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The business year is finished. What do your finances look like?

The business year is finished. What do your finances look like?

We hope that 2018 was successful and profitable for you and your business! The end of the business year brings an obligation to review financial state of the whole company. Sometimes, despite the successful business, the financial reports of the company can reflect a different image. What happened in the financial management process? Is there something you could have done if you had acted in time?

At the end of the business year, you probably did everything your accountant told you to. You delivered the full documentation for recording, “cleared your drawers”, invoiced all that was left, recorded all incoming invoices, paid due liabilities, but at the end of the business year, the results are not what you expected. Maybe you did business with a loss, but there is money on your bank account, so you are surprised. Or the other way around! This happens because entrepreneurs often do not have a fully developed monitoring from a financial aspect and cannot prevent unexpected financial indicators at the end of the year.

The business year is finished. What do your finances look like?

All business scene actors are interested in your financial positions. Banks want to know whether you will be able to take on the next investment wave, suppliers want to know whether you will be able to settle your obligations, investors want to know whether you have potential for growth etc.

Let us take as an example a company that realised a loan through a business bank in 2018 and has a new wave of investments planned for 2019. The bank will, before making a decision on financial follow-up of the new investment, want to see how the company’s previous business year looked like and if the company will be able to take new financial burdens. The bank will review historic and current business of the company through the analysis of annual financial reports, gross balance sheet, current analytics of buyers, suppliers, stocks, debts, taking into account whole assets and liabilities. In order to present the investment, economic benefits and effects that the new investment will have on the business, the bank will demand an investment study and business plan, i.e. the projection of future income and business expenses. The bank will analyse historical and future financial positions in order to assess the strength of the company and its potential to repay the current loan and the one that will result from the financing of the new investment. Besides analysing the financial position, the bank will also analyse the company in regard to the core activity, i.e. the industry it does business in and market environment, as well as the financial positions of main competitors. In order to be aware of how you stand in comparison to your competition, a quality peer analysis is needed. Your financial indicators must present the correct state to the bank, so that the bank could make a decision on financing the new wave of investments. But are your financial reports done in such a way that the bank can use them to make a positive decision about future financing easier?

In practice, the companies’ directors are often burdened by many other important questions related to the company’s business, such as growth, contracting new jobs, staff management. They actually have no time to deal with financial tools that would enable them to structure financial transactions in the way the bank wants. And it is crucial for the company to approach financial matters in a professional manner. By structuring financial transactions and adapting them in order to realise the second wave of investment, the company would have secured a better financial picture in time. Not only that, but by managing their finances in a quality way, the director would know the company’s financial situation at any given moment and could make quality business decisions more easily.

Did you manage to accomplish everything you wanted during the business year?

If you have quality financial reports, if you had information that were necessary for right decision-making during the year and knew what your finances looked like at any moment, while not being distracted from the core activity and not spending time you could have invested in the growth and development of your company, then you did a great job. Congratulations! If you did not achieve everything you wanted, try to determine the reasons for it. It is probably because you did not have timely information that would have made decision-making easier.

Business plans for 2019

The business year 2019 keeps pushing forward. We hope that your business plan is being realised in a successful way. If you do not have defined goals for this year, it is not too late to define them in a quality way. Goals help us to stay motivated and monitor the business progress.

If you need help in any phase, call us and we will help you. Our team of motivated experts with experience in banking can take full care of your company’s business from a financial point of view, and you will have more time to focus on the core activity.