Burned out

[Joel]

Clients started new business in 2012 (flower shop). They rented space in a strip mall in which there was a fire late in the year. Flower shop a total loss along with all their business and investment records. Clients say they were not making money but were keeping their heads above water in anticipation of the coming holiday season. Without any records for documentation where do we start? Any suggestions?

[cpabsd]

Copies of bank statements from the bank. Do the best you can to recreate financial data. Banks will usually waive any fees in a situation like this.

[ILLMAS]

Bank statements Bank Statements, Recreate books, time is money, have them pay up front. If this was a strictly cash basis business and there is no bank statements, you are a busy man, send them down the road.

[SFA]

see if their vendors / suppliers have any statements that may help. If you are interested in helping them, do the best you can. Good luck.

[RitaB]

The state's Department of Revenue might also be an option for recovering sales records. Cash may not have made it to the bank. (I know it may not have made it to the Sales Tax Return, either.)

[rfassett]

Utilities companies will give statements also.

[JohnH]

After getting bank statements, recording the transaction info in Excel is much better than using accounting software, (such as QB or Peachtree). And anyone who can type can be quickly trained to enter the raw data into excel, even if they have no accounting knowledge. This can even be suggested to the client that they do this in order to keep their costs down. Account coding can be done after the fact by somene knowledgeable in accounting terminology, and the end result given back to the client for their approval and sign-off.

Bank statements will provide check number, date cleared, and amount. Hopefully they are banking a bank which prvides check images with the statement. But if not, having the info in Excel allows you to group by transaction amount so you can detect patterns. Repetitive amounts can quickly be isolated (loan payments, rent, etc) and only a single check copy obtained to support multiple transactions. Having the ability to group and rearrange based on amount, date, payee, etc can greatly facilitate coding the transactions to the proper expense accounts, too.

Utility companies can be asked to provide account transcripts, which will help identify payees for those checks. Same for insurance companies, major vendors, and suppiers as has aleady been noted.

Personal bank statements of the owner(s) can yield a records of deposits which tie back to checks on the bank statement if there were withdrawals. This is important because clients often say they're not making money when in fact they are taking personal withdrawals. They equate not "enough money in the bank" with "not making any money", when in fact they are just withdrawing money to live on and not recognizing it as profit. How many times have we tld a sole proprietor that their personal withdrawals are profit nd they respond "but I have to have money to live on."

[Guest Taxed]

Clients started new business in 2012 (flower shop). They rented space in a strip mall in which there was a fire late in the year. Flower shop a total loss along with all their business and investment records. Clients say they were not making money but were keeping their heads above water in anticipation of the coming holiday season. Without any records for documentation where do we start? Any suggestions?

Very sad news. The first thing I would do as their "tax guy" is advise them to file for an extension. Buy some time to recreate records.

If it is a total loss was there business insurance, fire insurance? It will be a business casualty loss obviously. Get the police/fire dept. report to submit with return later.

For income recreation, go to the bank and look at cash and check deposits for 2012.

Go to sales tax dept. and get sales tax deposits for 2012. If they had employees you can get payroll tax deposits for 2012.

Go to vendors and suppliers to get inventory purchases. If they paid with credit/debit card the bank can give you records.

In otherwords these folks will have to do some work to recreate the records as best they can and hopefully they will be able to do it within 6 months. Actually right after the fire they should have contacted the financial institutions etc. to get backup copies.

I would also advise the client not to swing in the air and make a wild guess. If you honestly don't know then leave it alone. These never turn out good when there is an audit. A partial amount that can be recreated is far better than 100% wild guess.

[jklcpa]

You've received good ideas so far. Also, the owner could ask the employees if they kept copies of pay stubs that might have YTD amounts on them that will help tie in payroll. If the company used an outside payroll processing service, those records can be easily obtained.

[Joel]

Thanks for all the suggestions.

[Lion EA]

By the way, when I saw your topic I thought YOU were burned out. I was actually happy that it was your client with an actual fire (things can be recovered; people cannot) and not you under extreme stress with your health at risk. And, this is stress that you can hand back to your clients to solve. Give them a check list of all the good suggestions above, set them to work, and file an extension for now.

[joanmcq]

I'm with Lion, I thought this would be a thread about me, yesterday. I had to take the night off, I was that fried.

John & Taxed have given you some great suggestions. I agree with the creating the records in excel too. And for payroll, the state agencies and IRS will have copies of the filings.

Another reason to backup everything online...I fear fire, and my scanner is my friend.

[Joel]

I will have to say that I chose the title of this topic with tongue-in-cheek!

[JohnH]

Good strategy Joel - it got your question lots of extra view..

Let's keep the thread active.

It may take off on an entirely different direction in the next 3 weeks.