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How do I prepare my books before applying for a business loan?

Lenders want to see clean, consistent financial records that tell a clear story about your business. Before you apply, make sure your books are in shape to tell that story well.

Start with reconciliation. Every bank account, credit card, and loan should be reconciled through the current month. Unreconciled accounts signal sloppy record-keeping, and lenders notice. If you’re months behind, catch-up bookkeeping should be your first priority before you even think about the loan application.

Prepare accurate financial statements. Most lenders want a profit and loss statement and balance sheet, often for the current year-to-date plus the previous two years. These need to be accurate, not approximations. If your books haven’t been touched in six months, the statements you generate won’t be worth much.

Clean up owner activity. Lenders look at how money moves between you and the business. Large or frequent owner draws, personal expenses run through the business, or loans to yourself that never get repaid all raise questions. Make sure owner contributions and distributions are properly recorded and make sense when someone outside your business reviews them.

Categorize everything correctly. A $15,000 miscellaneous expense line looks suspicious. Lenders want to understand your cost structure. If you’ve been tossing transactions into generic categories, go back and fix them. Materials should be materials. Subcontractor payments should be subcontractor payments.

Make sure your books match your tax returns. Lenders compare your financial statements to your tax returns. If your P&L shows $200,000 in revenue and your tax return shows $150,000, you’ll need to explain the difference. Sometimes there are legitimate reasons, but unexplained discrepancies create doubt and slow down the approval process.

Check your accounts receivable and accounts payable. Outstanding invoices and unpaid bills affect your cash position. Make sure A/R reflects what customers actually owe you and A/P reflects what you actually owe vendors. Write off bad debts that you’re never collecting.

Address unusual items proactively. If you had a one-time equipment purchase, legal settlement, or other anomaly that affected your numbers, be ready to explain it. A note attached to your financials helps the lender understand these are not recurring issues affecting your ongoing profitability.

Give yourself time. Rushing to clean up books the week before a loan meeting usually shows. Lenders can tell the difference between well-maintained records and a last-minute cleanup job. If your books need serious work, start at least a couple months before you plan to apply.

The businesses that get approved quickly are the ones with bookkeeping services in Richmond or elsewhere that keep their records current month to month. When the loan opportunity comes up, they’re ready. Their statements are accurate, their accounts are reconciled, and their numbers tell a coherent story that lenders can trust.

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More Questions

How do I know if I need to collect sales tax in other states?

You need to collect sales tax in states where you have economic nexus, which usually means exceeding $100,000 in sales or 200 transactions. The rules changed in 2018, so physical presence is no longer required.

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What e-commerce expenses are tax deductible?

E-commerce sellers can deduct platform fees, inventory costs, shipping and packaging, software subscriptions, advertising, and home office expenses. The key is tracking expenses properly throughout the year.

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What forms do I need when I hire a new employee?

Every new hire needs a W-4 for federal withholding and an I-9 to verify work authorization. Virginia also requires a VA-4 for state withholding and new hire reporting within 20 days.

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How do I record Shopify sales in QuickBooks?

Record gross sales separately from the bank deposit since Shopify deducts fees and refunds before paying you. Use a clearing account to track what Shopify owes you, then match payouts to your bank deposits.

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How do I calculate my food cost percentage?

Divide your cost of goods sold by your food sales, then multiply by 100. The key is calculating COGS accurately using beginning inventory plus purchases minus ending inventory. Most restaurants target 28% to 35%.

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What's the difference between catch-up bookkeeping and cleanup bookkeeping?

Catch-up bookkeeping addresses a time gap when your books stopped being maintained. Cleanup bookkeeping fixes quality issues like miscategorized transactions and accounts that don't reconcile. Many businesses need both.

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