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Navigating a Chaotic Real Estate Clean-Up: What Would You Do?
I recently received an inquiry from a real estate investor in dire need of a financial clean-up for the current year. Her immediate concern is being unable to file taxes due to her disorganized books.
Following a brief 15-minute conversation and a quick review of her accounts, it was clear: her financial records are indeed a mess. Her situation involves three intertwined LLCs:
- A residential rental real estate company
- A commercial real estate company
- An interior renovation company
Fortunately, she maintains separate QuickBooks accounts and bank accounts for each business. However, there have been occasions where funds from one company’s account were used for acquisitions or expenses of another company, primarily to cover payroll or contractor payments. Luckily, she confirms there have been no personal transactions mingled with her business finances.
She revealed that her primary focus is on the residential property LLC as it is the most established and financially active. This is also the sole business she currently seeks help with in terms of clean-up and catch-up, leaving the other two on the back burner for now.
Previously, she outsourced her Bookkeeping to an online Accounting firm based on the west coast but ceased their services at the end of 2023 due to high charges. As of now, her accounts are trailing by about 1,100 transactions.
Here’s where I need your advice: how would you handle such a situation? It’s a complex case, unlike the simpler sole proprietorships or single-member LLCs I’ve dealt with before, given the multiple intertwined businesses.
If I decide to take on this challenge, what would be a reasonable fee to charge? I’m considering somewhere between $5,000 to $10,000.
This situation is undoubtedly intricate. Any suggestions or guidance would be greatly appreciated!
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One response
Handling a messy set of books for a real estate investor with multiple LLCs requires a methodical and strategic approach to ensure accuracy and compliance. Here’s a detailed plan for addressing this challenging situation:
Steps to Clean Up the Books
Define the Scope: Clarify with the client that the current focus is on the residential rental LLC, while the other LLCs might require attention later.
Prioritize Compliance
Compliance: Ensure that you adhere to all applicable Accounting standards and tax laws.
Segregate the Transactions
Record Intercompany Transactions: Clearly categorize and record transactions that involve inter-company payments to understand the cash flow and ensure they don’t affect the individual P&Ls improperly.
Use of QuickBooks
Match Bank Records: Cross-reference QuickBooks entries with bank statements to ensure all entries are accurately recorded.
Address Backlog of Transactions
Focus on High-Impact Entries: Prioritize larger or more complex transactions that have a significant impact on financial statements or tax reporting.
Regular Communication
Set Expectations: Clearly define the timeline for the cleanup process and convey any issues or delays promptly.
Consider Long-term Structural Changes