Bank Finance For Business “The New Normal”

Banks in Australia received a wake-up call in the global financial crisis and it has changed the way they work with business customers.

In the past, a business only needed to provide annual reports to obtain finance, however that left many questions unanswered. The annual reports only showed what the business had done last year. The reports failed to show what the business expected to do in future years.

If you were lending someone a large amount of money, you probably would not do it on a handshake and a story about how good they had paid off debt in the past. You would want to know they could reasonably expect to pay you back in the future.

Banks are now asking for more detailed and frequent financial data such as cash flows and quarterly or even monthly updates. They are also getting fussier about the quality of the data they receive. Remember the bank does not really want to own your home or your business if things go bad. They just want their principal and interest repaid.

At FORSYTHS we understand why the banks require this information (more banks would not have asked for handouts if they had required this information in past years). While many businesses may not be used to reporting in such detail and so regularly; the benefits to most businesses are significant.

You simply cannot make good decisions about plans for your business if you are using old or out-of-date information.

At FORSYTHS, we can train you to construct a cash flow and keep it updated. The banks will require estimates from your accountant.

If the data supplied to your accountant is not up-to-date, it may take days or weeks to produce figures acceptable to the banks. Therefore, it is important for your business to ensure the records have as much information as possible to prevent delays. Memos on your work are particularly important as they enable your accountant and bank to gain a better understanding of how your business works.

The information also enables your business financials to be more informative, prepared faster and at less cost.

You may be slightly peeved at the banks demands initially. If you accept the reasons for these demands, you will get better value out of the same sort of information.

The upside to your business will be a lot more for you than the banks if you use the information to plan future business decisions.

If you have to spend time and money to produce the data, you can use the accountants at FORSYTHS to show you how to use the same data to help grow your business.

Contact FORSYTHS today