Thanks for coming back! We know our business clients are put off by how much information we ask for. We’re not looking for more paper to sift through, we have just seen how what we don’t know can jump up and harm our clients. Here are a few more examples:
Businesses create a wide variety of financial reports, depending on their size and sophistication. Since we deal with businesses in distress, we naturally want to see what insight financial reports can provide to help us strategize with you. Accounts receivable aging reports can help us assess if there is actually value, and whether there are ways to turn receivables into cash. We will determine what debts exist between the business and its owners and compare asset information on a balance sheet to recent tax returns. Financial reports can also tell us if there needs to be better record keeping, or if the business has been using unpaid taxes, lenders or vendors as a way to stay afloat.
We ask for information about past payments to creditors and sales or other transfers of property as far as two years in the past. Such payments or transfers might be recoverable and provide a way to pay unsecured creditors. If payments or transfers have been made to owners or other “insiders,” they are at risk of having to return them. If salaries paid to owners are excessive, reductions may be needed for a reorganization or restructuring to succeed. Businesses often sell property to fund operations when business declines, but if these sales are for less than fair market value, or violate a lien there are potential consequences to plan for.
Next time: credit cards, insurance and employees.