I hear you! You’re sitting there saying “I’m small business; I care more about the balance in my bank account than I do about financial statements, income statements and balance sheets; GAAP.
GAAP, whatever that is, is for those “big guys” that have lots of investors, tons of money and have to report to the SEC. It’s just not for me.”
I beg to differ though; GAAP, Generally Accepted Accounting Principles, are for you!
What Is GAAP?
GAAP, simply put, is a set of standards, ok they’re accounting standards, that help businesses, large and small, report their operating results in a clear, concise and consistent manner. Not only that, GAAP allows for comparability of financial results between companies.
Banks, investors, venture capitalists, creditors and securities analysts like that. They need to be able to compare one company to another, similar company, when are looking to invest. This comparability can only come when each company’s financial statements are prepared in the same manner, under the same set of rules.
So what does this mean for you and your small, growing, business?
The Value of GAAP
Although your head may spin just at the mention of GAAP, you must resist the urge to turn a deaf ear. Having solid GAAP financial statements in hand for your bank meeting, board meeting or discussions with your investors will go a long way to ensuring your success.
If you are just starting out, but have big plans for your company, such as going public someday, having GAAP financial statements is essential and the sooner you can start this process the better.
It is much more cost effective to start out on the right foot and establish GAAP financial reporting processes in the beginning than to try to convert them several years down the road when you need them to either satisfy a bank covenant, obtain new investor capital or launch your company into the public markets.
I have worked with numerous growth companies over the years, helping them to align their financial reporting processes with GAAP after they had been in business several years. This process was not only time consuming, but very costly.
I highly encourage companies, no matter their size, to convert to GAAP financial reporting as soon as possible. Having a disciplined approach and solid financial reporting processes will help you grow your business and take it to the next level.
But don’t worry, you don’t have to go it alone. Here’s where your trustworthy CPA advisor comes in. Pick the right one and they can and will help you grow your business.
Looking for a CPA to help you align with GAAP? Contact us today to schedule a free consultation.
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