Trial balance due March 1 on books nobody has reconciled since October

Fix the deposits first, before anything else. That $9,300 isn't income, it's money you owe back to people, and it should be sitting as a liability on the balance sheet of whichever entity holds the lease. Coding it to income overstates last year's revenue by $9,300 and hides an obligation that comes due the day someone moves out.

The other half of that is where the cash physically sits. Deposit handling is set by state law and the rules genuinely differ. Some states require a separate account, some require interest, some just require you to account for it at move-out. Look up your state's statute rather than trusting what a landlord forum told you.

On my side of the business we keep tenant deposits out of operating entirely because reconciling a trust balance to a deposit ledger is a five minute job when the account only does one thing, and it's a nightmare when rent and mortgage payments run through the same account.

An $18,400 roof on an 11 unit portfolio is not a repair under any capitalization policy I've ever seen written down. Ask the preparer whether he actually took it as an expense on the return or reclassed it on his own worksheet, because those are very different problems.

Why is one checking account doing the work of two LLCs? Open the second account this week. It costs you an afternoon and it stops the problem from getting 14 months bigger while you argue about software.

Agreeing with verity and going further. When I diligence a small portfolio, one shared operating account across two borrower entities is the first thing I flag, because it means every number I'm given is an allocation someone made after the fact rather than something the bank statement proves. It doesn't kill a deal, it just means I trust nothing else in the package either.

Whether commingling actually threatens the liability separation of those LLCs is a question for an attorney in your state, and it's worth the hour. What I can tell you is the practical version: if your aunt ever sells, refinances, or brings in a partner, somebody will pull those statements and ask you to prove which entity paid what. Rebuilding that from memory two years later is worse than the cleanup you're staring at now.

Let me size the quote for you. At 90 to 130 transactions a month you're looking at roughly 1,500 to 1,800 transactions over 14 months. A competent cleanup person with good bank rules gets through that at maybe 60 to 90 transactions an hour once the rules are set, so call it 20 to 28 hours of categorization. Add reconciliations, 14 months times two entities once you split them, another 8 to 12 hours. Add untangling the deposits and the owner draws, call it 5.

That's 35 to 45 hours. $3,800 puts them somewhere around $85 to $110 an hour, which is a normal number for cleanup work and slightly cheap if it includes rebuilding the fixed asset schedule.

Ask whether it includes that schedule. It almost certainly doesn't. Reconstructing basis from closing statements is a separate job and most bookkeepers will hand it to the CPA.

Question about method rather than price. If you pay someone to do the catch-up, are they entering 14 months of history transaction by transaction, or are they booking a single opening balance journal entry as of a date and going forward clean from there? Those produce very different files and very different bills. I'd want to know which one the $3,800 buys before I signed anything.

I did your option 3 on a smaller portfolio and I'd do it differently now. Starting clean on January 1 sounds like it draws a line under the mess. It doesn't, because the balance sheet walks across the line with you. Accumulated depreciation, the deposit liability, the loan balances, the owner equity, all of it has to be correct at the start date or your clean file is built on numbers you made up.

The P&L you can abandon. Nobody is going to read a monthly income statement from 18 months ago. The balance sheet you cannot.

quarry is right about the balance sheet and I think overstates the rest. You don't need a correct opening balance sheet in the abstract, you need the specific accounts that carry forward to be right, and for rigging that's the two loan balances, the deposit liability, the fixed assets with accumulated depreciation, and the members' equity in each entity.

Everything else can be a plug to a single account with a note explaining it. I've closed out worse. The mistake people make in cleanup is treating all 1,800 transactions as equally worth their time. About 40 of those transactions determine whether the return is right. Find those 40 first, then decide how much of the rest you care about.

