Accounting News and Notes

Award Winning Duluth/Gwinnett/Atlanta CPA Advises Atlanta Business Owners on Understanding Nuances of Cash vs. Accrual Financial Statements

Using a computerized accounting package which has a balance sheet and profit and loss capability is a great start to being able to track your business transactions accurately and efficiently. Generally speaking for many small businesses QuickBooks is good system and often has much more capability than you will ever need. However this program is not a universal fit for everyone and you should take care to carefully evaluate your needs to ensure that you select a system which will work for you long term. Special consideration, for example, should be given if you need a POS/Point of Sale System, detailed inventory costing/tracking/and valuation, or if your business will require a multiple user system.

Being an expert at running your business does not make you one at the responsibility of accounting for your business. By applying our decades of experience we are well suited to guide you to track the financial and operational affairs of your business. Understanding the differences in the usability of financial statements prepared on a cash versus and accrual basis will do much to help your Atlanta Business have up to date and useful financial information. Below is a sample inquiry we might receive from a client regarding their internal financial statements/tax returns, that were prepared on a cash basis.

Hi John: We are trying to secure a mortgage loan against our  building.  It’s more or less approved, but the loan officer wants to clear up a few things in case he is asked by his supervisor. 

Basically he is looking at our 2008 and 2009 tax returns.  He said we started 2009 with negative retained earnings and ended at negative $45K. His question is “what happened”?  Any help? 

Below is my response: 

Your tax returns are prepared on a cash basis, which means they reflect only the changes in the company’s cash balances and therefore does not reflect any open billings or accounts receivable. 

To give any kind of initial answer I would have to defer to the cash based tax returns themselves. If we want to give a more meaningful answer for those years we would need to compile financial statements for the last two years on an accrual basis. To do this I would need the open Accounts Receivable and Accounts Payable at the end of the last three tax years for the already prepared cash based tax returns. 

Though many business owners will spend substantive time evaluating their cash balance, this alone fails to contemplate other information available that might dramatically impact important operational and strategic issues. Consideration to long-term issues would include evaluation of the business’s current results versus its annual forecast, and a careful review of future sales and profit forecasts. It is also important to evaluate cash balances considering anticipated dates of collection of receivables, payment of ordinary debt, accounts payable, fixed asset purchases, and leases as all of these issues have substantive impact on what your future cash balances will be. The best way to ready yourself for successful evaluation of your financial statements is therefore to prepare your statements on an accrual, rather than on a cash basis. 

In light of this information, you are better able to make wise decisions that take into consideration future issues and your ability to satisfactorily balance the varying ebbs and flows that affect not only your present but future ongoing operations and the very viability of your business. Failure to consider each and all of these issues will result in a perpetual array of poor cash decisions, as they are not grounded in fact. Though running a business is indeed an art, it is based upon one’s ability to perceive and properly process and evaluate the facts available that are tantamount to ones success and an accrual statement is your best bet to have the required information to compile needed useful information for Atlanta Business Owners & Entrepreneurs. 

And this is only some of the information available on our web site. You also have at our blog a host of other varied and timely tax and business management issues you can use. 

John Dillard, CPA of His CPA, PC (An Atlanta Christian CPA firm) 1940 Woods River Lane, Duluth, GA 30097  Phone 770-814-9304   http://www.hiscpa.com/    http://www.john-dillard.com/ To retain John Dillard CPA (An Atlanta Christian Speaker/Author) for your business group or church congregation, you can contact him today at 770.814.9304 

Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!  

We advise clients on: IRS representation, Offer in Compromise, Tax Problems, Incorporation in Georgia, Corporate and Personal Income Tax Returns, Part-time CFO, Virtual Controller, Business Planning, Offer in Compromise, Back Taxes, Business Acquisitions/Sales, Forensic Accounting, Business Valuations and Bookkeeping.

How Life Insurance Fits into your Estate Plan 

Even with reduced estate tax rates and higher exclusion levels, Americans could still be on the hook for billions of dollars in estate taxes over the coming years. More than half a million estate tax returns were projected to be filed with the IRS in calendar years 2004 to 2010. 

