It’s not just the small businesses with major problems that require help. Even successful businesses benefit from working with advisors who support and truly understand small businesses.
Just ask the owner of a profitable freight and trucking company in Georgia. His small business’s financial statements weren’t up to par, and he had to make a change in order to secure the line of credit he needed to expand his business.
The Typical Small Business Accountant Wasn’t Cutting It
As with many small business owners, this owner received little help or financial advice from his accountant beyond filing his tax returns. His accountant couldn’t prepare proper financial statements, but it hadn’t been much of a problem before.
That all changed in 2012, when the owner decided it was time to expand his freight business.
At the time, the company was essentially a freight broker, arranging for another trucking company to pick up his customers’ freight and have it delivered. The owner didn’t have his own trucks. He paid other companies to provide transportation after he and his team arranged customer pick-ups.
The owner’s plan was to purchase his own trucks and hire his own drivers. When he met with his banker to get a line of credit, he quickly learned that he didn’t have the information necessary. His accountant only produced “financial statements” that showed his small business’s cash and earnings. The bank needed more detailed financials that were prepared according to acceptable accounting standards.
Unfortunately, his accountant couldn’t produce the financial statements the small business owner needed.
Finding An Advisor And Getting His Loan
Needing help to prepare the documents he needed, the owner of the freight company connected with a local business advisor who works with many small businesses and produces monthly financial reports for his clients.
When his new partner reviewed his financials, he found a bit of a mess, to say the least. The business owner was missing many of the requirements he needed to show the bank. And what he did have was mostly prepared improperly.
With proper documentation in hand, the business owner met with his banker and was approved for a line of credit.
Growing His Small Business With His Consultant’s Help
With the funds and trucks necessary to expand his business, the business owner worked with his advisor on a consistent basis to manage the growth phase of his company.
His partner produced monthly financial reports and reviewed them with him, explaining the trends and offering advice to help him navigate this important time in the business cycle.
The small business advisor also uncovered some risky payroll issues that the owner (like many small business owners) didn’t think were problematic. He was paying his entire team as independent contractors, but misclassifying some who were legally full-time employees. While his business hadn’t been audited, he was risking $52,000 in unpaid Social Security and Medicare taxes, plus payroll tax penalties and interest.
The advisor worked with the owner to complete the necessary paperwork and started managing his payroll on a weekly basis. And it sure helped, as the owner has since doubled the size of his team.
In the growth phase of a business, most companies see revenues grow, but profits decrease due to the investment (and fixes costs) required to grow.
According to the advisor, this high-level look into the small business’s financial statements seems to signal that the company is finally primed to reap the benefits of its owner’s investment and expansion. The owner’s bottom line is “back in the black,” and with more than $3 million in revenue, the owner is taking home hundreds of thousands of dollars in profit.
Learn the four factors to determine if you’re working with the right tax and small business partner.