Presenting financials that tell the story you want to tell.

Some believe that the numbers are the numbers, thus there is no art or science involved in disclosing financial information, it is what it is…

Not so.

The presentation of financial information, in the hands of a skilled technician is an art form and can tell the story you want, honestly and appropriately and I emphasize honestly. There is not reason to lie, ever, there is adequate opportunity to express your numbers to tell the story you want, within reasonable limits.

For example, a basic and very important disclosure for so many purposes is the evaluation of real estate. First of all,  real estate always has a range of value, high, medium and low, depending upon your purpose and the comps you chose to use, you can express the value high or low.

Additionally, other factors can adjust the value dramatically. For example, deteriorated features, be it the roof, the heating system,  sceptic system, anything expensive, necessary and in need of repair or replacement will reduce the value appropriately.  An extra building lot which may be part of your front or back yard can increase the value dramatically.

Receivables, another important aspect of a business financial document can also be misleading, leaving over 90 day receivables on increase value, taking them off decreases value, both are viable decisions, as over 90 are considered noncollectable and should be written off.  You may have over 90 day terms, or the industry may simply pay over 90 but are good receivables.

Equipment, inventory, work in process, all subject to high optimistic evaluations, or low liquidation valuations, a huge difference with great impact.

Owners draw, or payroll, the paycheck is obvious but borrowed money from the corporation may not be, expense money, cars paid for by the business, insurance paid by the business personal travel paid as a business expense, etc etc, clearly these can be reported as owners income or business expenses, a big difference either way.

Wife or kids on payroll, nothing to do with production  but another expense issue that has flexibility in its reporting.

Home office…same, can go either way depending on what you are trying to accomplish.

Invested money, or is it lent to the business and intended to be aid back, could be either, a big swing.

Bad debt write offs, another area for effecting the presentation.

Cash or accrual accounting, demonstrates large swings in reality.

Repeating contacts, for monthly delivery, report that which is shipped or book that which you expect to ship in the future and book it as a sale, either interpretation is true.

Evaluating any asset, fair market value, liquidation value, replacement value, all three work all three tell a different story.

Pending law suits, for or against, reported or not, valued or not, valued high low or med range, or not reported at all as it is all conjecture.

Management consulting fees, add in or take out.

Contingent obligations or receivables, guaranteed sales, product on consignment, services on consignment, how reported will change the picture accordingly.

On a personal level, it a little harder to adjust your financial picture as there are fewer opportunities but the largest asset most individuals have is their home and this can reflect a huge swing. Currently the real estate market is depressed so we can assess home values 20% lower if we choose, if we choose to ignore the temporary market swing and hold on to historical values, we can fall back onto higher appraisals.

If we are not intending to sell but just valuing there is no reason why we cannot use an older appraisal done prior to the market decline as we all know it will return to previous values in due time and thus reporting it artificially low because the market swing is temporarily declining is a decision one can make..either way.

Environmental issues, buried oil tanks, a swelling brook running just behind your home, asbestos shingles, can destroy value if evaluated and reported.

…and on it goes. The skilled craftsman will probe, ask and uncover the various issues and choices one can make and deliver either the higher, lower or mid range financial picture you may want depending upon your goals and the purpose of the financial presentation.

The first question is to whom are you presenting, what is the purpose and what must you accomplish in your presentation. Then disclose in your best interest. Call me for help 413-549-2966.