Fortunately, there are strategies to help protect the legacy you intend to leave your heirs. One popular method uses life insurance to complement your estate plan and possible help offset your estate tax liability. 

Set Up a Life Insurance Trust

The death benefit from a life insurance policy is not subject to federal income taxes. But if you are the policy owner and the death benefit is large enough to push the value of your estate over the applicable exemption amount ($1.5 million in 2004 and 2005), some of your estate could be taxed (maximum 47 percent rate in 2005). 

If you set up a properly structured irrevocable life insurance trust to purchase your life insurance policy and pay the premiums, the death benefit will be paid to the trust and will not be considered part of your estate. You can fund the trust with “present interest gifts” of cash each year. The trustee appointed when the trust is drafted can use the cash to pay the policy premiums, and eventually will distribute any proceeds according to the terms of the trust. 

The proceeds from a policy held in an irrevocable life insurance trust may also help protect your heirs from being forced to raise cash to pay any other taxes that your estate might incur.This may prevent them from having to sell assets such as a home or business. 

But be careful. An irrevocable trust cannot be changed after you finalize the terms of the trust. 

Setting up an irrevocable life insurance trust to hold your life insurance policies could help protect your heirs from having to pay estate taxes on your legacy. That’s one good reason to carefully consider the role of life insurance in your estate plan.  

1)      Internal Revenue Service, 2003

2)      The cost and availability of life insurance depend on such factors as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable by having the policy approved.

3)      The use of these approaches can involve a complex web of tax rules and regulations. You should consider the counsel of an experienced estate planning professional before implementing such strategies. 

Meredith C. Moore is a Registered Representative offering securities through NYLIFE Securities Inc., Member NASD/SIPC.  (404) 459- 2000.  Financial Advisor offering investment Advisory services through Eagle Strategies Corp., A registered Investment Advisor. Moore and Associates Wealth Management is not owned or operated by NYLIFE Securities Inc. or its affiliates.

Maximizing Value When Selling Your Entrepreneurial Business 

Atlanta Bookkeeping & Accounting Services

Once an owner has decided it is time to make a change in the company’s ownership, the owner usually seeks advice from financial advisors.  The owner reviews the tax returns and financial statements for the past few years.  Owners’ thought processes lead them to set a bottom line price before seeking a valuation.  After a valuation is performed by a qualified professional, the owner typically is in “shock”.  The company documents do not support the owner’s value.  Typically a company’s value maybe understated based on the documentation.  Many investor owned, privately held companies manage through emotional decisions rather than by the numbers.  Owners should rely on the advice of professionals and fully document their company’s operations before they decide to sell. 

Reposition the Documentation. 

1.         Maximize the EBITDA by applying financial ratios.  Go beyond the usual cost cutting and receivables management.  Understand how management of the financial ratios may change the bottom line.

 2.    Fully document the use of add backs. Include all add backs to maximize the value of the company. 

Reposition the Operations. 

1.    Reposition the operations so that 80% of the annual revenue is contractual, reoccurring revenue.

2.    Eighty percent (80%) of the customer base should generate a majority of the company’s revenue.  A company is less valuable when a majority of the revenue is generated by 20% of the customers. 

3.    Create management depth.   Adding an operations manager, trained to handle the day to day operations, identifies management strength to a prospective buyer and spreads the perception of customer loyalty to the company, beyond the owner. 

4.    Determine the risk factors associated with the owner’s ability to grow the company.  The owner can increase the value of the company through the development of a plan to reduce and eliminate risk factors.  Reposition the company’s weaknesses as opportunities by altering management strategies.  

5.    Prove the value of a company through acceptable documentation and turn a buyer’s skepticism into confidence.

To discover more about positioning your business for sale you can contact Terry Robinson, Broker of the tfr Group, Inc. at 770 262 6491or by e-mail at tfrobinson.net

Atlanta CPA Spotlight on Wealth Transfer and Retirement Planning 

Planning for retirement is first and foremost about assuring that you have enough to retire on. But for many it’s also about planning to preserve assets for heirs and charity. If you and/or your spouse are a business owner, professional, or highly compensated executive, chances are you would like to have enough wealth to not only provide for yourself during retirement, but also to create a lasting legacy. The key to achieving this goal often lies in structuring payments from tax-qualified retirement plans (QRPs) and individual retirement accounts (IRAs) in a tax-efficient manner, making lifetime gifts of non-retirement assets, and creating wealth and liquidity through the use of life insurance.

