When Financing is Required - The Importance of Notice to Reader Financial Statements

In business, and in life, obstacles arise. Decisions have to be made. 

As a business owner, you need to be 10 steps ahead. You need to expect the unexpected. When you know what your numbers are, you can make decisions in financing. You can make decisions in hiring. You can make decisions in building your business.

I have seen a few times in the last little while, the importance of having Notice to Reader ("NTR") financial statements. If you don't know what a NTR financial statement is, it is literally a Notice to the Reader that the financial statements were prepared without any audit or review of the numbers. There is no assurance provided and it is based on the numbers provided by management. It may seem like an unnecessary expense at the time. Your accounting software statements provide enough information for you to make that corporate tax filing, so why need more? However, there comes a time when financing is required. Most banks and leasing companies will usually require, at a minimum, NTR financial statements. Also, the bank might further require your most recent personal income tax return.

Be proactive instead of reactive. Getting financial statements prepared is an investment in your business. It is a report that can provide you a guide of how your business has done in the last year. It can be used to compare to future and prior years. Why wait until you need financing to have NTR financial statements prepared?

Also, NTR financial statements make you evaluate what is sitting as an asset, liability and equity on your balance sheet. You can evaluate the ratios that your bank is going to consider in the assessment of your company for financing - Debt to Equity, Working Capital, and others. When you have more than one year of NTR financial statements, you can compare your profit and loss, and the changes in your revenues, cost of goods sold, and expenses. You can evaluate your Gross Margin, EBITDA, and other income statement ratios.

When you know your numbers, you have a bit of power in negotiations, because you have knowledge. You may not get everything you want, but you may be able to negotiate the monthly payment, the interest rate, the length of the lease, or even getting the lease or financing in the first place!

Take that first step in your 10 steps ahead of the game. Get NTR financial statements prepared, and make that investment in your business today. ​

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