[IMGCAP(1)]Operating a successful business requires foresight, preparation and attention to detail.

Creating and maintaining a solid financial and legal foundation is the key to long-term prosperity. However, many entrepreneurs and business owners spend much of their time focusing on the issues of the day and put planning on the back burner.

Accountants and attorneys who understand clients’ goals need to be proactive to accomplish them.

They must work with business owners and other advisors to ensure that their clients are prepared for growth and ready to meet challenges.

Meticulous preparation and taking a proactive approach creates an infrastructure for a business to manage growth and mitigate unanticipated risk as the economy improves. A complete analysis and update may not be necessary annually, but a comprehensive review of corporate documents, financials, insurance and operational materials must take place periodically. 

Keeping a business’s “house in order” is always important, but it is crucial during an economic recovery when having legal documents, contracts, financials and insurance records in place and current can mean the difference between being able to take advantage of opportunities or being totally unprepared.

Accountants help prepare business owners for growth by putting financials, including profit-and-loss statements, sales reports, cash flow reports and other materials in order and in hand. Having these materials available makes the process of securing loans, credit lines or other funding options easier, especially in today’s difficult lending environment.

If an opportunity arises and funds are needed quickly, the delay that compiling this information could impose may mean the loss of a deal, contract or new game-changing client. This information provides a clear picture for owners about operations and will highlight areas where efficiencies can be made.  

Businesses must have their legal documents and information up to date as well. An attorney will review corporate entity or partnership documents, as well as those documents essential to daily business. Often these documents are rarely looked at, but they must be updated, particularly if changes occur during an economic downturn.

For example, family members may have left a business, or the size of a business may have been reduced. In some instances a new business structure may be needed for growth. An attorney can identify weaknesses or outdated clauses in contracts. Changes to the economy, increasing energy costs and the development of new technology are just a few big-picture reasons why contracts should be reviewed. Clauses relating to shipping and fuel surcharges alone, if not updated, could damage a business’s profitability. Changes in specific industries and the fluctuation of commodity prices also make it necessary to reexamine contracts. 

With an understanding of the owner and the accountant’s financial perspective, a set of fine-tuned core documents—including bylaws, operating agreements, shareholder agreements, shares issued (for determination of ownership), insurance policies, contracts, books and records—all should be updated or created.

A team of advisors often includes a financial planner, real estate or trust professional, insurance specialist and possibly a human resources expert. The team can be structured in the way that best fits the business. However, the leadership should come from within the business: perhaps the owner, CEO, president or other executive who can direct the team and facilitate the internal information-gathering process to reduce confusion. Advisors and clients should be in agreement as to the goals and responsibilities associated with the ways in which information is shared.

When conducting a review, if the issues are specific to the expertise of one advisor, then this member may be the most effective leader. Although every situation is different, typically the accountant or attorney takes the leadership role. Initial team meetings define goals and familiarize advisors with operations.

Once the core elements are determined, team members can collaborate on more specific issues. In some instances job descriptions for each position in a business may be essential. The creation of a human resources manual may be needed to position the company for growth. The HR expert and attorney can work together to make this information clear and comprehensive. Risk issues are the domain of all advisors, but they are the main focus of the insurance specialist.

The team concept works, but keep in mind attorney-client privilege. Anything discussed between a business owner and his or her attorneys is confidential. This rule does not apply if a non-privileged individual is present. Compromising situations can be avoided by having the owner and attorney cover sensitive topics in separate meetings or, if the accountant or other advisor is important to the discussion, by having the attorney retain this individual as a consultant, thus extending the attorney-client privilege to other team members and protecting all parties.

In addition to a periodic review, spending a few hours per month in consultation with the owner will keep information up to date and planning on track. This time can be used to ensure that financial documents such as past and quarterly earnings, projections and cash flow analyses are updated and organized. Such information is essential to properly valuating the business and securing capital. When it is time to attract a purchaser, investors, lenders or partners, all the data will be in place and ready.

How can these goals be accomplished without having the cost exceed the benefits? Certainly, a cost-benefit analysis is necessary for each business so that these efforts to improve the business do not have a negative impact. One strategy is to initiate prescheduled reviews semi-annually, with special meetings whenever necessary. In some instances, quarterly meetings may be necessary initially until issues are identified, acknowledged and under control.

It takes a team of proactive professionals to assist a business to thrive and overcome challenges. Economic conditions will provide opportunities, but also some hurdles. If the client team is cohesive and well utilized, the operation of the client’s business will become more efficient and the personal and business relationships between business owners and managers will be strengthened.

Richard Gertler is a partner at Thaler Gertler LLP, an East Meadow, N.Y.– based law firm that specializes in corporate and bankruptcy law, commercial litigation and mediation.

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