Structuring Payments from QRPs and IRAs

            Basically, distributions from QRPs come in two forms—lump sum and periodic payments. Couples who need QRP benefits to meet day-to-day living expenses are most likely to choose periodic payments. Joint and survivor annuities are popular with married couples because a joint and survivor annuity guarantees that benefits will be paid for as long as one of the spouses remains alive. More affluent couples are likely to find lump-sum distributions more attractive.  These distributions may be rolled over income tax-free into IRAs, where the IRA owner has considerable flexibility in the form of the payout and often a wider range of investment options than offered under a QRP.

            Most advisors recommend that non-QRP/IRA assets be tapped for living expenses during retirement years before QRP and IRA assets are spent. The reasoning is straightforward—assets in QRPs and IRAs continue to accumulate tax-deferred even after you retire or die. The idea is to stretch-out payments for as long as the law allows.

One obstacle to “stretch-out” planning is minimum distribution rules that require distributions to begin on a specified date and to be at least a minimum amount.  In general, you can defer taking payments from your IRA until April 1 of the year following the calendar year in which you turn age 70½. For your QRP distributions can be deferred until April 1 after you retire, if later, unless you are a 5% or greater owner.  At that time, you can elect to spread the payments over your lifetime or the joint lifetimes of you and your spouse or some other beneficiary. The longer the spread-out, the greater the deferral. Although amounts distributed to beneficiaries are included in income, amounts left in an IRA continue to grow tax-deferred, even during the pay-out phase.

A second obstacle to stretch-out planning is federal estate taxes. Although QRP and IRA distributions to a surviving spouse generally qualify for the marital deduction and are not subject to estate taxes at the death of the first spouse to die, the value of distributions to children and grandchildren are subject to estate taxes at rates as high as 45 percent on taxable transfers of $2 million or more in 2007. The amount of total estate tax at the applicable rate is reduced by a credit–$780,800 in 2007 to determine the actual amount of tax payable. The credit translates into an applicable exclusion in 2007 of $2.0 million. Consequently, only taxable estates in excess of $2.0 million are subject to estate taxes. The exemption amount increases to $3.5 million by 2009.  (The federal estate tax is scheduled to be repealed for one year in 2010 and reinstated in 2011 unless Congress takes additional action.) Under the current law, at that time, the applicable exclusion amount will revert to $1 million and the top estate tax rate will be 55%.  As discussed below, life insurance can be a cost-effective way to provide the cash for tax payment for those individuals caught in the estate tax net.

While your beneficiary will be able to offset a portion of the distributed income with a deduction for the estate tax paid on the QRP or IRA, between income taxes and estate taxes, that is a huge bite out of the legacy you hope to leave.

Lifetime Gifts of Non-Retirement Assets   

If, after stretching-out QRP and IRA benefits, you still have more than enough income to live on in retirement, you may want to consider lifetime gifts to family and charity.  Don’t miss out on the several tax breaks that encourage lifetime gifts.

First, you and your spouse using your annual gift tax exclusions can join together to make outright gifts of up to $24,000 (2007 indexed for inflation) per family member entirely free of estate and gift taxes.

Second, lifetime gifts and any future appreciation associated with them escape estate taxation at your death—and, that translates into less estate taxes.

Third, outright gifts to charity may be deductible with certain limitations against income and gift taxes and the value of the gift also escapes estate taxes.

Finally, any future income earned by the transferred assets is taxed to the donee, not you.

There are non-tax reasons for lifetime gifts as well. By making the gift while you are still alive, you get to see the beneficiary, family member or charity, use and enjoy the gift. You can even offer advice about how to manage the gift. If you think a child or grandchild isn’t quite ready for the responsibility, or if the donee is a minor, consider creating a trust to manage the asset for him or her.

