As an accountant, you are in the best position to help your small business clients in raising capital. You have insight into their cash flow which can help you identify opportunities, flag warning signs and identify patterns.
A study found that more and more business are asking their accountants for financial management and other business advice. Helping your client raise funds can help strengthen your small-business client relationships and differentiate your firms from competitors.
1. Cash flow monitoring
Most small business owners do not have the energy or resources to monitor their cash flow, but this is very important in securing loans. If you can help your client in monitoring their cash flow, you will put them in a good position to access needed capital. You can also help in anticipating situations that may require additional capital and prevent costly last-minute scrambles.
2. Building business credit
A good credit standing is key to accessing capital, from business credit cards to loan applications. You should advise your client to have a separate business and personal account and to incorporate their business in order to have a limit on their personal liability. If your client is already incorporated, ensure that the business is registered with business credit bureaus such as Equifax and Experian and help them obtain a DUNS number. Also advise your client to protect their personal credit score because it is considered by many lenders in loan approval.
3. Borrowing Against Unpaid Invoices If your client is in urgent need to cash, whether to support a growth opportunity or avoid cash flow problems, you can suggest borrowing against unpaid invoices. Invoice financing or factoring is particularly helpful for clients who do not have very good credit standing because more weight is given to the credit score of the debtor than the invoice issuer. It is also easier to obtain than other types of loans and can sometimes be processed within a day.