organizing your financial files as you grow
4 tips and tricks to organize balance sheets and other documents
Your business’s paperwork reflects your company’s financial health and future potential.
Your paperwork should be well organized and up to date. One of the factors in the time it takes to process a loan for approval is how quickly and accurately the required documentation is provided. If your records are out of order, you risk more than a delayed approval: missing documents is among the top reasons business loans are rejected.1, 2
Growing a company takes a lot of your time, and as the business grows, you might have less time to keep your records up to date. As a business owner finding the bandwidth to keeping your paperwork in order becomes more difficult the larger your business becomes.
Here’s how to get your documents in order
37% of small businesses say it can take one to three days to get accurate financial data about a specific area of their business.3 As a business owner, spending upwards of three days trying to track down and organize all the files you need for a loan isn’t the best use of your time.
The following steps will help you remain ahead of document requirements for a future loan, plus they have the added benefit of helping you run a tighter ship.
Step 1: Stage your growth strategy
Start by mapping out the realistic expansion phases of your business, based on where you are now at the start of every year. This step should help you anticipate significant cost decisions, such as whether to lease or buy equipment. With this backgrounding, you can contemplate the appropriate type of loans you might need. An unsecured line of credit for example, can provide flexibility over a number of years and require less paperwork. This is great if you have small one time needs or a short-term cashflow crunch.
An equipment finance loan or lease on the other hand, is for much larger machinery or equipment costs. Knowing what type of loan is best for your business is a key part of knowing what you’ll need to have to apply.
Quick tip: Set aside a cash reserve, one to three months, to carry your business during potential hiccups.
Step 2: Know which documents you’ll need
Different kinds of loans require varying degrees of paperwork. An unsecured revolving line of credit, for example, might require less paperwork than an asset-based loan or commercial real estate financing. Consult a business lender for guidance if you’re unsure. Examples of the records you’ll need include the following.
- Accounts receivable: This file lists the outstanding invoices for goods or services your company has provided on credit.
- Business assets: Include anything that increases the value of your company, such as real estate, inventory, intellectual property, and contracts.
- Balance sheet: This document tallies your business assets and liabilities. To determine your capital, or value, subtract your liabilities from your assets.
- Cash flow statement: This is your follow-the-money record, showing what’s coming in (such as customer payments) and what’s going out (what you owe others). The timing reveals when you’ll have cash on hand for future bills and times when you might need to borrow.
- Income statement: Also known as a profit-and-loss statement, this document logs all business income and expenses, including noncash items such as depreciation, to calculate how much your company has made (or lost) in a given period.
- Operating budget: This record projects what your company will make or lose over a set period of time, allowing you to make adjustments. Include a one- to two-year sales forecast of “best-case,” “worst-case,’ and “most likely” scenarios.
- Personal assets: Your need for a personal assets list depends on the loan you’re applying for. A collateral loan, for example, might require an itemization of real estate, vehicles, and other collateral.4, 5, 6, 7
Quick tip: Your lender might also ask for the following information, so bring it with you to avoid a delay:
- Personal income tax returns (three years)
- Business licenses and permits
- Employer identification number (EIN)
- Credit history (business and personal)
Step 3: Create a record-keeping system
Compiling all these records could feel intimidating, but there are plenty of accounting software programs that can step you through the process, perform the calculations, and quickly produce statements and summaries. Your part: Enter all financial events as they occur, and ensure they are easy to understand and explain. This extends to headers (for example: “XYZ Co. Balance Sheet 2024”).
Quick tip: Audit your records monthly to ensure they are up to date and accurate.
Step 4: Store all of your records safely
Take inventory of all your records and then protect them. Scan paper documents, such as receipts, deeds, and licenses. You can use a standard scanner for these tasks or buy a specialized one for receipts. Store your computer documents on a third-party cloud service, such as Microsoft, Dropbox or Google One. Cloud services have the benefit of encrypting your information, as well.8 Tools like QuickBooks® can also help track and categorize expenses digitally.
Quick tip: Store all physical records in a locked, fire-proof box.
One last word on timing
Your loan approval time depends on your preparation. We can sign off on a business line of credit in as little as a few hours, assuming the paperwork is organized, accurate, and up to date.
That said, it can take longer depending on the loan – for example a Small Business Administration (SBA) loan can take anywhere from 30 to 90 days.9 Make sure you account for the time it’ll take for your loan to get approved in your growth plan. You’ll want to make sure you have plenty of breathing room built into your capital.
Our experienced business finance teams have the knowledge and experience to guide you through your funding needs, so you can focus on your business strategy faster, and go further. You can learn more about First Financial's business lending solutions here.
