Planning to sell? (Part 2)

Planning to sell? (Part 2)

Bookkeeping tips to help ensure you receive maximum value.

Part 2: Bookkeeping Tips

By Andrew R Holtgrewe

Here are a few tips for insuring that you are capturing these add-back expenses properly:

Tip One

Properly structure your chart of accounts: creating a chart of accounts that aids an owner in the management of his or her business is extremely important; however, with proper planning, the chart of accounts can also be an effective tool for capturing add-backs and maximizing business value. Having a class of accounts specifically designated for personal and/or non-recurring items can make the process of identifying these items much cleaner and more efficient.

Tip Two

Create separate accounts for recurring vs. non-recurring items: expenses such as consulting fees, legal fees, and other contract labor can be either recurring or non-recurring in nature. Tracking these items in separate accounts based off of their frequency of occurrence can greatly aid in the process of valuing a business and can often results in thousands of dollars in increased business value.

Tip Three

Create separate accounts for expenses that can be categorized as personal: Internet, phone, personal auto expense, country club dues, home office expenses are just a handful of expenses that the IRS allows as a deduction for a business; however, many of these are generally added back to EBITDA when determining a business value and need to be captured properly.

With a little planning and assistance from an accounting professional, business owners can capture their business expenses in a way that helps insure they receive maximum value upon a sale. Good luck!