If the October Tax Deadline Uncovered a Mess, Consider Financial Records Reconstruction
Now that the October tax extension filing deadline has passed, it’s time to think pie. No, not Thanksgiving pumpkin pie – but “pie in the sky” financial record-keeping that might have caused headaches when contending with the recent deadline. Now that the big push is over, it’s time to pick up the pieces and assess what needs to be done to make the process smoother the next time around.
Often — whether through benign neglect, active mismanagement, or by innocently relying on an incompetent or dishonest bookkeeper– business owners allow their financial records to slip into a state of nonsense. Then tax season rolls around. Suddenly, the need for reliable financial records becomes acute. Many business owners hope their CPAs will magically clean everything up.
One potential solution: business reconstruction, a process by which bookkeeping data is located, organized, and checked to ensure that it accurately and completely reflects your business transactional activity.
Among the sloppy bookkeeping signs that may indicate a reconstruction is appropriate:
- Excessive journal entries, especially for cash transactions
- Large unexplained Miscellaneous expenses; “Ask My Accountant” or Suspense accounts
- Uncleared transactions that stay in the account indefinitely
- Not writing off uncollectible, duplicated, or erroneous Accounts Receivable (which increases taxable income)
- Recording loan proceeds and transfers as taxable income
- Balance sheet accounts are not reconciled, or changes are made after a reconciliation
We help CPAs help clients with big messes. We locate and organize source documents and data files, reconstruct financial records to accurately and comprehensively reflect the financial health of the business, and suggest processes to implement to keep records clean and accurate moving forward.