I am about to give you a cheat-sheet that will guide you through this potentially terrible idea, in the hopes that your decision is a well-informed one.
- Question 1 – “Spouse, is this something that you want to do?” Please record the answer to this question on your handy, dandy iPhone thingy. I want to hear the response.
- Question 2 – “Spouse, how long will you be willing to help me to do this?” If the first answer is anything other than “as long as it takes you to find a CPA,” I will buy you a steak dinner.
- Question 3 – “Spouse, when did you last study accounting?” This can go two ways. Either the spouse replies “Never.” Or “I cannot remember what happened last week…you want me to recall what happened 10 years ago in college?” Either way, you have detected a problem with your spouse’s level of accounting expertise. Houston, we have a problem.
- Question 4 – “Spouse, when will you have time to do this for me?” Whoa, you need to take a step back….right now.
I get it. When you have 3 nickels in your business checking account, it makes perfect sense to think long and hard about hiring someone to help with your accounting needs. It’s ironic that this is also the time that you need someone the most, isn’t it?
How your hard-earned money is accounted for affects more than your bank account. Accounting records are used for preparing tax returns, applying for business loans, and enticing investors to help you out. If that information isn’t classified properly, then you could cause yourself some serious heartache.
- For instance, when recording money that you have deposited into your company bank account, do you classify it as capital or a loan? Do you know the difference?
- Do you know the proper way to record the purchase of a new piece of equipment, like a company car or leased office furniture? How about that land you purchased, on which your new building is about to sit?
- Do you have the proper tax identification numbers? Did you know that you can’t start processing payroll until you have them, nor can you open a bank account until you can prove to your bank that the business is legitimate?
Fast-forward two years. Assume you’re still married and that your spouse is still doing the accounting for your business
- Do you know how to respond to that latest tax notice from IRS? They’re expecting a response in 30 days, and it’s day 28.
- Are you ready for the worker’s compensation insurance audit next week? Do you have all those payroll reports printed, along with copies if your last four quarterly payroll tax reports?
- Do you know who is supposed to receive a 1099 at the end of the year?
Shoving something you don’t have time to do onto someone who doesn’t have the expertise can cause some tense moments at your office, and at your house. Trust me. But, if your spouse is willing to continue to help you, it could only help matters to have a professional who can serve as a resource to him/her. You started this business to enhance your life, not fast-track your ride to divorce court. But if you think that accounting is “no biggie” and take for granted that your spouse “can just handle it”, you may be in for a bumpy road.
This article was originally written by Jonathan Godwin on LinkedIn.