Case Studies from the Vault.

Bob's Mangled Maintenance

This is a case study of a maintenance company owned by Bob. (Not the actual business and not the real owner's name.)

Bob’s Business didn’t carry inventory and had a variety of vehicles and equipment. His books were in QuickBooks Online (QBO) and had been setup several years before but not correctly. Bob asked me to look at them after we talked about his situation.

“They are a disaster, and I can’t find anyone to fix them for me.”

He was a year behind on taxes, the accounts hadn’t been reconciled for three years, and the transactions had been entered from importing the bank statements in a way that caused multiple duplicates and errors. Much of his supplies and repairs were in the Cost of Goods Sold (COGS) accounts, but he didn’t sell goods. He didn’t carry inventory at all. The way QBO is set up, or any accounting process, expenses in COGS are held in a sort of limbo, and the program “expects” that you will sell something at some time. When nothing gets sold, the reporting and possible profit numbers begin to go sideways, and if an IRS audit happens, there can be a huge problem; it can trigger audits going back several years.

Thankfully, the payroll module was in good shape.

The fix was to go line by line, starting through the transactions and removing all duplicates. Then, go account by account in the Chart of Accounts (COA) and move transactions into proper expense and income accounts. Former credit cards had to be reconciled and zeroed out. Loans had been set up as bank accounts, payments for loans went to the asset accounts of the items purchased, no depreciation had been established, and no correct long-term liability accounts were established. Every transaction in COGS was corrected to zero out all the COGS accounts.

The last two things I did were to modify or remove many of the posting rules that had been made (over 180) to streamline the process and create a basic instruction manual and reference sheet he could use when entering transactions. In the end, we had several talks about good ways to do business to minimize the chance of triggering an audit AND staying out of prison.

This set of books was one of the worst I have ever dealt with, but they were not the worst.

California Crazy Chaos

This case study is based on a company I managed for five years out west. Let's call it “The High Chaparral.”

Several years ago I found myself in a management role for an organization. It had a budget of a little over $2M and had a unique legal structure. The books, in QuickBooks Desktop were a shambles. Some folks had been trying to clean it up, but it was filed with issues. No financial reports could be trusted as accurate. Members were not being tracked well; they were owed hundreds of thousands of dollars. Taxes had been behind and was being caught up by a board member. The operation had big problems from operational procedures, safety practices, and years of deferred maintenance. After a couple of years, many procedural improvements had been made, some good people rose to the top in performance, and the time came to dig deep into the books.

A previous person had made a valiant effort to bring things into balance but, due to lack of skill, had unintentionally made matters worse. I convinced the board that we needed to hire an accounting firm and we did so. Through my direction, working with the accounting firm, we were able to write off hundreds of thousands of bad debt, bring accounts current, and somewhat fix the accounts. Unfortunately, there were a considerable number of old and irrelevant accounts in the Chart of Accounts (COA), which created serious complications in the balance sheet and organization.

I met with the accountants and suggested we scrap the old set of books, create a new COA for them to review, change how members were tracked, and figure out the best balances of the old accounts as of December 31. The plan was laid before the board of directors and approved. The first week of January, the old books were “closed” (locked up from editing), and the new amounts were brought over. Procedures for purchases and other expenditures were put in place, money was set aside in reserves, and the office team was reorganized to place folks in the roles they could do best.

After the books were flowing smoothly and any report the Board wanted could be accurately printed, I turned my focus to establishing maintenance tracking software that the team could use from their phones. No longer were requests buried on truck consoles and seats.