After successfully navigating the start-up phase, your business now has a strong foundation for growth. At this stage, business and financial advisory services become essential. Focus on these two key areas to take your company to the next level:
1. Financial and Tax Reporting
Businesses in the growth stage typically have more sophisticated financial reporting needs than start-ups. If your company has been using cash- or tax-basis accounting, it may be time to transition to the accrual basis and start following U.S. Generally Accepted Accounting Principles (GAAP).
Lenders and investors often require CPA-prepared financial statements, which come in three types, listed in increasing levels of assurance:
- Compilations
- Reviews
- Audits
Audited financial statements are the gold standard, required for companies regulated by the Securities and Exchange Commission (SEC).
However, many closely held businesses can meet lender and investor needs with compiled or reviewed financials.
Audits involve a thorough evaluation to ensure financial statements are free from material misstatements and comply with GAAP. This process may include:
- Analytical testing
- Physical inspections of assets
- Third-party verifications
- Internal control evaluations
Auditors will also report any identified weaknesses.
Once your business becomes profitable, federal (and often state) income taxes will apply. If your business is not structured as a C corporation, income typically passes through to the owners and is taxed at the individual level.
Tax planning meetings with professionals are critical. They help reduce liabilities, plan for law changes, and position your business for long-term financial health.
2. Working Capital Management
Cash shortages are common during periods of growth due to the cash gap — the time between:
- Paying suppliers and employees
- Receiving payments from customers
For businesses that manufacture or build products, the time to convert raw materials and labor into finished goods, sales, and eventually cash can be significant.
A line of credit can help bridge seasonal or temporary cash flow issues. However, before approving credit, lenders typically require:
- Financial statements
- Tax returns
- Updated business plans
- Personal guarantees from owners
To maintain healthy cash flow, consider applying these working capital strategies, targeting:
- Receivables — accelerate collections
- Inventory — optimize levels and maintain safety stock
- Payables — negotiate better supplier terms
Professional advisors can help benchmark your performance against competitors and recommend strategies to boost efficiency and competitiveness.
Ask the Pros
As your business matures, guidance from experienced professionals becomes crucial. DIY accounting, tax strategy, or business planning can lead to frustration and missed opportunities.
If you haven’t already, now is the time to seek expert advice to ensure your business remains strong and continues to grow successfully.
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