Need a Small Business Loan? How Your ERP Software Can Help

Amherst accountant James Kincaid prepares more financial statements for small-business clients now than he did two years ago.

The uptick, he says, stems from stricter lending practices. Many banks and other financial institutions want details – lots of them – before agreeing to extend financing packages to small businesses.

“It means more hours and more work, which frankly for accountants isn’t a bad thing,” said Kincaid, partner at Lougen Valenti Bookbinder & Weintraub LLP. “But it’s a huge effort for business owners.”

Banks that once accepted tax returns as proof of companies’ stability may now require full-blown financial statements, which means business owners must provide key details to accountants who, in turn, create the statements.

James Segarra, managing partner at Tronconi Segarra & Associates LLP, said he views the additional work as “helping clients become better prepared to borrow money” needed to run businesses.

“Lines (of credit) aren’t being pulled, but banks do want to see more information,” he said. “It’s a totally different system of keeping records. I don’t fault the banks, but these can be onerous things to comply with.”

So how can the right software help? Most small businesses do not have a CPA or a degreed accountant on staff. The bookkeeper and owner have done the record keeping since the business opened and used their CPA firm to do the tax returns which were used by banks and other financial institutions for loans and leases and other credit requirements. Doing a P & L and Balance Sheet once a year was fine. Are we making a profit? Do we have enough assets to cover the loan being asked for? Do we have money in the bank to cover payroll?

In today’s world, the questions are more complex and require drilling into the details. What is your 5 year trend on sales and margins and expenses and profits? How’s your inventory asset valued and what is is your inventory turnover? What is the age of your inventory? Have your Customers Days to Pay increased? Have your Days to Pay Vendors increased? What would be the effect on cash flow by increasing your inventory turnover by 10 days or decreasing your Receivables Days to Pay by 5 days or increasing your Days to Pay Vendors by 5 days? What is your unshipped order backlog and why is there a backlog? What if you added another shift or product line? How are you marketing you business to drive new business?

These questions and many more would require hours of work by a CPA to determine which means $$$ to you. However, with the right software, these are just part the natural flow of daily work being done and tracked by your staff. The role of the CPA then becomes to review and recommend your data rather than bookkeeping and creating the reports for the banks. This is what they do best and for what you want to use them. The banks want to see details and professional looking reports which are just clicks away. You can monitor the business trends on a daily or on-demand basis rather than getting the information after the fact and then have the ability to change or continue the methods being used.