Getting your financial house in order
No house stands without a sturdy foundation, and the same can be said of a motorcoach operator’s “financial house.” Without basic fundamentals in recordkeeping, accurate financial information and benchmarking, no motorcoach operator can grow their business or have a successful and profitable business.
Charabanc, Atlanta, GA, is a diversified financial services company serving a wide spectrum of American industries, including the motorcoach market. In an interview with BUSRide, Jason Cash, president and founder of Charabanc, offers best practices and advice for getting your financial house in order.
What kind of basic accounting best practices can you offer to motorcoach operators?
You have to start with the accounting process. So many small businesses today, particularly in the motorcoach market, don’t manage their balance sheet or their P&L statements properly. A lot of it stems from the fact that they have their own internal bookkeepers processing this paperwork, and they just don’t fully understand how to account for proper expenses or where assets and liabilities should be recorded.
What financial institutions end up receiving are internal financial statements with unbalanced balance sheets, assets not recorded or depreciation not recorded properly. Sometimes vehicles are listed as “loans” when they’re “leases,” or vice versa. There are a lot of people, bookkeepers at best, handling accounting. Data isn’t properly recorded and you can’t get accurate financial statements from that.
When you hand that information over to any type of financial institution, they’re going to automatically assume that mismanagement is bleeding from accounting into the entire company.
What basic recordkeeping should operators engage in?
First of all, there’s the basic recordkeeping required from the IRS. Unfortunately, many people don’t even balance their bank statements and reconcile the general ledger. If you don’t do that, particularly in a small to midsized business, your financial records will never be correct. One of the biggest mistakes starts with the new hire and payroll process. An owner should know and adhere to all the IRS guidelines. From an owner’s standpoint, you won’t get all of the deductions and other benefits you’re legally entitled to.
What accounting benchmarks should motorcoach operators remain cognizant of?
The ultimate benchmark for any type of company is getting to the point where it can properly provide accurate financial information.
In lieu of that, there are a few phases that businesses must go through:
Step 1: Balance bank accounts. Make sure everything is recorded properly. An accountant can play “catch-up” and figure out most of this for you. They’ll track assets, liabilities, loans, financial statements, depreciation and other items.
Step 2: Reconcile all balance sheet accounts monthly, including all payroll activity. If the payroll is outsourced, make sure that all legal expenses are charged to that period. It is imperative to make sure that the appropriate government authority is paid on time. Analyze what your financial statements mean to help your business run better.
Step 3: An accountant can now take financial statements a bit deeper into a reviewable status. Every financial lender wants reviewed financial statements for the best loans or credit extensions. In lieu of that, they’ll take consolidated statements with limited exposure.
There’s a reason that accounting firms want you to go to review – because there’s an intrinsic value in being able to leverage assets (primarily buses) at the right interest rate, without having to waste time with so many different financial institutions.
It’s a matter of operators increasing their accounting expenses by just a little in order to keep business expenses lower.
What are some of the pitfalls that motorcoach operators tend to fall victim to?
Most operators miss the basics – they need someone with the education and experience to get them accurate financial information.
Jason Cash is the president and founder of Charabanc Financial Services, Inc. Since 2002, Charabanc Financial has provided commercial lending predominately in the passenger transportation sector of the transportation industry. Visit Charabanc online at www.charabancfinancial.com