Tag Archives: prescott auditors

Audits Add Shine to Firms – WSJ.com

By ANGUS LOTEN, WSJ.com

Small businesses whose books are audited—by a hired certified public accountant, not the Internal Revenue Service—improve their chances of getting a loan, and at far better terms, than businesses with less scrutinized financial statements, a new study shows.

Yet even as owners continue to struggle with tight credit, few can afford the time, effort or cost of preparing complex financial statements, let alone having them audited, small-business owners, lenders and accountants say.

“Banks love when you have audited financials because they view it as a form of insurance,” says Buzz Rose, a certified public accountant in Pittsburgh. “But audits have become very expensive and to have one done ‘just in case’ would seem to be a waste of time and money.”

But the benefits might outweigh the costs.

Based on data from more than 10,000 closely held companies—about half of which have less than 500 employees—a study by the University of Chicago Booth School of Business found audited businesses save an average of $6,900 for every $1 million in outstanding debt every year as a result of lower interest rates, which were more than half a percentage point below rates paid by nonaudited businesses. For a loan of $3.3 million, the average size of loans analyzed in the study, the savings was about $23,000.

A small-business audit costs anywhere from $5,000 to $75,000, depending on the size of the company, the complexity of its data and other factors—typically double the cost of a financial statement review, the next highest level of CPA-verified assurance after an audit.

An audit provides third-party assurance that a company’s financial statements are correctly prepared and based on verified business data, while a review shows the statements are at least internally consistent with data provided by management.

“There appears to be a very real cost benefit to getting an audit, beyond the obvious value of having your financial statements in order,” says Michael Minnis, a Booth School assistant professor of accounting who led the study. The Booth School study is expected to be published in the Journal of Accounting Research in May.

Similarly, a joint study last year by Michigan State University and Indiana University found small businesses with audited financial statements were “significantly less likely” to be denied credit from banks.

David Leuthold, chief executive of Century Negotiations Inc., a North Huntingdon, Pa., consumer-debt settlement firm, says he started having his books audited annually in 2005 to double-check his own bookkeeping, paying about $8,000 an audit. The move paid off when he applied for a $100,000 line of credit the following year.

“The bank required audited financial statements,” says Mr. Leuthold, whose company made $8 million in revenue last year. Even without audited books, he believes the bank might have approved the loan, though at less favorable terms. “We had what they wanted, so it was definitely worth it,” he says.

Still, for many small businesses seeking a loan, lenders say an audit is costly and unnecessary.

“Audits provide good information. The more concrete information a lender can get, the better,” says Tom Burke, the director of Wells Fargo’s Small Business Administration lending division. But he questioned the necessity of audits for every business.

Mr. Burke says a business with less than $1 million in annual revenue can ask a CPA to prepare a compilation, which is a cheaper, unaudited financial statement based on recorded sales, inventory and other data. Since owners often use these statements to manage daily operations—and they’re prepared by CPAs—lenders have some assurance of the statements’ accuracy in making loan decisions.

“I’d hate to see people taking steps that aren’t necessary, or that they can’t afford,” Mr. Burke says.

Small-business accountant David Wilke, of Carnegie, Pa., says he helps borrowers and lenders negotiate loan terms based on mutually acceptable levels of assurance, ranging from compilations to audits. He says a CPA “adds value by determining what a bank wants and what a business can provide at an early stage,” rather than trying to convince every client to get audited.

Mr. Rose, the accountant in Pittsburgh, says it’s only worth going through an audit—which can require days and even weeks of a manager’s time—when a business owner has a loan in hand that’s contingent on providing audited financial statements.

Audited or not, less than a quarter of businesses with fewer than 500 employees keep financial statements of any kind, according to the Federal Reserve Board’s National Survey of Small Business Finances.

“There’s a lot of criticism that it’s expensive and difficult to prepare and audit your financial statements,” says Teri Yohn, an Indiana University associate professor of accounting who sits on the Financial Accounting Foundation’s blue-ribbon panel on private-company accounting standards. “But there are clearly benefits.”

Schutte & Hilgendorf, PLLC, a Prescott based CPA firm provides audits and reviews to small businesses, government entities, non-profit organizations, and homeowners associations.  We also provide tax preparation and planning services, QuickBooks consulting and training and payroll and sales tax services to individuals and small businesses.  Contact us for pricing or more information about how we can help you!


Daily Courier Highlights Prescott Accounting Firm

courierteresa 

 

 

Q&A: Numbers create livelihood for Prescott CPAs

By Ken Hedler
The Daily Courier
Thursday, June 18, 2009

Les Stukenberg/The Daily Courier
Les Stukenberg/The Daily Courier

Q&A with Gidget Schutte and Lois Hilgendorf, owners of Schutte & Hilgendorf Audit, Accounting & Taxes in the Crossings business park, 3140 Stillwater Drive, Suite A., Prescott. The office is open 8 a.m. to 5 p.m. weekdays “officially,” Schutte said. “During tax season we are here all the time.” The phone number is 778-0079;  the website is www.prescottaccountants.com.

Q: Why did they buy the business and when?

Schutte: “We bought out one of the partners, which was Lambson & Rader. Preston Lambson retired, so we bought his business (and started it Jan. 1, 2008). We both worked for the previous company. I had worked with the previous company since 2003.”

Q: What is your previous business-related experience?

Schutte: “I have been a CPA since 1992, and I also worked in finance for private companies before moving to Prescott September 11, 2001.”

Hilgendorf: “Several years in accounting.”

Q: How many employees do you have?

Schutte: “We have three besides ourselves. We have another CPA on staff.”

Q: What changes have you made?”

Hilgendorf: “We are focusing our business where our strengths are, which is auditing. And we offer tax prep and planning for both businesses and individuals, and we also do accounting work, which might include payroll, tax returns and QuickBooks consulting.”

Q: What services do you provide to your clients?

Schutte: “We do focus on homeowners associations, nonprofit organizations and small businesses – local.”

Q: What is the best business advice you have received or given?

Schutte: “All the support we had getting into this business. The advice we took to do it was a great decision for both of us. In general, one of the best pieces of advice I received is ‘Keep it simple.'”

Hilgendorf: “Don’t give up on your dream.”

Q: What has been your biggest business challenge?

Schutte: “It has been challenging, but it has been a new welcome perspective. We are the ones running the company.”

Q: What is the key to your success?

Schutte: “Word of mouth is our biggest PR. The key to our success is being good business partners/advisers to our clients.”

Q: How are you adjusting to the recession?

Schutte: “We are flowing with where our clients are struggling. We’re trying to find ways for them to save their costs. What we mean by that (is) we are scaling back for them to save money but adding value for them in other areas.”

Q: What are your plans for the business?

Schutte: “We want to be the public accounting firm in Prescott, Yavapai County and the surrounding area. We want to get our name out there. By the way, we are having an open house 4 to 7 (p.m.) next Thursday, June 25. We just moved in February from Plaza West (on West Gurley Street). We are really trying to establish this new identity.”