Happy New Year! We want to help you with your plan for 2019 – Your plan on a personal level – Your plan regarding your business – And how both are used for a succession plan. We want you to know the importance of a personal financial statement, creating a dashboard for short term and long term business monitoring and planning, and determine if your succession plan is ready for a full valuation.

Today we will highlight the purpose of the personal financial statements and who needs to have one prepared.

What is a personal financial statement?

A personal financial statement (PFS) is a financial statement. A PFS can also be referred to as a personal balance sheet. A PFS outlines an individual’s fiscal position during a given period of time. This document will include a listing of all personal assets and liabilities. The purpose is to net assets with liabilities to get to a net worth figure. Accurate net worth will prove valuable when making financial decisions in the short and long term.

Who needs a personal financial statement and when?

Entrepreneurs and Business Owners

• Start-Up and Presenting a Business Plan – An up-to-date, accurate PFS will be crucial when seeking financing. This would be presented along with the business plan and loan application. Many businesses need capital to get started or additional capital as a result of growth. A PFS will prove to be a powerful navigational tool when negotiating terms with financial institutions.
• Debt Restructuring – As the business progresses, the organization has the potential to experience an unfortunate downturn and debt restructuring may be necessary to reestablish the company. A strong and updated PFS demonstrates that the owner is serious and values current financial information.  This will help in courting investors and negotiating favorable terms with vendors.
• Investing – Smart serial investors and entrepreneurs need to know where they are invested, what each investment is yielding, and how much money they can risk.
• Exit Strategy – An accurate and reliable PFS can prove to be a valuable navigational and planning tool when determining an exit strategy for a business.

High Net Worth

The high net worth individual will benefit greatly as a PFS gives them a “screenshot” of their wealth. It also aids in establishing and continuing long term financial planning, retirement.

Retirement

A PFS can become a retirement compass. It will allow an individual to determine an approximate timeline and financial picture when entering retirement and beyond.

If you are in any of these categories, we would like to continue this conversation. Please contact our experienced business advisors to help you plan and budget for financial success.

Contributor: Andy Klein, Audit Team Lead