As discussed in other episodes, it’s important to have good records when running your business. But if you decide to sell your business someday, it can be absolutely essential to have good record keeping in order to sell for maximum profit.
In some cases, you may not be even able to sell the business at all if you have sloppy records. In today’s episode of MissionBusinessPodcast.com, Bernard Roesch will talk through what you can do now to ensure that you don’t have any bookkeeping issues that hurt you if you ever decide to sell your business.
If you have any questions about this podcast episode, please feel free to contact us.
Key Elements of Good Bookkeeping Records
It’s important to ensure you have a few best practices in place for your bookkeeping so that you can effectively show the value of your business based on those records.
Best Practice Bookkeeping Organization
Here’s a quick overview of a few best practices that you should have in place for your bookkeeping.
- Your books should be structured similar to other businesses in your space. This would allow a potential acquirer to compare your financial performance with other businesses in your space.
- Specifically, the sales line should be accurate and organized based on your key revenue sources.
- Your expenses should be organized to quickly understand the main expenses associated with the business.
Not only should your records be organized but it’s important that the integrity of your bookkeeping data be strong.
- For example, all of your expenses should be logged, expenses should be accurate and not overstated or understated, and you should also have a up-to-date reconciliation process in place.
- This gives a potential acquirer reviewing your records confidence that the data is accurate when evaluating the performance of your business.
Separate Business And Personal Expenses To Maximize Value
When you go to sell your business, your financial records are the main factor that prove the value of your business. You cannot simply say a business is profitable but not have the financial records back that up.
- If you run personal expenses through your business and don’t separate them effectively, then this can cloud your financial records and make it difficult to value the business.
- By separating your personal records, you can effectively show the acquirer what the actual business income and expenses are while removing personal expenses that will go away when you are no longer involved in the business.
- This boosts the value of your business and also shows that you had best practice bookkeeping standards in place, even though you are running personal expenses through your business for various reasons.
Need Help Preparing Your Business For A Potential Sale
Most businesses do not think of these things until the last minute when trying to sell the business or raise financing and sometimes it’s not possible to complete records in time. This can make it so that you don’t receive the full value of your business when selling or in some cases, you will not be able to sell the business at all.
If you need help ensuring your business is in a strong financial records position, contact Bernard today.
You can also visit MissionBusinessPodcast.com for more insights that Bernard has been sharing with us in the previous episodes.