Life Insurance

Life insurance is the cornerstone of many retirement and wealth transfer plans. When you’re accumulating for retirement, life insurance helps protects your family from your premature death. During your retirement years, when wealth transfer is a focus, life insurance provides the cash to help pay estate taxes and other death costs and helps assure that everything goes according to plan.  Many individuals take advantage of irrevocable life insurance trusts as a way to remove the policy proceeds from their taxable estate. An irrevocable life insurance trust avoids estate taxes because it is a separate legal entity in which the individual retains no interest or control.  With proper planning, an irrevocable life insurance trust shelters the death proceeds from both income and estate taxes.

Life insurance can be especially important if you own a business and/or have significant amounts in QRPs and IRAs. Closely-held businesses are often highly illiquid—hard to convert to cash. Unless you have cash from another source to pay the estate taxes, you may have to sell or liquidate your business at a discount to pay the tax man. Similarly, with respect to QRP and IRA assets, even though the plans will pay out over the life expectancy of the beneficiary or as an annuity over many years, estate taxes on such assets are due within nine months of death. The need to pay taxes on “phantom income”—income that has not yet been received—can create a hardship. That’s where life insurance comes to the rescue.

Conclusion

You’ve probably spent a lot of time and effort accumulating your retirement assets and building an estate. Take the time to meet with a licensed financial professional to help make sure that you not only enjoy the income you want during retirement, but also leave your loved ones and favorite charities with a lasting financial memory.

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This article provides general information for the subject matter covered.  It is not intended to render legal or tax advice.  An individual’s particular circumstances should be discussed with a personal tax or legal advisor. The Prudential Insurance Company of America, 751 Broad Street, Newark, NJ  07102-3777

Provided courtesy of Cornerstone Financial Partners, LLC.   For more information, contact  Richard L. McDonald, Tim Thornberry, ChFC or John Winters, MBA, CLTC, who offer investment advisory services through Prudential Financial Planning Services, a division of Pruco Securities, LLC.  They can be reached at 770-730-6100. Cornerstone Financial Partners, LLC is not affiliated with Pruco.  Other products and services may be offered through a non-Pruco entity.

Atlanta CPA on Addressing Financing Needs for Atlanta Business Owners & Entrepreneurs for Decades

Helping Clients in a Down Economic Market…Procuring $100,000 line of credit for Atlanta Based Business

Despite the news of the times and the severity of the downturn in the economic market, there remains financially sound quality lenders who are seeking to extend credit to qualified business owners. As you would expect, however, banks are getting back to the basics of lending practices that ruled the decades of lending practices before the recent downturn in the economy. Rather than the “free wheeling” lending business practices of the past, banks and other traditional lenders are seeking to lend monies to well-run companies who have an idea to expand both the revenue and profit of the business.

Lenders are now more than ever looking to the Five C’s of lending:

-Credit

-Cash Flow

-Character

-Collateral

-Conditions

If you have a sound business model, a good business plan, good payment history, adequate collateral and the respect of your peers, lending sources are available and credit to extend credit to your business. However, as has been true for decades often having the attention and relationship with a good smaller bank is the best bet for entrepreneurs and business owners who have definitive financing needs. Smaller banks and lenders are often much more flexible and willing to extend credit when larger regional and national banks will not. Working with your CPA who has these contacts and is aware of economic conditions and trends in your area is essential to procuring and especially funding credit needs in tough economic times.

We have recently helped a business owner here in Atlanta area obtain and procure a $100,000 needed credit line for their business. The credit line could not have come at a better time as the economy was shrinking and it allowed the company sufficient cash flow to cash flow their business needs and allowed them sufficient time for them to package their business and to sell the business outright. It is probable that without the credit line in place that the business would have folded before the owner could “cash in” by the selling of their business to a competitor for hundreds of thousands of dollars.

John Dillard is a Christian Speaker/Author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ (An Atlanta CPA firm) and for his latest book Overcoming Life’s 9/11’s: Job’s Journey and to learn about his ministry visit http://www.john-dillard.com/ To contact John Dillard CPA (Atlanta Christian Author/Speaker) today call 770. 814.9304 proudly serving Duluth, GA, Gwinnett County and Beyond.

“Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!” What, then, shall we say in response to this? If God is for us, who can be against us? Romans 8:31 Why are these verses here? Learn how His CPA became a Christian Accounting firm visit http://www.hiscpa.com/christian-CPA.html

Business Banking 101…Getting Financing For Your Atlanta Business

Getting Your Banker to Say Yes to Financing Needs

Knowing how to best package your business and to present yourself to a banker is essential to getting your bank to say yes to your financing needs. This is the third part of the series of Getting Financing For Your Business. Integral building blocks to this series can be found on this blog and are entitled and are available on this blog:

Building Your Business Credit…Getting Financing For Your Business

Top Five Criteria Banks Use to Extend Financing/Credit Lines…Getting Financing For Your Business

These are the essential components of getting a loan and this article, Business Banking 101, is the “icing on the cake.” Putting a well-organized and thought out loan package together is the last step in our series of Getting Financing For Your Business. The loan package will be the documents that the bank will use to evaluate your loan should be presented in a well organized and typed format. These documents will be first reviewed by your primary bank contact and then forwarded up the “ladder.” Thus, having the documents well presented and in order are essential to ensuring that your data is reviewed thoroughly. A poorly presented package, regardless of your other qualifications, will do much to have it quickly ignored and discarded. A well-presented package should include most or all of the following, depending upon your particular circumstances:

-Income Tax Returns. Corporate and Personal Income Tax Returns for the last three years. Corporate Tax Returns should ideally reflect a positive net worth/retained earnings and a positive and growing net income. Though banks frequently  extend credit to companies that have a negative net worth and a recurring loss on their books, it is much less likely than when a bank sees that a company is managing well their own financial results and operations. Tax returns should be prepared by a CPA who is well informed and versed in your business and all taxation issues impacting your business. Having returns prepared by anyone else is a recipe for failure in both the loan process and the legal mitigation of your annual income taxes due.

-Interim Financial Statement. Banks want to know what is currently going on in your business. Unless the year is just over (less than sixty days), then it is prudent to have a interim financial statement prepared by your CPA showing the proper classification of assets, liabilities, revenues and expenses. A banker, like all prudent investors/lenders/owners of a business should first look to see if there is a positive retained earnings and net income. Failing to have these as integral components of your internal financials will not bode well for the approval process. Frequently there can be prudent management decisions made to help ensure that financials presented put the company in the best light possible. For example, presenting your April interim financials that show a profit will be more meaningful and beneficial than presenting your March interim financials, which reflect a loss. Also providing a narrative of any significant issues, trends, concerns and operational issues is a great way to “pre-answer” any potential questions.

-Current Net Worth Statement of Owners/Guarantors. Often banks and lending institutions will want for you to have available for their review a Statement of Net Worth. Most lending institutions will have a form that you can use for this purpose and many want the information presented on their standardized forms. This form lists all of the owners/guarantors personal assets and liabilities. Being sure to list all of the information both completely and succinctly will make this easier for review. Also, being sure not to unduly inflate any values on the forms will add credibility to the package. Two of the more widely inflated values include the valuing of home furnishings and stock of a closely held corporation.

-Credit Reports. A credit report is an independent source of information that a potential lender uses to evaluate a banking credit. Although any lender is going to pull one on their own as well, you being sure that you are aware of and have adequately addressed all potential blemishes is essential. Clearing any potential problems off of your credit report prior to submitting any loan package will do much to gain favor in the review of your package. Your goal should be to ensure that a potential lender does not “discover” any nuances or missteps in your package being sure to cover all of your business strengths as well as weaknesses adequately.

-Business Plan. Especially for longer term or permanent financing, having a well-thought out and organized business plan is essential as it will “lay out” and tell the story of your business, its operations, how you plan to use the money, how profitable you anticipate the business to be in the future and most importantly to the bank, how you plan to repay them. Working with a CPA who is well versed in business plan development is essential to providing a package to a bank.

-Aging. If your business has a large amount of accounts receivable or accounts payable, it is suggest that you include in the loan package a recapped aging by customer/vendor. This will assist a potential lender in evaluating whether your billings and collections are up to data as well as highlight any potential collection issues. Also this will allow the banker to evaluate your liquidity and your ability in keeping all your company’s bills and financial obligations current and paid.

