To insure your CPA-prepared financial statement presents your company in the most advantageous light possible, follow these guidelines:
Number of Periods on Statement – Generally, if you have more sales, cash and profit this year than last year, a comparative statement will work to your advantage. If profitability and liquidity are down from last year, a single period statement is better for you and won’t highlight the downtrend.
Cash – Aggregate total cash from all accounts into one line item. Believe it or not, $500,000 on one line makes a more positive impression than five $100,000 accounts listed separately.
Liquid Investments – Include liquid investments in your cash total. Have your CPA use a schedule or footnote if he feels compelled to segregate the investments from regular cash.
Accounts Receivable – Make sure the amount includes only trade customers receivable, not other amounts due to your company.
Fixed Assets – Have the CPA show the cost and total accumulated depreciation on the balance sheet summary. Don’t allow them to use a one-line net amount. You have likely invested heavily in your assets even though they may be very depreciated.
Consolidate Debt – If you have lots of loans, ask you CPA to aggregate them into one line. Also, try to minimize the debt footnotes. There is no need to show every single loan separately in the footnotes.
Interest Rate Disclosure – If you have great, low rates, you may want to flaunt them. Otherwise, if they are too high and you intend to go to bid or negotiate your rates with this statement, try to avoid rate disclosure by just providing payment amounts.
Extraordinary Events – Check to be sure that nonrecurring expenses do not get buried in operating expenses. Since most of us don’t segregate these expenses on our internal P&L, our CPAs don’t know to isolate these expenses on our year-end statements.
Commitment and Contingencies Footnotes – CPAs have a great deal of discretion on what they consider to be commitments or contingencies. Discuss your CPA’s thoughts on contingencies and come to a mutual agreement on the exact language to be used. Some CPAs can raise red flags on even routine events with poor wording, while the savviest CPA can avoid causing alarm on even very serious issues by staying factual and matter-of-fact in their wording.
Intercompany and Related Accounts – Remember to minimize these transactions on your year-end statement by netting receivables with payables, etc.
This year, have a nice chat with your CPA before sending him your internal statements. Let him know he is working for you!
