What If My Banker And Accountant Disagree?

by Debi Enders

Your banker and accountant should agree on one thing: the success of your business. But because they come from different perspectives, their advice on how to get there may sometimes be at odds.   

Take taxes, for example. A small business typically looks to its accountant for ideas on how to reduce its tax bill. Accountants may respond with suggestions for asset depreciation, write-offs and other strategies for reducing taxable income.  

An accountant’s success in saving tax dollars, however, can have unintended consequences should that same small business be in the market for a loan. That’s because banks look at taxable income when assessing a potential borrower’s ability to repay. A company that shows little income on its books is a less-than-ideal candidate for the financing it may need to grow.

So what’s a small business to do?  A good place to start is to make sure your accountant and your banker are on the same page. A skilled accountant should be able to recommend strategies that help position you for loan approval. That may mean fewer deductions and a higher tax bill, at least for the year or two before you seek financing.

It could also mean liquidating assets to build greater cash reserves given that banks often like to see at least a two-month cushion in place before you complete a loan application.  Because bankers typically consider “global cash flow” – which includes both personal and business income and debt – when working with small businesses, you might also need to rethink any new personal debt you might be considering.

Should your banker and your accountant always be on the same page? If both understand your goals, your needs and have your best interests in mind, they will agree more often than not. Keep lines of communication open!

Debi Enders (debi.enders@commercebank.com) is vice president, small business banking at Commerce Bank.