-Detail Fixed Asset Schedule. If your business has a substantial amount of their net worth invested in fixed assets.

-Substantive Corroborating Information. Every package is different and needs to be treated accordingly. For what might be desired to emphasized in one package may not even be listed in another. Being sure to list all of the important substantive issues such as upcoming events, sales, acquisitions, product line enhancements etc. would all be important and critical to share on the front end of any loan package request.

John Dillard is a Christian Speaker/Author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ (An Atlanta CPA firm) and for his latest book Overcoming Life’s 9/11’s: Job’s Journey and to learn about his ministry visit http://www.john-dillard.com/ To contact John Dillard CPA (Atlanta Christian Author/Speaker) today call 770. 814.9304 proudly serving Duluth, GA, Gwinnett County and Beyond.

“Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!” What, then, shall we say in response to this? If God is for us, who can be against us? Romans 8:31 Why are these verses here? Learn how His CPA became a Christian Accounting firm visit http://www.hiscpa.com/christian-CPA.html

Building Your Business Credit…Getting Financing For Your Atlanta Business

There is no magic pill to take that will make you business “bankable.” As you would expect, banks make loans with the goal of being repaid, thus some of their primary concerns will center on your most recent past history, experience and the basics of your business itself. Frequently however business owners instead will look at a bank in the hope that they will do Venture Capital (VC) funding. VC funding is commonly used when you have a new business idea or a start up venture that is more speculative in nature. This could be for either an established business or a very new one, but the central theme in VC funding is that there is more uncertainty and much more risk that one would find in traditional bank funding.

Building Your Credit in the only true way that matters evolves over time as you build your business over time and develop a documentable track record. For example, when I initially started my CPA practice over twenty years ago, it is difficult to gain a loan in the tens of thousands. Now however, banks are more than willing to grant and extend credit in the hundreds of thousands. There is nothing about me that has changed. I am still a CPA and have remained in my chosen field of profession. However that is where the similarity stops as over time my business has developed a following, a predictable cash flow and a track record. I cannot recall all the times I have watched in my career as a  CPA in Atlanta where business owners have failed to prepare; which is in essence, preparing to fail.

Banks want to see that you have been a good steward and that all that you have managed to date that you have done so with care. Often this means that you will need to make financial decisions that by worldly criteria are unpopular, choosing to manage money, while answering to a higher standard and by conservative standards. This means that frequently you will pass on business opportunities, turn down credit and have a mental attitude of being debt averse. In fact, the best way to ensure that you have money down the line, is not to spend it. Doing so will require you to pass on business deals that sound too good to be true and that you will work to stay out of debt and then to liquidate it, when you acquire it. Though this is not the way the world sees money, it is the best way to ensure that when you seek to obtain credit for a valid business proposal and expansion of your business that banks and traditional lending sources will be on our side with their checkbook ready.

John Dillard is a Christian Speaker/Author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ (An Atlanta CPA firm) and for his latest book Overcoming Life’s 9/11’s: Job’s Journey and to learn about his ministry visit http://www.john-dillard.com/ To contact John Dillard CPA (Atlanta Christian Author/Speaker) today call 770. 814.9304 proudly serving Duluth, GA, Gwinnett County and Beyond.

“Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!” What, then, shall we say in response to this? If God is for us, who can be against us? Romans 8:31 Why are these verses here? Learn how His CPA became a Christian Accounting firm visit http://www.hiscpa.com/christian-CPA.html

Top Five Criteria Banks Use to Extend Financing/Credit Lines…Getting Financing For Your Atlanta Business

“Knowing the Ropes” is essential to positioning your company to be able to be in a position to be bankable and to get a line of credit or more permanent financing when it is most needed by your business. Just as you cannot obtain fire insurance the day after a fire and to have it cover a past loss. Similarly is it true, that you cannot one day decide to “get a loan” and acquire needed financing as easy as picking up the phone and ordering it, as if off a menu. Though restaurants respond well to that sort of relationship and, in fact, they cater to it, banks and lending institutions often have Lending Boards, Boards of Directors, Review Committees, Shareholders, Officers and many regulatory authorities they all answer to. As such being aware of what they are looking for is essential to any search for financing. Getting “your financial ducks in a row” is the first part of the process. Failure to satisfactorily address all of these variable components will do much to impair your firms ability to procure monies for operating and capital financing needs.

