What to Do When Your Bank Wants Financial Statements

Kirsch CPA Group

Jun 11, 2021

If a bank, investor, buyer, bond agency, or other third-party asks for or demands your financials—and your CPA firm cannot provide them in a timely manner—you may not get the loan or credit line increase you need. Banks are especially strict because of the pandemic and are requiring your financials more often the before.

You don’t want to put the relationship with your bank and access to capital in jeopardy because you can’t produce accurate financials in time, especially if you’re experiencing rapid growth or are using a small CPA firm. Here’s an overview of what they’re looking for, how to comply, and how to ensure you can provide them on time especially when they are needed unexpectedly.

Why Financials Are Required

There’s no better way to gauge your financial health than a financial statement. Banks request them to make lending decisions including when credit limits are increased, investors and buyers request them to estimate their potential returns, and bond agencies request them to provide surety bonds.

Financial Statements Needed

Third-parties typically want to see the following financial statements:

Balance sheet
Income/profit and loss (P&L) statement
Statement of cash flows
Statement of changes in owner equity

These statements provide a deeper understanding of key financial metrics including:

Cash
Receivables
Inventory
Investments
Fixed assets
Intangible assets

Notes payable and accrued expenses
Long-term liabilities
Contingencies and commitments
Revenue and expenses
Net company equity

Types of Financials

You may be asked for reviewed financial statements, but you could also be asked for compiled or audited financials. Here are the differences:

Compiled Financials: prepared in the right format by a third-party CPA firm, but with no formal assurance of accuracy
Reviewed Financials: prepared by a third-party CPA firm who provides assurance that they are accurate and conform with generally accepted accounting principles (GAAP)
Audited Financials: prepared by a third-party CPA firm who audits them along with internal controls, and attests to conformance with GAAP and accuracy by reviewing source documents and confirming financial information with your bank and other relevant third-parties

If you’re planning to sell your business within the next 3-5 years, we recommend that you have your financials audited, or at least reviewed, every year. Your prospective buyers will have a better picture of your financial health potentially garnering a higher selling price for you.

Get Started Today

If your CPA doesn’t provide compiled, reviewed or audited financials or may not be able to do so promptly when required, Kirsch CPA Group can help with our assurance services. We have deep experience working with banks to prepare the financials of their clients, including nonprofits, and we can do the same for your business. This will help strengthen the relationship with your bank and facilitate your access to capital.

Contact us to explore our assurance services and we can provide you with a complimentary Profitability Analysis that includes a review of your company’s performance and how it compares with your industry peers.