan in the next 12 to 24 months, you want to be able to show that your business has a profitable operating history.
This is just one example of the kind of information your financial advisers need to help your business plan accordingly.
Debi Enders (debi.enders@commercebank.com) is vice president, small business banking at Commerce Bank.
Submitted 8 years 2 days ago