The Five C’s of Lending

Cash Flow. A lender will look at your internal books and records to ensure that there will be adequate cash flow available to pay for all of the business normal operating expenses, including all salaries, including the owner. In addition to the past operating results of the business a bank will review to make sure that substantive cash flow is available to safely ensure that all required loan payments, including principal and interest, will be made on a timely basis. One old adage to be constantly aware of is “that cash is king” for without it, many business opportunities will be lost, due to poor planning and under capitalization.

Credit. Your credit score is the banks source to independently determine and verify you past track record of paying and keeping your financial obligations current. Though there are many things one can do over time to improve your credit, the best change in your credit score will be dictated over time by you obtaining reasonable credit limits and sources and then the timely payoff of any and all existing obligations. When cash flow permits paying your bills in advance will do much to help ensure that you are a favored creditor. If you have had a bankruptcy or default in your past, often it will take many months or several years for those events to “season” and for you to improve past blights on your record with sound financial management and prompt bill payment.

Collateral. Part of the recent demise in our economy is that banks and lenders failed to stay committed to tried and true lending criteria that had worked previously for decades. Collateral is essentially the amount of the commitment that a borrower makes themselves in a financing consideration. This can take the form of existing cash, retained earnings, stock, real estate, property and any other substantive item of value that you and the bank agree. Though banks never make a loan in an effort to “get at” the collateral, having it available as a backup, in the event of a default, does much to help mitigate a banks given exposure on any particular loan.

Character. Who you are, what you do, what strengths you have, how you work, your past successes, your present working habits are all essential parts of your character that a bank will review when evaluating whether or not to extend your company a credit line, mortgage or bridge financing. Banks do people frequently because of the people who run a business rather than the business itself. This is especially true if you are a business that is relatively new and growing and therefore the business is still interlocked and identified with who the owner is, rather than what the business does.

Conditions. Just as we have all so dramatically learned over the last several months what is going on in our world around us will do much to determine what will happen in the future. By our own personal and business analysis of economic and demographic trends in the areas where we live and work will tell us much about the prospects for the future. Though analyzing them will not guarantee either success or failure, they do much to provide leading indicators of potential success. A bank/traditional lender will stay abreast of this information, which is often available through your local Chamber of Commerce. For example, in Gwinnett County where I live they even have a separate operating department that keeps tracks and analyzes key economic operating criteria.

Focusing on these Five C’s of Lending will not guarantee you a loan but they will dramatically heighten your awareness and understanding of what banks and lending sources are looking for. This will give you a leg up and an opportunity to put your best foot forward to ensuring adequate funding and souring of business lines of credit of financing.  These items when taken as a whole will give the banker specific and general information alike when determining on whether to extend credit to you and your business. I have watched many CPA clients in Atlanta fail in their financing attempts solely as a result of failing to know what to look for. Staying abreast of your business community and trends will do much to ensure financial success.

John Dillard is a Christian Speaker/Author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ (An Atlanta CPA firm) and for his latest book Overcoming Life’s 9/11’s: Job’s Journey and to learn about his ministry visit http://www.john-dillard.com/ To contact John Dillard CPA (Atlanta Christian Author/Speaker) today call 770. 814.9304 proudly serving Duluth, GA, Gwinnett County and Beyond.

“Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!” What, then, shall we say in response to this? If God is for us, who can be against us? Romans 8:31 Why are these verses here? Learn how His CPA became a Christian Accounting firm visit http://www.hiscpa.com/christian-CPA.html

Our Newest Series Starts Today…Getting Financing For Your Atlanta Business

Techniques for Financing Your Business, Procuring Credit & Mortgages

Learning what you can do to get your business and personal affairs in order to address financing needs and issues is essential. As a forbearer to a new series called Getting Financing For Your Business will be coming soon. This series will focus on what you can do to get ready for this series and to ensure that you have much of the requisite “course material” out of the way. Having a basic familiarity with Financing Vehicles, Terms, and Options will ensure that as the Series begins you will be ready to learn and apply the concepts.

