One of the smartest things you can do when giving your business its annual physical check-up is to investigate whether refinancing is a timely and value-added option. You may have capital needs related to new projects, growth, or seasonal sales fluctuations and there may be attractive financing options available.
The key to success in this endeavour is getting a complete picture of your balance sheet and cash flow statements before you head to the bank or other financial institution. Many small businesses don’t have the finance capabilities to do this in-house and turn to Five Star Accounting for support in creating and understanding these documents. Beyond one-time refinancing considerations, ongoing advice in managing finances works as a wellness check for your business throughout the year.
Your balance sheet is a financial snapshot that shows current and long-term assets and liabilities and equity. These financial items are loaded with information on how well your business is doing. A good analysis of the balance sheet tells you how much debt you have and how much of your assets can be liquefied. These are key indicators your finance advisor will use to determine if restructuring is appropriate.
The cash flow statement, on the other hand, gives forecast run rate information. Careful scrutiny will help you predict cash shortages, finance needs, or investment opportunities and help you manage accounts receivable. Managing your finances on a pro forma basis is important to keep your business healthy. Using smart refinancing to get through a tight cash period may mean the difference between long-term health and death of the business.
There are many refinancing choices. Most obvious is getting better terms and conditions, starting with interest rates and payment terms and period and even looking at the whole loan structure. Consolidating debt can often reduce cash outflow. Refinancing can leverage existing assets or increase working capital.
Many small business owners don’t have existing finance understanding to consider these choices and can’t take the time to learn. Bringing in finance and accounting specialists to help with this can be just what the doctor ordered.
Contact Five Star Accounting for a business review to determine the health of your business.