Slightly behind everyone here. What is a trial balance and why would a preparer want that instead of the QuickBooks file itself?

plumb, it's the list of every account with its ending debit or credit balance. It's what the preparer keys into his software. He wants it because he doesn't want to click around someone else's QBO looking for surprises.

rigging, the sequence I'd use. Export the bank feed for the whole 14 months to a spreadsheet first, before you touch QBO. Sort by amount and by counterparty and you'll find that a huge share of your transactions are 20 or 30 repeating items. Rent deposits, two mortgage ACHs, insurance, the same three vendors. Build your rules on those and the categorization collapses to a few hours plus a tail of oddities.

Then reconcile month by month in order and do not skip forward. The month where the cash stops tying is where the real problem lives, and it's usually a transfer between the two entities that got recorded once instead of twice.

cobalt, when you quote cleanup do you go fixed or hourly? And does the bank rule automation actually cut hours the way vendors claim, or does it just move the work to reviewing what the rules got wrong?

beacon, I'll answer since I'm pricing this exact thing right now. Hourly with a not to exceed number after I've seen the file. A firm fixed quote given before anyone opens the books is either padded or it's about to become a fight in week three.

The automation cuts data entry a lot and cuts judgment not at all. Rules will happily code an $18,400 roof to repairs forever because the vendor name matches a plumber you paid $200 to last year. What eats the hours on a portfolio like rigging's is deciding which entity owns a payment when both entities share one account. No software knows that.

On the deposits, one more wrinkle. Even if your aunt was self managing, the deposit statute still applies to her, and in a number of states you're on the hook for a specific accounting to the tenant within a set number of days after move out, sometimes with a penalty if you miss it. Some states also require the deposit be held in a separate account. Check your own state's landlord tenant code directly, since this is exactly the kind of rule that varies and that people quote from the wrong state.

If your books say $9,300 came in as income and the tenant ledgers say something different, you have a legal exposure sitting on top of the accounting one.

Per property tracking is what I'd set up before I categorized a single transaction, because doing it later means touching everything twice. In QBO I use a class for each property and the tenant as the customer. That gives you a P&L by class, which is the only report that ever changed my behavior. I had a unit I was sure was my best performer and the class report showed it had eaten $6,800 of turnover and plumbing over two years while a boring one across town returned steady money with nothing but a water heater.

With 11 units across two entities you also want the entity split, which is why people end up with two QBO subscriptions instead of one file with classes. Two files is cleaner and costs more. I'd pay the extra.

Nobody has said the hard part out loud. The fixed asset schedule isn't lost paperwork, it's the entire depreciation history of both portfolios, and if the prior preparer won't send it you're rebuilding basis from closing statements. Get those first. Every one of them, for all 11 units.

Then you need the allocation between land and improvements on each purchase, since land doesn't depreciate. People often use the assessor's ratio of land value to total value as a starting point for that allocation, and how defensible that is depends on the property and on your preparer's judgment, so that's his call and not yours. If your aunt did a cost segregation on any of these, that changes the schedule again.

Without that schedule your balance sheet cannot tie, no matter how well you code the checking account.

On the roof, pull the actual invoice, not the credit card line. Contractors on my jobs itemize tear off, decking repair, and the new membrane separately, and the split matters to how a preparer treats it. If part of the old roof was disposed of, there's a treatment for that too and it's very much a licensed preparer's question.

Also write down a capitalization policy and put a dollar threshold in it, then apply it consistently. Most of the coding arguments I've watched happen because nobody ever wrote the threshold down.

Pay the $3,800. You said 60 to 80 hours of your own time while learning. If an hour of your attention is worth more than $50 you're already behind, and the version you build yourself in month one will need fixing in month four anyway.

Before you buy anything, ask the preparer four specific questions in writing. What format does he want the trial balance in. Does he need it per entity or combined. Does he have the depreciation worksheet in his file or did the prior preparer keep it. And what does he do with the balance sheet if it doesn't tie.

I'd bet the answer to the last one tells you how much of this cleanup he actually needs, which might be a lot less than $3,800 worth. flint may still be right that you pay it. I'd want to know what I was buying first.

