Your Banker is your best friend - Part IV
Frederick J. Sitzberger
Many times during the year-end planning for our clients they ask me, "Fred, is there one item I should concentrate on for my financials for the bank?" Since I am paid by the hour, I say, "Let me ponder this." What is most important, current ratio, inventory turnover, aging of accounts receivable, days sales in accounts receivable, days of inventory on hand, etc.? I believe it is the "staying power" of your business. This is measured by net worth %,
This is calculated by the following:
Equity/Total Assets
| I illustrate this to my clients in the following manner: |
|
Percent
|
Banker's Response
|
| 0-20% | The banker will seldom return your
call the same day. |
| 21-30% | The banker will call you once a year
and every second year take you out
to lunch.
| | 31-40% | Lunch and one ball game |
| 40-50%+ | Lunch, golf, ball games, birthday
cards, you name it you got it. |
The banker is in the business to lend money risk free. At higher percentages, his risk is greatly reduced as your staying power increases.
As you begin building your business, build your net worth. It allows the staying power for the future and will allow your banker to be a trusted semi-equity partner without risk to them, which makes them happy.
| Provided by: Fred Sitzberger, CPA, CVA |
| Sitzberger Widmann & Company |
| 14640 W. Greenfield Rd. |
| Brookfield, WI 53045 |
| Phone: (262) 860-1724 |
| Fax: (262) 860-1726 |
|
