Why Have Your Financial Statements Reviewed (Even When Not Required)
Reviewed financial statements can increase the value of your business and serve you in a multitude of ways
Business owners typically field requests for reviewed financial statements for a specific purpose. Whether the requests come via a tax preparer, a lender, a potential investor, purchaser, or partner, providing a reviewed financial statement provides an added level of credibility.
But reviewed financial statements have value beyond providing assurance to a third party that your numbers are sound. Peace of mind, for one thing, is no small advantage in running a business.
Solid financials also enable you to make better decisions that not only serve your current business objectives, but the future of your enterprise. Moreover, reviewed financial statements created by your accountant can increase the value of your business in multiple ways.
3 Types of Financials
There are three types of financial statement services: compilations, reviews and audits. Each type offers a progressively higher level of assurance.
Whatever level of assurance you choose, obtaining financial statements through an external accounting advisor is a better option than having them prepared by an in-house bookkeeper.
7 Reasons for Reviewed Financials
Here are seven ways reviewed financial statements can benefit your business:
1. Banks Favor Third-Party Preparation
Banks give lower interest rates, greater loan balances, higher lines of credit, and better approval ratings to firms that have an outside accountant preparing their reviewed financial statements. Loan applications generally ask who prepares your firm’s financial statements, and what level of assurance is provided. Reviewed financial statements generated by an accounting firm carries a higher degree of credibility which can translate into value for your firm.
2. Better Bonding Terms
Bonding underwriters also place a higher value on financial statements that have passed the scrutiny of an accountant. They may add that value to your firm in the form of higher bonding limits for individual projects and aggregate, or more favorable bonding terms such as lower collateral and better bonding approval ratings.
3. Waiting Costs More
The longer you wait between instances of having your financial information verified, the more work you’ll have to do in the future. Uncorrected miscalculations can create bigger headaches down the road. They’re also easier to correct when the underlying information is still fresh in your memory. Such gaps and delays can raise the cost of engagement.
4. A Good Investment
It’s a common misconception that reviewed financial statements are expensive. If that’s your mindset, consider the cost of future errors. And consider this math: after you recoup bank interest rate savings, the extra bonding capacity, and the new business you earn, the cost of the financial statements will seem well worth it.
Note: A compilation may be all that your firm needs, and that service is very reasonably priced.
5. Opportunity Facilitation
You may be surprised at who is interested in seeing your reviewed financial statements, and what they can do to help you grow your business. Opportunities to share them can lead to strategic partnerships, joint ventures, and even revenue-growing mergers and acquisitions.
6. Progress Measurement
Securing financing typically requires financial statements that go back three years. Without financial statements compiled and reviewed by your accounting partner, your books and records are always subject to inadvertent changes that may create obstacles.
7. Increased Credibility
Some businesses publish their reviewed financial statements. That’s a sign of the credibility that comes with having financial statements prepared by an accounting and tax professional that will not only put your company in the best light but can also give you a competitive edge.
Take the First Step
If would like to review your financials but lack a resource, we invite you to speak with one of our CPAs who can discuss what’s involved in the process, how much it costs, and how to get started.