Everyone's arguing about the return. The return is the smallest thing your books do. With 11 units and two loans, the report you need monthly is NOI per property and debt service coverage per entity, because that's what tells you whether the five unit LLC can carry its own note when a tenant leaves.

rigging, what are the two loan payments and what are the annual gross rents in each entity? If the six unit side is subsidizing the five unit side through that shared account, you've been running a portfolio with a hidden problem and the bookkeeping mess is how it stayed hidden.

Checking the ongoing number. $450 a month across 11 units and two entities is about $41 a door, and that's on the low end for two separate files with two separate reconciliations. I'd expect that price to move once they've lived through a couple of month ends with your transaction volume. Ask now whether the $450 covers both entity files or one, and whether 1099 prep at year end is inside or outside the fee.

On cobalt's hour estimate I think 35 to 45 is right for coding and reconciling and understates the deposit untangling. You have $9,300 of deposits across some number of leases and no ledger showing who paid what. Reconstructing that from bank detail and lease documents is slow, and it's per tenant.

Read the two loan agreements before you spend a dollar on cleanup. Small balance commercial and portfolio loans on LLC borrowers frequently include a covenant requiring the borrower to maintain separate books and records and to deliver annual financial statements, sometimes within a stated number of days after year end. If those covenants are in there and nobody has delivered anything in two years, the lender's silence is not the same as a waiver.

Also read the operating agreements. If either one requires books kept on a particular basis or distributions made in a particular way, that $6,200 of transfers to her personal account may need to be characterized in a specific manner rather than whatever the preparer picks. Neither of those is my call to make for you, but they're both sitting in documents you already have.

Reading twice and still unsure. What actually goes wrong if two LLCs share one bank account? Is it a tax problem or a legal problem or just a tidiness problem?

juniper, mostly it's a proof problem. Nothing explodes on day one, you just lose the ability to demonstrate that the entities operated separately, and that matters if anyone ever challenges the separation.

rigging, one thing I didn't see. If the lenders escrow taxes and insurance, each mortgage ACH splits into principal, interest, and escrow, and only two of those belong on the P&L. If someone coded the full payment to mortgage expense for 14 months, your expenses and your loan balances are both wrong. Ask each servicer for the annual escrow analysis and the year end interest statement, then work backward.

I split shared accounts on a four entity setup two years ago and the cost was almost entirely calendar, not cash. Two weeks of redirecting tenant ACH, insurance drafts, and two servicers, plus a month of watching for the payment that didn't get the memo.

The thing that surprised me was the intercompany cleanup. Once you separate, every dollar one entity paid on the other's behalf becomes a due to or due from that has to be settled or documented, and in your case that's 14 months of them. You may find that one entity effectively lent the other real money. Get that number before you decide it doesn't matter.

Taking notes for a purchase I haven't made yet. If I could only do four things on day one, is it separate account per entity, class or file per property, a written capitalization threshold, and a deposit liability account? Or is there something earlier than that.

quill, add "keep every closing statement in one folder forever", judging by parcel's post.

rigging, for my own underwriting, what's the honest all in on the ongoing side? $450 a month is $5,400 a year against 11 units. I've been penciling $30 a door a month for bookkeeping on a smaller build and wondering if that's fantasy.

tally, $30 a door works when the books are already clean and you're paying someone to maintain them. It doesn't cover a rebuild.

rigging, the reason I'd move faster than March 1 is the refinance you haven't scheduled yet. On the lending side of the deals I look at, a request for two years of entity level financials plus current rent rolls is routine, and the borrowers who take six weeks to produce them are the ones who lose the rate they were quoted while the file sits. Your aunt's two notes have maturity dates. Go look at them tonight. If either one comes due within 24 months, the cleanup stops being a tax chore and starts being the thing standing between you and a loan. Confirm what your lender will actually require in writing, since every shop's document list is its own animal.