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4 Replies Latest reply: Jul 26, 2012 9:38 AM by Moderator Berta RSS

Small business nightmare accounting issue

Ezelle Newbie
Currently Being Moderated

We have a small business (corporation) and have been in business for over 25 years.  We've been too lax with our on staff accountant who had been employed for 10+ years and finally made the decision to let her go.  We knew from pc monitoring that she was not working most of the day also from billing errors and lack of financials and bad financials.

 

We had no idea how bad the problem was and are now finding she has not posted payments, not reconciled bank since 09, not paid some taxes etc etc.

 

Our question is what to do now?.  We are frantically trying to catch up postings etc and make sure vendors / taxes are paid.  Also she ran financials through 7/11 but after seeing mistakes and lack of bank reconciliations we feel certain they are not accurate.

 

Do we try to back track or start over or what? 

 

Thanks,

Jon

  • Re: Small business nightmare accounting issue
    OfficeGoddess Expert
    Currently Being Moderated

    I would start by finding a good bookkeeper,   Then, I would have them verify and/or enter all of last year's transactions - and be sure and notify your accountant of the situation so they can, if necessary, file a tax extension for 2011.  I would then go back year-by-year and verify/enter all transactions, again notifying your accountant as each year is completed.  I don't file taxes, myself, but I know they can do an amended filing for at least the prior 3 years.

     

    I have a client that I've been with for 7 years that had a similar situation when they hired me.  The diff being that it was only 2 years of messed up accounting. Their accountant was able to get the tax extension and the prior year's tax returns amended without too much trouble.

     

    Lily Chambers

    The Virtual Office Goddess, LLC

    Author: How To Do Your Own Small Business Bookkeeping

  • Re: Small business nightmare accounting issue
    Kirsten Clark Novice
    Currently Being Moderated

    After you find a good bookkeeper, it's important to review and understand your financial reports on a monthly basis.

  • Re: Small business nightmare accounting issue
    Tran Nguyen Expert
    Currently Being Moderated

    I agree with OfficeGoddess and Kirsten, you need to find yourself a good bookkeeper.

     

    My only concern is with such a lapse in internal control, will the bookkeeper even know where to start and how to root through some of the information. As an accountant and bookkeeper, I have had to deal with this before and it is a terrible headache.

     

    But first thing is to not panic. Also, since you have been in business for 25 years, I do not recommend you starting over. You would lose the audit trail and that would be catastrophic if you were to be audited. I say your best bet is to backtrack, but within reason. In order to get this back together, you'll need the following:

     

    1. Bank Statements from prior periods
    2. Credit Card Statements from prior periods
    3. Call your vendors for a list of all current and outstanding balances
    4. Notify your tax accountant, you can amend the last 3 years  ------> however, the very fact that your tax accountant did not bring it to your attention that the numbers dropped or looked weird means you should consider finding a new one
    5. Go back and enter (off of the bank/credit card statement) all the transactions that were never entered -------> you won't remember them all, but you will get some of them. This way, only your line items will be inaccurate, but your overall numbers will be correct. Also, because it is a bank statement, it will have much more creditability if you are audited than a receipt you kept
    6. Don't worry about getting everything correct; just worry about getting everything in
    7. The unpaid taxes, it depends (see below response)
    8. Close out the years as you go, and give it to your tax accountant

     

    Unpaid Taxes

    It depends on the taxes. Any unpaid tax means trouble, but it also depends on the tax. Normally a good accountant will be able to call the IRS or the State Department of Revenue and negotiate some terms so you don't get in trouble when you pay -- not to be rude, but when I say "good accountant" I don't mean the tax accountant who didn't realize there was anything wrong with your yearly filing.

     

    The IRS and the State will most likely send you a letter asking for the payment and the amount due. If you can pay the full amount, the's good. If you cannot, you'll have interest on the amount until it is paid off.

     

    Also, if the task above seems too daunting, consider taking it to an accounting firm. They have both the accountants, bookkeepers, and support staff to enter that on a fly. It will be expensive, but so is hiring an hourly person to dig through everything. Let me know if this helps and if I can be of any further assistant.

     

    Tran N Nguyen

    Accountant & Owner

    Tran'sActions Accounting, LLC

  • Re: Small business nightmare accounting issue
    Moderator Berta Master
    Currently Being Moderated

    Lots of great information and advice here. How's things going Ezelle? Have you found a new accountant?

     

    ~Berta

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