Sooner or later, almost every small business gets asked for financial statements. A bank wants them before approving a loan or line of credit. A landlord wants them before signing a commercial lease. A larger customer or a government agency wants them before awarding a contract. Springfield is the state capital, so plenty of local businesses run into that last one.
I’m Miles with MilesP Bookkeeping, a certified QuickBooks ProAdvisor (Level 1, Level 2 and Payroll). I work remotely with small businesses around Springfield and Sangamon County. This post is about one specific job: getting your books ready for the moment someone outside your business wants to see them.
What “lender-ready” really means
When a bank or agency asks for your financials, they usually want a few things:
- A profit and loss statement (also called an income statement) for the year so far and often prior years.
- A balance sheet showing what you own and what you owe.
- Sometimes a cash flow statement showing how money moved.
- Supporting details, like bank statements, so they can check the reports against reality.
“Lender-ready” means those reports are accurate, consistent and backed up by your bank records. If the numbers don’t tie out, the person reviewing them notices. That can slow things down, lead to more questions, or end with a “no.”
The most common problems I see
The balance sheet doesn’t make sense
Negative cash, loans that never go down, old balances that no one can explain. These are the first thing a lender’s eye goes to. I wrote about why balance sheets are wrong because it’s so common.
Personal and business spending are mixed
If your business account paid for groceries and a vacation, your expenses look bigger and your profit looks smaller than it should. It also raises questions. Here’s how to separate business finances.
Months are missing
A gap in the records, even a short one, makes the whole report look unreliable.
Numbers don’t match the tax return
If your books say one thing and your filed return says another, expect questions. Your books and your CPA’s work should line up.
How to get ready, step by step
1. Start before you need it
The best time to clean up your books is a few months before you apply. Cleanup under a deadline is stressful and leaves less room to fix things properly.
2. Reconcile every account
Every bank account, credit card and loan should match its statement, month by month. That’s what makes your reports believable. See my guide to bank reconciliation.
3. Clean up the balance sheet
Make sure loan balances match lender statements, old invoices and bills are resolved, and owner contributions and draws are recorded clearly.
4. Review the profit and loss statement
Look for odd swings from month to month, and make sure income and expenses are in sensible categories. Here’s how to read a profit and loss statement.
5. Prepare a cash flow statement
Not every lender asks for one, but it’s useful to have. My post on how to prepare a cash flow statement explains it in plain English.
6. Talk with your CPA
Your CPA may need to prepare or review statements for some applications. Clean books make that faster and less expensive.
Be ready to explain your numbers
A lender doesn’t just read your reports. They often ask questions. Why did sales dip in March? What’s this big expense in August? Being able to answer clearly builds trust. I always walk my clients through their reports so they can speak to them with confidence. My post on the best financial reports for owners covers what to focus on.
Keep it up after you’re approved
Many loans and contracts come with ongoing reporting. You might need to send updated financials every quarter or every year. If your books stay current month to month, that’s a quick task instead of a scramble. My post on monthly financial reports for small businesses explains a simple routine.
How I help Springfield businesses
I’m remote-only. I don’t have an office in Springfield, but I don’t need one. We work through QuickBooks Online, phone, email and secure file sharing, which also makes it easy to share clean reports with your bank or CPA.
Here’s what I usually do:
- Review your QuickBooks file and tell you honestly how ready it is.
- Clean up and reconcile past months.
- Produce clear statements you can hand to a lender or agency.
- Keep the books current so the next request is easy.
You can read more about my Illinois work on my Columbia, IL bookkeeping page.
Frequently asked questions
Can you guarantee I’ll get the loan?
No one can. What I can do is make sure your books are accurate and clear, so your financials help your case instead of hurting it.
Do my statements need to be audited?
Some lenders and agencies require statements reviewed or audited by a CPA. That’s outside bookkeeping, but clean books make that process faster. Ask the lender what level they need.
How far back do I need clean books?
It depends on who’s asking. Many want the current year plus one to three prior years. Check their requirements first.
Can you send the reports to my bank directly?
I can prepare them and share them with you, and with your OK, with your banker or CPA.
If you’ve got an application coming up, let’s talk on my contact page so your books are ready in time.