When a business applies for credit, one thing banks often look for is accurate financial statements, whether it be a balance sheet or a profit and loss statement. Without these, businesses may get turned down for credit or possibly told to get their books in order and apply again.

In recognition of March being National Credit Education Month, here are some basic tips for businesses to consider if they need to borrow funds for cash flow or if they want to grow financially.

1.   Use quality accounting software. QuickBooks works well for most small businesses. There was a time when bookkeeping was more like data processing – plugging numbers into the ledger – but because of all the new technology, that role is gone. Not just anyone can do it – you need a business-savvy person with some accounting background.

2.   Reconcile all bank accounts and credit card accounts monthly. This is where businesses will find errors and sometimes fraud on their accounts. There is a lot more to accurate accounting than reconciliations, but if I had to pick the most important component, this is it. And to reiterate, reconciling credit card accounts is just as important as reconciling bank accounts.

3.   Ensure that your chart of accounts is set up correctly and is used to accurately label your expenses and income. An accurate chart of accounts, which provides a complete listing of every account in an accounting system, is critical to have an accurate picture of your business finances.

4.   Make sure accounts receivable records are kept correctly. This allows you to follow up on past due accounts and work with confidence knowing that all your clients have been billed. (I have a vendor that I keep reminding to send me an invoice!) Another way to get business financing is called factoring – a loan based on your receivables. It’s well worth keeping those records in order.

When new clients come to On the Money, it’s often because they realize their books are incomplete or inaccurate or because they need to clean up their numbers before applying for credit or bringing on investors.

To provide a real-life example, let’s look at a client whose owner is refinancing his current home mortgage. Since the owner’s income is 100 percent from the business, the bank has asked for business financial statements and tax returns. The tax returns have not yet been prepared for 2016 and the company now faces financial penalty for each month not filed. Plus, it doesn’t have the tax return for the bank. The company’s 2017 bookkeeping is incomplete, so we’ll also need to fix and complete that set of books to in turn complete the 2017 tax return.

My point of view is that most companies’ bookkeeping habits are horrendous. (I admit I might be biased because we’ve cleaned up so many bad or neglected books for our clients.)

In several cases, businesses owners are trying to do it themselves to save money or have an administrative person or family member handle the books, and they’re not sure what they’re doing.

It is more cost-effective to hire someone to keep up with bookkeeping monthly than it is to hire them to catch up multiple months or years. The margin for error is a lot higher when the work is delayed. If someone embezzles from you, you could miss it until it’s too late to do anything. And when you need money, why put yourself in a situation where you scramble to put your books in order before the bank will approve your loan?

Ruth Urban is president and CEO of On the Money, which is a team of self-proclaimed bean counters, number crunchers and calculation nerds who are forever dotting the i’s and crossing the t’s. But the Phoenix company’s employees are also compassionate coaches, passionate cheerleaders and impassioned mentors who care wholeheartedly about their clients and take joy in their successes.