Contractors, Is Your Wife Doing Your Books? A recipe for family success or disaster?

So many of our clients come to us when the wife who has been taking care of the accounting puts her foot down and says, no more, I cannot do this!  An argument may ensue, but let me share with you why having your wife run the accounting/business management side of your ever growing contracting firm may not be the hot idea that you felt it was in your head!

Enter Wife Into The Family Business

Predominately, when a contractor, trade, or new home builder starts up a company or is not satisfied with the service levels offered in the accounting field, and if they are married and their spouse stays at home or has part-time work, the responsibilities associated with accounting and bookkeeping magically fall on the wife.

Some of you may think, how hard can this be and it will save me on expense and be a family project/goal!  We’ll do this together!  Sounds like a sound decision initially, but let’s take a second look!

#1  Does She Really Have The Time?

What happens so often, is that your spouse stops being treated like a spouse and becomes your highly overworked and underpaid employee,  financial business manager and is hard as you are working, you are expecting her to be all things, keep up with your hectic pace along with managing the household, family life and the specialized accounting and administrative needs of your ever growing business!

You’re both extremely hard working and as fast as you can pump out quotes and manage projects, she is trying to juggle purchase orders, inventory, data entry, reconciliation, cash flow, accounts receivable and payable management, filling out government forms, dealing with insurance companies and the list goes on and on.

She is consistently bombarded with other family obligations, stresses, family management and likely cannot dedicate the same amount of hours to this business you as she is managing everything else!  Both of your days start early and end very late!

Making collections calls, paying bills, filing government reports, handling employee time sheets, payroll and remittances, keeping up on the changes in contractors WSIB rules  forms along with handling business finances?    If your wife does not have the background, time and associated expertise necessary, it really can create a stressful situation for both of you. We’re talking about major relationship issues, missed expenses, income and the cash flow that can bring your business to a halt very quickly.

#2  Is She Qualified To Be Everything?

We all have our unique gifts and talents.  Do you know that it takes 10,000 hours to master a field or talent?  And let’s get a little more specific, mastery includes education and an understanding of the correct information and putting into practice.

10,000 hours is approximately 10 years of experience working full time.  Not even close?  You may want to rethink this.  Cleaning up accounting messes is much more costly than doing it right the first time.  Messing up of accounting records most often never done deliberately.  It is simply misinformation and lack of pertinent knowledge.

I am not saying that having your wife in your business is a mistake.  She can give you her 100% honest opinion, when presented with proper financial statements, she can lend you great perspective.  Perhaps there is a skill that she is really good at!  Look out outsourcing your accounting work so you can both concentrate on your personal gifts.

#3  Are You Getting The Information You Need?

Financial reporting and job costing is critical to the health of your contracting business.  Cash Flow and Cash Flow Reporting is king and you’re adding a whole other stress level if not only are you discussing and dealing with your personal finances, but also those of the business.

Are critical reports and work being procrastinated on?  Could it be that she does not want to let you down, but really needs help understanding the role accounting plays in your family business?  Does she have the birds eye view and perspective to go over the financials, advise and direct the funds to where it needs to and doesn’t need to go?

#4  Missed Opportunity Means Missed Money

If you have a desire to take on bigger projects, you likely need to consider funding the project prior to your the initial payment.  You need to know where you stand all the time and so do your lenders.

Many larger projects require engagements reviews from a professional accountant, consistent and up to date financial detailed cost reporting.  If you’re a new home builder, you’re also looking at qualifying with Tarion who also require proper financial reporting.

In short, not only are you missing out on cold hard cash, but you’re missing out on greater opportunities for your business that generate major revenues.

#5  Relationship Killer

Now, I’m going out on a limb here and am going to say, you did not marry your wife so that she could work for you free.  If you did, perhaps not your most brilliant move.  You likely married your wife for the characteristics and qualities that are unique to her.

Placing your wife in the pressure cooker of your business is going to be a relationship killer.  Added stress, arguing over personal and business finances, perspective and then you want some romance?  Forget about it!  It is a unique woman indeed that has these skill levels, can maintain perspective, calm, and plan for romance.  Please, tell me if you meet her!  I would love to shake her hand!

Let me tell you a quick story…

I was contracted to look over the books of a successful electrical contractor… His wife handled the books along with his sister in law.  They had some knowledge, but not enough.  His wife was busy managing her own small side business to bring in extra income.  There never seemed to be enough money.  They did not know where it went and the financial reports did not tell them what they needed.

From the outside, this contractor appeared to be highly successful, in fact he was, but he was trapped.  They were trapped.  They had no idea where they stood financially and his business growth was stumped as his books were a mess.  Lending institutions wouldn’t touch them without the right reporting and their taxes, well, let’s just say, they were left in high risk exposure.

After an afternoon of analyzing their accounting, I discovered that receipts were placed in bags and placed in a storage room, all entering was done through the bank and credit card statements and yes the banks were reconciled but there was a large amount of misallocation and misinformation.

The assets were not even input into the company books including 10 vehicles (depreciation expenses), year-end entries were not input and didn’t match the accounting records, another family member did their taxes for them and they lost thousands of tax dollars.

The Accounts Payable and Receivable reports again were a mess, The financial statements meant nothing.  The business was coming very quickly to a standstill.

It was no one’s fault, the wife did not intentionally set out to harm her husband or the company, in fact, she is a very smart woman.  This just wasn’t her field of expertise.  She was  also a hard worker tirelessly trying to managing her husband’s and her business, along with all of the other life obligations.  He was a hardworking man and also worked tirelessly.  Rarely stopping.

Things were coming to a head and the D word was constantly coming up in their mounting and daily arguments!  Did they really want a divorce?  No, but they were under incredible stress.

By the time we were done with the cleanup, we had found over $40,000.00 in missed expenses that were legitimate write offs, and over $5,000.00 less in HST that needed to be paid to the government. We found an additional $300,000.00 in Accounts Receivable (funds owed to the client) and we were able to establish a plan to get this business back on track and become even more successful.

With clean books and the ability now to bid on government projects, this company was able to take on bigger work, decide to incorporate their company and we reduced their stress significantly by coming up with a better plan that in the end we were told saved their marriage which was falling apart due to overwhelm, constant arguing and stress levels.

This wonderful wife still assists her husband in his business but in a lesser, more manageable role that suits both of their needs, expectations for the business and life has calmed down.

Although initially he didn’t have to pay her, with the added expense of an accounting professional, they are making more money than ever and are better equipped to make great financial and business decisions and this past year, they have taken two vacations with the family!

So next time, you feel you’re both going to lose it over the accounting records, call us!  We are happy to assist you with your accounting/bookkeeping needs to add more value, more dollars and less stress into your personal world.