Accounting Archives - Page 21 of 22

You Must Understand Accounting to Value a Business

October 31, 2020March 5, 2019 by josh

There are few absolutes in business valuation. This is one of them. You must understand accounting to value a private business correctly. Why?

Recognize Issues
Issues in the accounting records can have a huge impact on value. If issues aren’t identified, the whole foundation starts to wobble. Knowing what to ask and how to ask it are keys to finding issues. Here are two real stories:

Me: “What about this truck on the depreciation schedule?”
Client: “Oh, that’s a personal truck (insert name) bought. I won’t be buying personal vehicles through the business.”

That was a $20,000 change to my capital expenditures estimate.

Me: “Can I see the Accounts Receivable aging schedule?”
Client: “Here’s our over 90 days past due list.”

It was over $40,000. A hit to book value and possibly future cash flows. Once you find issues, you must…

Handle Issues Correctly
Knowing where to look and finding it won’t get you home. You must know how to handle it using accounting. That inventory balance needs to go up. Every entry needs a debit and a credit. Where do you book the other side? Cost of goods sold or accounts payable? It depends. So, you dig a little further. You find the answer and make the adjustment. Maybe that changes the value $10,000…or maybe $100,000? Maybe not at all.

The Bottom Line
I rarely get a perfect set of accounting records. Even when I’m lucky enough to get CPA-prepared financials, it doesn’t guarantee there won’t be issues. Sometimes it’s as simple as reclassifying money from one account to another. Other times, I have to turn everything inside out. If you’re valuing a business, I hope you’ll learn the language of accounting or find someone who knows it. Otherwise, you could miss something big. I’m here if you need me.

Thanks,
Josh

Sign up for this blog here if you want tools to increase the value of your business or want a refreshing view on business valuation from a recovering CPA. I’m Josh Horn, CPA, CVA of Horn Valuation. I value businesses for owner exits with a focus on HVAC and trade contractors. I also assist litigation and divorce attorneys as a business valuation consulting or testifying expert. My clients are business owners and attorneys. If you’d like more information, email me at [email protected], or call me at 217-649-8794.

I’m a licensed Certified Public Accountant (CPA) and credentialed in business valuation (CVA). I’ve been a tax and business consultant in a top 100 CPA firm and a controller in a large international company. I’ve also valued and advised small family-owned and multimillion-dollar companies. You can connect with me here on LinkedIn, Facebook, Twitter, YouTube and Instagram.

“Once-in-a-lifetime events demand an expert.”
Josh Horn, CPA and Certified Valuation Analyst

Owner compensation and why it matters in your company’s valuation

August 24, 2020December 21, 2018 by josh

Here’s a 4 minute video to help you understand the impact owner compensation can have on the value of your business. Secure link here…or YouTube here:

Thanks,
Josh

“Once-in-a-lifetime events demand an expert.”
Josh Horn, CPA and Certified Valuation Analyst

Why Can Valuing Your Business Be Tough? Reasons and Solutions

August 29, 2020November 28, 2018 by josh

Here’s a 3 minute video I put together to answer the question, “why can valuing your business be tough?” and how you can solve it. Secure link here or YouTube here:

Thanks,
Josh

“Once-in-a-lifetime events demand an expert.” Josh Horn, CPA and Certified Valuation Analyst

Are Those Losses Real? This is How You Find Out

August 17, 2020September 24, 2018 by josh

Hey everyone,

Whether you’re running a business or buying one, it’s important to understand losses. By “losses”, I mean when expenses exceed sales. In simplest terms, it’s when the income statement or profit and loss shows a negative number. You don’t need to immediately panic. You need to review the causes.

Here’s my list for non-accountants:
-> Are there personal expenses? (Pull those out).
-> Is it a Tax loss or a Cash loss? (You care about Cash).
-> Cash losses can’t keep going unless more money is invested or borrowed.

Or, stated another way…
-> Is the business worth more “alive than dead?” (Supporting a family without more debt, capital, or fraud).
-> How much cash is going in the owner’s pocket? (Assuming they’re following the rules).

Yes, there’s a lot more I could teach you about accounting if you had the time. But you don’t, so this will put you ahead of 90% of the world.

Thanks,
Josh

Can I Help You?

Hi, I’m Josh Horn, CPA, CVA of Horn Valuation. I help with business valuations in friendly or unfriendly situations. I also help owners build valuable companies. My clients are business owners and attorneys. If you’d like more information, check out my website hornvaluation.com, email me at [email protected], or call me at 217-649-8794.

I’m a licensed Certified Public Accountant (CPA) and credentialed in business valuation (CVA). I’ve been a tax and business consultant in a top 100 CPA firm and a controller in a large international company. I’ve also valued and been the primary advisor to multi-million dollar and small companies in various industries.

“If you’re not working on business value, who is?” Josh Horn, CPA and Certified Valuation Analyst

Don’t Gamble with Divorce Tax Returns

June 26, 2020September 17, 2018 by josh

If you’re concerned about using a business tax return for child support, maintenance, and assets in your divorce case, you’re in the right place. It’s a dangerous gamble unless you know what to do. Learn how you can spot the seven red flags and fix them. We begin with a typical business tax return, walk through the red flag adjustments step-by-step, and quantify the impact. You’ll be amazed how much you could be leaving on the table.

The Seven Red Flags of Business Tax Returns guide is here. This is a bullet-point instruction document that defines the seven red flags, provides guidance on why the red flag matters, and gives you detailed steps to fix each red flag. Don’t skip these steps if you’re using a business tax return in divorce.

Secure link to the video here or on YouTube here:

Call me if you would like to discuss valuing a business in divorce or litigation.

Thank you,
Joshua L. Horn, CPA, CVA
Horn Valuation
Phone: 217-649-8794
Email: [email protected]
2901 Boardwalk Dr., Suite A, Champaign, IL 61822

Horn Valuation is for attorneys, judges, and business owners who believe there’s an easier way to settle business disputes and want to work with a valuation expert using fixed fees. I’ve been a CPA since 1999, a certified valuation analyst since 2008, and valued mom and pops to multi-million-dollar businesses. Call me today if you’re interested in working together on a valuation solution.