What does Recasting the Financials mean?
Owning a business provides many deductions, which in turn will show a lower profit on the Tax Return. Which means lower taxes being paid versus not taking advantage of using legal deductions.
This is where Recasting the Financials (also referred to as Add-Backs) comes in to show the actual Owner Benefit.
So, why would you want to do that? If you have your business for sale and a prospective buyer is looking at your Tax Return and they show that the Net Profit was $61,076.00 in 20XX, however your actual income is actually $102,345.00. It is going to have to be shown where the difference between the two numbers is coming from.
Now is where the Recasting comes in. By adding back your deductions to prove where your actual Owner Benefit is coming from.
When we Recast your Financials, we add-back every business-related deduction and non-business deductions.
Examples of Business-related deductions would be Depreciation, Bad Debt, write-off of Obsolete Inventory, Interest on a Loan, Meals and Entertainment (unless essential to running of the business), etc.
Examples of Non-Business related deductions would be cell phones (used by the family), personal automobile expense, travel, a spouse who is paid $1,800.00 per month as an Executive Assistant, but does not work at the business, etc.
This is a simplified explanation why Recasting Financials is so important when selling a business and for a purchaser to understand how the Owner Benefit is determined.
When we Recast your Financials, we go through a rigorous process to obtain an accurate Owner Benefit. We want to get the highest price for your business or medical practice.
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