Want to Be a More Successful Bank? Tell the TRUE Story of Your Clients Through Better Accounting

To become a more successful company, businesses need to create better customers. Nowhere is this truer than in the banking industry.

It’s no secret loan officers earn commissions on the loans they close. The more loans an officer can generate, the more money they can put in their pocket. But many loan applications are rejected. Not because the client company is unworthy, but rather the accompanying financing statements are incomplete, badly formatted, or don’t accurately reflect the business’ true financial situation. 

This kind of accounting sloppiness helps no one, not the company requiring capital to grow, not the bank needing to issue loans to generate profits, and certainly not the loan officer desiring commissions to put food on the table. So, what’s the disconnect? Well, the reason so many loan applications appear faulty is because business owners — many of them entrepreneurs — don’t spend enough time thinking about accounting. 

It’s easy to see why. Entrepreneurs tend to be visionaries, according to Michael Gerber, author of The E-Myth, one of the top five business books. As Gerber asserts, they’re “big picture” folks more interested in results rather than how those outcomes are technically achieved. They’re also oriented toward sales and growth, not numbers and spreadsheets. 

And God bless ‘em for it. Without vision, passion, and an appetite for risk, the American Dream would be moribund. But, as noted above, this dismissal of accounting’s importance can come back to bite them when it comes to acquiring the most critical of entrepreneurial assets: capital. 

To get banks the monies their entrepreneurial clients need to grow and generate more loans helping their institution’s own bottom line — loan officers must help businesses submit statements that will impress their loan committee members. Or at least not turn them off.

This is where my company comes in. Blueprint CFO understands and celebrates the entrepreneurial spirit. This is why we have dedicated ourselves to helping privately held middle-market businesses ($5 to $75 million annual sales) organize their books to best secure financing. Like the clients we serve, we focus on the future, identifying what works and what doesn’t to create a plan — a blueprint — for growing revenue.

A recent success story exemplifies our approach. A bank we regularly do business with had an aerospace manufacturing company needing a larger line of credit to fund growth. Unfortunately, the institution had to repeatedly reject their client’s applications despite doing $7 million in annual sales and posting yearly profits of $500 to $700 thousand. 

This might seem difficult to believe. That is, until we peer closer at the applicant’s financials. It turns out the company’s books were being kept by their CPA on a cash basis, describing money going in and money going out. What the bank wanted to see was not cash flow, but rather accrual accounting — a statement which includes all outstanding debts owed to others and payments owed to the company. 

In order to secure the needed $2,000,000 loan, the company in question reached out to their CPA to see what they would charge to convert their bookkeeping from cash to accrual. $20,000, they said, for this privilege. Then the same loan officer asked Blueprint CFO what we would charge.  

Our answer? $1,000. I am happy to report they took this offer, changed the accounting from cash to accrual, and secured the capital, making the bank and the client very happy. 

Here’s another example of the power of strong accounting. We worked with a bank possessing a construction services client regularly posting $10 million in annual sales. According to its accounting records, it had $9 million in cash on hand. 

However, when we dug in deeper, it turned out the applicant only had $100,000 in the bank. How is this possible? The flawed accounting was not up to date and didn’t account for spending going back three years. Needing a $2.5 million loan to pay vendors, the company called us in to fix their books, a job that required plowing through years of bank and credit card statements. In the end, we were able to produce a statement accurately reflecting the company’s true financial situation. (Which was quite strong.) As a result, the bank granted them the loan they needed.

The point is simple: Banks need customers that speak their language. Blueprint CFO is the translator that can bridge the gap between bank and customer, helping borrowers submit financial documents in ways facilitating — and expediting — loan approvals, leading to win-wins all around.

If you are interested in learning how Blueprint CFO can help your bank create better customers, email me at [email protected] or read about us in Forbes to learn how we can help your clients build their biggest futures yet.