The Importance of Monthly Financials for Business Owners

All members of our GRP Capital team understand the value of monthly financials. This is especially the case when seeking financing or selling a business or property. If you’re not already creating or receiving monthly financials, we strongly recommend you start this process right away.

Finding Patterns Early

When you only receive financials quarterly, it is hard to spot emerging patterns. As a business owner, you may be very well aware of new contracts and vendors. These can include the big ticket items like equipment rental and insurance. However, following each line of a profit and loss statement monthly often reveals other expenses that are creeping up. Conversely, they can also reveal weakening or softening income sources.

Nimble decision-making:

If you are conversant with your monthly financials, you have enough time to course correct. You can quickly assess:

• Whether you need to change rates or prices
• If you should switch between payroll and contract labor
• How effective your marketing plan is
• How this month compared to the same month last year

Ultimately, if you only receive financials quarterly, you may miss your entire high season without a chance to act appropriately.

Understanding your financial position

Don’t forget balance sheets. Be sure that you or your accountant creates balance sheets in addition to Profit & Loss statements (P&L). Your P&L shows your income and expenses. Your balance sheet includes all of your long-term and short-term debts (your mortgages and other loans, including SBA EIDL loans). These debts are listed along with your assets. Assets include real estate, furnishings, accounts receivable and stock on hand, as well as your money in various bank accounts.

Your balance sheet will help you determine your DCR (debt coverage ratio), which is a critical figure to know when you are looking for future financing.  For more information about debt coverage ratio and appraisals, consult with our GRP Capital team. 

Preparing for financial transactions

If you are in need of financing, any lender will require current financial statements. Waiting for the end of the quarter may not be an option. If you think that you will be in a position to sell, buy or refinance, switching immediately to monthly financials will prevent any delays in the underwriting process and even in obtaining a variety of competitive term sheets from lenders.

Our GRP Capital team collaborates with you and your accountant to be sure the financial documents make the strongest case for a lender.

DIY vs. CPA: Choosing the Right Approach

If your business is rather simple, and if you have an accounting background, you may be able to create your own financials statements. This is especially true if you do not have ownership in  multiple businesses. However, for most of our clients, their money is well spent on hiring a professional.

A knowledgeable CPA will be able to recommend strategies to lower your tax outlay throughout the year. With just a few pieces of well-timed advice, you will quickly learn that a CPA is an essential regular expense.

Whether you are buying, refinancing, building, expanding your existing portfolio or investing in your first business, GRP Capital has the resources to help you meet your required capital needs. Contact any member of our GRP Capital team for a free consultation to determine next steps. We have access to a large network of lenders to help you meet your business goals.