Multiple Businesses Lead to a Big Bookkeeping Mess

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This story came from a CPA friend of mine.  One of her clients ran multiple businesses. One was established in 2004 as an S Corp and another was set up in 2007 as an LLC.  The owner had controlling interest in both entities.

When the second company was started, staff was borrowed from the first, supplies were shared and the bookkeeping consisted of throwing the receipts for both companies in one box.  The bank accounts were also commingled.

A year later, it was next to impossible to compile and allocate the costs for the businesses. There was no accounting at all for the first year.

My friend went in and set up QuickBooks and wrote out policies and internal control procedures.  A year later, guess what. Nothing had changed.

The cost to prepare her return was much more because the bookkeeping had to get done first. And last minute, after the fact bookkeeping ALWAYS costs more.  And there is the lost opportunity cost. Without solid financials, the owner couldn’t make informed decisions.  And the CPA couldn’t do tax planning.

Bad bookkeeping costs money.  Luckily, the client got the lesson and began getting interim financial statements prepared.

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