by EBJ

Your weekly dose of B/S:

November 9, 2010 in Financing by EBJ

Balance Sheet! What did you think!? This is a professional blog here for crying out loud! So what brought me to this? Thing is I have been dealing with companies and start ups in Lebanon for a quite a while and have witnessed all kinds of atrocities related to financial statements. Things that you cannot even imagine!  Best way to show you the extent of “creativity” of some company managers when it comes to financial statements is through a very particular case I went through when I was screening some files for financing:

Four different financial statements for the same period in the same file! I had seen cases with two different ones before, just the usual wise guys trying to declare fewer profits in an attempt at evading taxation, but never four. If those were wise guys, how can I qualify this one? I had to meet him! So I called him for a meeting. Surprisingly the guy was punctual, honest, and pretty much straight forward. When asked about this anomaly in his file, he calmly and clearly explained that  one version was the real one and kept it for himself, the second showed lower profits and was intended for the authorities for tax evasion purposes, the third had inflated profits and was intended for the bank, and what about the fourth? It was for his PARTNERS as he wanted to keep the bulk and undeclared part of the profits for himself and distribute the remaining crumbs as dividends! Now that was malefic genius! I have to admit I was very intrigued at how open he was about it. Why would a guy who’s cheating the authorities, the bankers, his partners, and God if his wife too, be telling me the truth? Is it because he included all the different financial statements in one file by mistake and was trying to gain my sympathy by showing me that I am the privileged one he chose to be honest to? Or should I simply qualify him a schizophrenic crook?

Anyway, it doesn’t matter, his file was flushed down. The point of this short note and the few ones to follow are to show you the importance of having clear, formal and well organized financial statements. Whether you are a start up or an existing company, this will help you have a better visibility of your activity and will allow you to diagnose any problem at source in order to take preemptive measures. This is not to mention that without clear records it will be quasi impossible for you to raise additional funds whether in debt or equity. So if in any sense you are doing like the above mentioned crook, I advise you to stop this BS! We will explain more about this next week in a rather familial/social context by comparing the importance of your Cash Flow relative to that of your Mother…