Whether you're ready or not, tax season is in full swing. While the filing process can be stressful, tedious and time consuming, smart business owners know that maintaining good records and books throughout the year helps ease the process.

In many respects, that same diligent bookkeeping approach towards tax preparation can be applied to selling a business. The more time and energy you invest in managing the books now, the less work you'll have when you decide to sell. And just as your financials need to check out with the IRS, so do your financial claims with the potential buyer. A strong, documented financial track record not only assures buyers your business is worth every penny you're asking, but it also demonstrates that your business is an organized and well-managed one.

Whether you plan to sell your business within the next few months or years from now, maintaining your financial records will ensure you have the documentation needed when you decide to sell. Here are a few tips to help prepare your financial records for a sale:

Make time for good book and record keeping.

Although it's easy to push aside bookkeeping responsibilities, it will ultimately hurt and slow down not just tax filing, but also your ability to sell your business. Thorough and accurate financial reporting brings a level of objectivity to the buying process. Setting aside time to prepare and annually review key financial statements will improve the overall value of your company and create less work for you when you decide to take your business to market.

Owners should prepare and review the following key financial statements on an annual basis: profit and loss statements (from the last two to three years), the current balance sheet, cash flow statement and business tax returns. It's also important to regularly monitor and evaluate other documents that influence the business' financial health such as your current lease(s), insurance policies, supplier and client contracts and employment agreements.

Verify your financials.

Although many small business owners can get by with an off-the-shelf accounting solution, if you don't have the time or skills to maintain the books yourself, then invest in a part-time bookkeeper. A small business CPA can ensure the integrity of your financial records, and also help identify any gaps or shortcomings that could be improved. They might even be able to lower your taxes enough to off-set their fees.

It's also worth noting that buyers often place more weight on financials that have been scrutinized by a qualified accounting professional. A CPA review or even an audit can lend your financials more validity, and potentially increase your business' selling price.

Organize your financial records before going to market.

As mentioned above, serious buyers will want to see your company's financial statements. Compiling a well-organized package of key financial documents from the last three to five years beforehand will not only help expedite the sales process but also demonstrate that you're serious about selling. Generally speaking, nearly all businesses should include the following documentation records:

  • Current and past financial statements
  • Records of business purchases and bills of sale
  • Statement of seller's discretionary earnings or cash flow
  • Financial ratios and trends
  • Accounts payable/accounts receivable reports
  • Non-disclosure or confidentiality agreements
  • Marketing plans and samples of marketing material

All key information about your business, such as your inventory and staff lists, a current client list and tax returns, should also be included in your financial package. Your business broker or accountant can also identify if there are any other key documents that should be included based on your company and its situation. Make sure that you have a signed non-disclosure agreement in place and only share this confidential financial information with serious buyers.

Strong financial records are not only a sign of well-managed businesses, but also a critical part of the sale process. By applying the same diligence and commitment to maintaining your financial records as you do to preparing your taxes, the easier it will be to sell your company for the full market value you deserve.