Your company balance sheet is an indication of the financial strength of your company – it gives an how much you owe, how much cash you have in the bank and how much profit you have made by way of your shareholders funds.
Demonstrating you have a strong balance sheet will help if you are trying to get business credit, bank loans and funding. But it also extends to your personal life if you own a Limited Company if you are trying to get a mortgage since some lenders will take into account your shareholder funds when working out how much you can borrow. So if you are approaching your financial year end here are 4 simple ways you can strengthen your balance sheet position:
If you have new costs coming in which you can defer then try and order them in at the start of your new financial year allowing you to disclose a higher profit and therefore shareholder funds on your balance sheet.
Watch out, this will result in increased corporation tax so this approach may not be right for you depending on your future intentions.
Cash is king. So chasing your customers who owe you money and getting this cash in your bank account while not altering your net asset position will mean you can disclose a healthy cash balance adding confidence to those reading your balance sheet.
Pay Off Loans
If you have a loan in your books and are fortunate enough to have enough cash to pay it off then consider doing so. A balance sheet with little or no debt is stronger than one which has financial responsibilities and creditors.
The fixed assets section of your balance sheet discloses what you own and their value, after depreciation. In order to strengthen your balance further check that all assets you have bought during the financial year are correctly included within assets and not incorrectly allocated to your profit and loss account. This not only increase your fixed assets but if mis allocated will increase your profit for the year by transferred a cost to your balance sheet.
Your balance sheet will be registered with Companies House and cannot really be changed, expect for in exceptional circumstance so it is advisable to consider whether you need to strength your balance sheet before your year end date. Make sure you consider your motivation before choosing the approach you take to strengthening your balance sheet or seek professional advice so you disclose the strongest balance sheet possible.