Stay tuned to this site as we unfold the Financial Series… Getting Financing For Your Business

Funding Your Business – Loans, Leases, and Lines of Credit
There are many financing methods that are available as your business grows. This guide will help you select which one is best for you.  http://www.hiscpa.com/business-funding.html

Alternative Funding Methods for a Growing Business
A guide on what to do when you banker says no leading you to discover new funding vehicles to help your business achieve its goal. http://www.hiscpa.com/alternative-funding.html

Working with a Banker and Obtaining Credit for your Business
Finding a good banker and maintaining a close rapport keeping them well apprised of your business’s trends and operations results will help him be able to say yes when you need them the most. http://www.hiscpa.com/banking-relationships.html

Examine Your Options Before Taking Out a Mortgage
A changing marketplace and a tightening economy are impacting financing decisions as well as the whole of the economy impacting this critical financial decision. http://www.hiscpa.com/mortgages.html

There is no magic pill to take that will make you business “bankable.” As you would expect banks make loans with the goal of being repaid, thus some of their primary concerns will center on your credit, cash flow, character, past operations and business plan. These items when taken as a whole will give the banker specific and general information alike when determining on whether to extend credit to you and your business.

Having served as a Public Speaker and CPA in the Atlanta Area for over twenty years, I have learned that business owners and entrepreneurs are still seeking guidance on similar issues of decades ago. This reference material will have you seeking after more.

John Dillard is a Christian Speaker/Author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ (An Atlanta CPA firm) and for his latest book Overcoming Life’s 9/11’s: Job’s Journey and to learn about his ministry visit http://www.john-dillard.com/ To contact John Dillard CPA (Atlanta Christian Author/Speaker) today call 770. 814.9304 proudly serving Duluth, GA, Gwinnett County and Beyond.

“Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!” What, then, shall we say in response to this? If God is for us, who can be against us? Romans 8:31 Why are these verses here? Learn how His CPA became a Christian Accounting firm visit http://www.hiscpa.com/christian-CPA.html

Keynotes and Speaking Engagements for Atlanta Business Owners and Entrepreneurs

We have created programs for:

• Professional & Civic Associations
• Corporate “Lunch & Learns”
• Chambers of Commerce, Kiwanis, Rotary and  Business Groups
• Libraries
• Colleges/Universities
• Community Centers

We can cover a wide range of topics covering all types of Business Management Issues for the Business Owners. We work closely with business owners each and every day bringing our decades of experience to bear to “Keep Your Tax Bill as Low as Legally Possible” while serving as a part-time Virtual Chief Financial Officer for Your Business.

Business Management

Business Plans

Writing a Business Plan
Writing a Business Plan is your first best step to help your new business survive. A business plan is an invaluable tool that you will want to refer to often to ensure you business stays on track and maintains and achieves all of its operating goals.

Finding a Good CPA

What To Look For When Selecting A CPA
Selecting a professional is a daunting task. This guide will enable you to be better able to select a professional whose talent, expertise, and style will best assist you long-term.

Finding an Atlanta CPA
Even though all Certified Public Accountants must meet strict standards to earn their license, A CPA’s experience, education and life experience can help you select the right firm for your needs.

Top 10 Reasons to Contact Our Firm
Learn the key reasons why His CPA, P.C. cares about your business and how you can benefit from being served by a CPA whose ambition for you and your business matches that of your own.

Free CPA Consultations
Do you want that good old-fashioned way of doing things where your CPA looks out for you and your interests. We believe that your initial business consultation should be free so that you might make the best hiring decision without fear of getting a bill for the first thirty-minute interview.

John Dillard is a Christian Speaker/Author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ (An Atlanta CPA firm) and for his latest book Overcoming Life’s 9/11’s: Job’s Journey and to learn about his ministry visit http://www.john-dillard.com/ To contact John Dillard CPA (Atlanta Christian Author/Speaker) today call 770. 814.9304 proudly serving Duluth, GA, Gwinnett County and Beyond.

“Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!” What, then, shall we say in response to this? If God is for us, who can be against us? Romans 8:31 Why are these verses here? Learn how His CPA became a Christian Accounting firm visit http://www.hiscpa.com/christian-CPA.html