The client
A family-owned importer, wholesaler, and retailer based in Kansas. It's a group of six related companies: the main operating company, a trucking subsidiary, an import company, and three real estate and storage entities. It sells wholesale across the country all year long and runs seasonal retail in eight states.
The challenge
The group had outgrown its books. The operating companies should have been on accrual accounting but had been kept on a cash basis for years. A mid-year switch to accrual only went partway. Money moved between the six companies all the time, with little record of who owed whom. Payroll for the trucking company ran through the parent. The insurance, rent, and loan payments shared across the group were never divided up among the companies.
The reports showed an $8.3 million accounts payable balance and negative equity of more than $7 million. The owners were facing tough questions from their bank without clean numbers to answer them.
What we did
Found the real balance sheet
We traced the $8.3M payable to the penny. It wasn't debt. It came from years of journal entries posted straight to accounts payable, which QuickBooks can't handle correctly on a cash-basis report. True accrual A/P was about $636K. Roughly $7.7M of the “problem” was never real.
Finished the accrual conversion
We rebuilt monthly wholesale revenue by checking it against the actual invoices, not the inventory system's reports. We also reconciled accounts receivable back to a verified opening balance and set a clean accrual process going forward.
Put intercompany activity in order
Six companies sharing money need rules. We set up:
- Monthly payroll reimbursement between the parent and the trucking subsidiary, split by wages and taxes
- A written rule for dividing the insurance premium by owned vs. leased property and by vehicle
- Recurring rent billing between the related companies
- Month-end netting so each pair of companies shows a single balance
Built lender-ready reporting
Each period now produces two packages: a management copy with detailed notes, and a clean bank copy. We also wrote the letter to the lender explaining the change in accounting basis.
Looked past the books
We mapped the trucking company's tax obligations in all 50 states and D.C. That covered sales tax, highway-use taxes, and refund opportunities on equipment purchases. We also handled a new payroll registration for remote staff in another state. This is the office manager in a box side of the work: the questions that aren't bookkeeping but land on the bookkeeper anyway.
The results
- $7.7M of false liabilities identified and explained
- Six companies reconciled against each other every month
- Clean accrual financials the owners and their bank can rely on
- Repeatable monthly routines, so the next close builds on the last one instead of starting from scratch
Why it worked
Messy books usually come from a handful of habits that repeat for years. We find those habits, fix what they broke, and put routines in place so they don't come back.