My first bus show was the UBOA Expo in Tucson, 1989. The United Bus Owners of America was the predecessor to UMA and I am not sure it was even called an Expo. The show’s featured new technology was passenger video and Jake brakes. Ashtrays built into seat armrests were still seat options.
Our bold plan was to buy our second new bus, which would bust out our fleet to three! To tell you the truth, I am not sure what we had for financial statements. Our books were prepared by a local accounting firm who was given the daunting task of deciphering our check stubs and receipts. I probably received a yearend balance sheet and income statement just before the tax return was due. What I can tell you is that GE Capital, the father of all modern bus lenders, was not too excited about our financial performance, and the thought of a second loan was risky business at best. But there was our stalwart Eagle bus salesman pushing Mike Denny to make the deal. In the end our passion, enthusiasm, and the fact that we had our three month old daughter with us, made us just too cute a family to deny its dream.
Move ahead 29 years to the present and that cozy scenario doesn’t fly. Today’s lenders require a loan package that includes tax returns, financial statements, fleet lists, top customers, company history and a darn good explanation as to why you need a new bus. And that is just for the business. Add personal tax returns and financial statements for each of the owners and loan guarantors. This is a big task for operators already dealing with an extremely full plate. Our professional team can take care of this for you.
Your bank representative is a salesperson selling you his bank’s money. To get you that money the rep needs to sell you to his underwriter. The underwriter determines if you qualify and at what terms. The process begins with your financials, for which the completion, accuracy and form matter.
Most in house accounting programs, like Quicken, produce Balance Sheets and Income Statement reports. Those two reports, by themselves, do not tell the entire story of your company. CPA prepared financial statements include:
- Balance Sheet
- Statement of Income
- Statement of Retained Earnings
- Statement of Cash Flows
- Supplemental Information
Multiple enterprises can be presented in one set of reports through consolidation, a valuable procedure for operators that own property, have multiple terminals, operate within multiple states, or run additional businesses unrelated to the motorcoach industry. In addition, CPA issued financial statements are issued by an accounting professional trained in generally accepted accounting principles and their application pertinent to your business. A CPA is also independent of your business, has no equity position in the business, and makes no management decisions.
A CPA offers three levels of assurance when issuing financial statements.
The lowest level offers no assurance at all and is referred to as compiled financial statements. A CPA prepared compilation is a standardized presentation that provides additional information useful to management, creditors, and investors. Included will be short and long term debt schedules, current fleet lists, and key revenue sources. Comments and disclosures can include risks associated with the debt, payables, receivables, and revenue sources, to name a few. This compilation presents a clear financial picture to its intended audience.
Reviewed financial statements offer limited assurance. There is limited assurance that the issued statements do not included any material misstatements from generally accepted accounting principles. Reviewed statements require your accountant to dig deeper, requesting more information and access to your numbers, building on the level of assurance that the numbers are correct.
Audited financial statements offer the highest assurance that there are no material misstatements from generally accepted accounting principles and the most commonly prepared for publicly traded companies. Audited statements provide the ultimate assurance by conducting a formal examination of the company’s accounts.
Expo 2018 featured an abundance of technology requiring operators to evaluate the new and exciting options. To most observers, financial reporting is boring, yet successful operators know how important the process is. Getting there sounds complicated, but doesn’t need to be. Let an industry CPA do it for you. Contact us so we can help you through it, and you will have time to focus on all that new and fun technology!
Our next Nerd News will discuss the Balance Sheet – a snapshot of what you own, and what you owe.
Written by Tracy Fickett, CPA and Peter Shelbo, Veteran Bus Operator
BUSBooks is a unique CPA accounting firm dedicated to the motorcoach industry.