Larger companies have all of the same problems that smaller companies have. It’s just that the problems are much larger.
And the tax consequences of those issues are a lot more expensive.
I see every accounting problem known to man in larger companies. Bank statements that don’t reconcile, loans balances so far off that even the most junior lender would question them, and balance sheets that have never been tied out to an income tax return.
In other words, financial statements that cause nothing but problems for everyone.
Management can’t make reasonable decisions because the information they have is completely unreliable. And if the IRS or the State ever knocked on their door for an audit, the liabilities alone would choke a pig, not forgetting the possibility of criminal charges.
Many times this occurs because of bad internal bookkeeping and accounting. Most of the time a company doing anywhere from $20M to $100M has a long term bookkeeper and accountant on staff.
Sometimes those people are good, but many times they aren’t. Ownership has had them in place forever and wouldn’t know how to run the business without them. They’re great at payroll, payables, and billing, but couldn’t do a journal entry to save their life.
They’ve also had the same outside CPA doing their returns forever. And that accountant, for whatever reason, doesn’t dig into the details.
The CPA has been told time and time again, to leave it alone, so they do. The CPA given the license is protected, so they do the return based on inadequate bookkeeping, and everything goes swimmingly until something happens.
Maybe the bank won’t renew their loans or one of the taxation agencies shows up for an audit, and the proverbial “guacamole” hits the fan. A one year audit becomes an audit on three years and the liability involved becomes egregious,
Ownership goes to the internal accounting staff who starts pointing fingers saying that it’s not their job to do the tax return correctly. The owner then goes to the CPA who says that he asked the right questions and tried to get it right but was told continuously to leave it alone.
The only thing ownership knows is that they now have a huge tax bill they can’t afford and that something needs to change.
Many times something similar will happen when ownership decides to sell the business. They hire a business broker who lines up several potential buyers.
Ownership meets with the buyers, settles on one, and a Letter of Intent is tendered outlining a deal. The buyer’s CPA then begins due diligence and the whole thing falls apart.
Now the current owner is looking at their original selling price minus a zero if their lucky enough to get any deal to close at all. And everyone of these problems could have been avoided if ownership had hired the right CPA.
I’ve seen these situations more times than even I can count, and fixing the problems will come down to two things.
Ownership must be willing to make a change, and change is never easy. It takes patience, time, and a willingness to get it right. The second thing is that the right accounting firm that will do the hard work, ask the right questions, and not put up with the status quo must be put into place.
I’ve fixed dozens of these situations in the past 34 years and have always been able to work through the problems with the existing in-house bookkeeping and accounting staff. It just takes time, attention to detail, and a willingness to teach them the right way of handling things.
If you find yourself in this position, we’d love to hear from you. Please don’t hesitate to call.
Your problems are solvable.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Schedule a Free Consultation, please click here.
Watch our Introduction Video here.
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
www.SalarySolutions.net
www.AccountingSolutionsLtd.com
Note that the only professional services provided by Accounting Solutions Ltd. are those specified in a written communication from our office detailing the scope of services to be rendered and the terms and conditions applicable to the engagement.