Why Shared Business Expenses Create Bookkeeping Problems Fast. S9E4

Shared expenses. Missing communication. Bookkeeping chaos. What happens when one business owner starts moving between multiple companies, reimbursable expenses, partnerships, and credit cards… but forgets to tell their bookkeeper what’s actually happening?

In this episode, our favorite Bookkeeping Mensch, Paul Rosenblum, walks through a real bookkeeping situation involving reimbursements between businesses, partnership accounting, balance sheet loans, and how one missing piece of communication nearly created major tax filing problems. But this episode isn’t really just about bookkeeping entries. It’s about the growing communication gap between business owners and bookkeeping teams, especially in today’s remote work environment.

If you’ve ever thought bookkeeping was “just data entry,” or assumed your accountant or bookkeeper would somehow magically figure everything out later, this episode explains why that mindset can become expensive fast.

Transcript

Season 9 Episode 4, Why Shared Business Expenses Create Bookkeeping Problems Fast

In these days of small businesses expansion where business owners with one business are now creating new companies with partners in addition to running their own company, financial scenarios that have happened before, but not on a regular basis (at least in my practice), are now happening more often. Let’s talk about money being transferred from one company to another as capital or loans being made from one company to another through cash or expenses on a credit card, both businesses either owned or partially owned by the same person. I’m Paul Rosenblum.  

I recently talked about (in the last short episode), a client who has his own LLC and was using his credit card for meals that he knew were going to be reimbursed by his client. The short of that situation was that could be tricky.  Meals while traveling are 50% deductible, but he is being reimbursed for 100%. And I suggested a way of inputting that in the bookkeeping so that the client doesn’t overpay taxes.  

Here’s a related situation:   

If my client uses his credit card for meals when he travels, but the meals are with a new partnership that he recently joined, and he knew that the partnership LLC was going to reimburse him for these expenses, how do you deal with that in bookkeeping?  Well, that’s exactly what happened with one of my clients. He had reimbursable expenses all year when he went to where the new partnership existed.  The problem is that he didn’t tell me about it. So, all of those expenses went into the books as travel meals, or Travel (to the city, since I have a breakdown of all the cities or countries, he travels to do business in).  When he did tell me, it was already 2026 (May of 2026). My first thought was to reclassify all of these expenses (which he sent me on a spreadsheet) --- to a balance sheet account – more precisely, a loan TO the new partnership. I suggested a short conference call with his tax preparer, which we did, and the tax preparer made a very good point.  And that was --- How did the partnership accountant count those reimbursements on the tax return, and is the tax return filed yet or on extension?’  And even before that, how did the bookkeeper for the partnership (not me), enter those transactions in the books?  Not only did nobody know off hand, but when asked to my client, ‘Did you submit these reimbursements to the other company?’  Do they even know about these reimbursements?  And the answer was….   ‘NO.  I totally forgot to’. We then found out that the tax return was just about ready to be filed but hadn’t been yet for the partnership. So, at this point, I just have to make sure that the reimbursement amount that my client submitted to the partnership is exactly the same amount that will be in my books. 

If the partnership tax return was filed already, then it would have had to be amended. Because the loan is on the balance sheet of the partnership, it would be included in the K1 to my client.  Luckily, we caught it just in time, or better yet, the client caught it just in time, and also luckily, he was on extension with my books as well.  On the partnership’s books, a liability on the balance sheet would have to be created called “Due to ABC Company” or whatever the company would be, and in my client’s books, we’d have to create an Asset on the balance sheet called “Due FROM XYZ”, or whatever that company’s name is.  It’s a bit of a different situation than if my client had two single member LLC’s that he was just transferring money to and from through the capital Equity account, and not have it count as a loan.  

Nobody talks about this, so I have elected myself to say something about it.  Remote bookkeeping was here even before Covid, but obviously, the pandemic really made it explode as the normal thing to do. A bookkeeper in the office can get information much quicker if the bookkeeper can just walk up to someone and ask them about certain financial things going on. Or a business owner can drop a note on the bookkeeper’s desk very easily letting them know that there will be reimbursements on some of the trips to particular cities.  But that kind of communication gets lost remotely. Yes, there is email, texting, phone calls, google folders, google docs, voice messages, Dropbox, and countless other ways of communicating these things, but it seems they are rarely used anymore. At least for this purpose.  

My point of this episode?  Why is the bookkeeper the LAST person to find out about these reimbursements that started in Feb. of 2025 and continued through December?  And why did I find out about these in May 2026?  This goes with general statements that I have talked about pretty recently.  And they are: 

1. Business owners think that bookkeeping is just ‘data entry’
2. Business owners think that bookkeeping is like magic and there doesn’t have to be constant communication between the bookkeeper and the client 
3. Business owners just want the books to be done, taxes filed, and they will deal with any fall out later, or just fire the bookkeeper or ask the bookkeeper for a refund or a discount and ask the accountant or tax preparer for a credit on a tax return that had to be amended or audited by the IRS.  

Yes, I have a responsibility to do the very best that I can as a bookkeeper, but the business owner has that obligation and responsibility too -- to communicate to the bookkeeper all we have to know to make books as accurate as possible.  Then, any adjustments that the tax preparer needs to make to the books should be for tax purposes only. 

This is the one big change that I have seen in the last few years in my practice.  Most clients don’t even look at their books more than once or twice a year, and some clients look at their books, call me or email me with questions, and some tell me that I have done something incorrectly without knowing about what they are talking about. It seems like there’s nothing in between anymore. 

There is really something to be said about in-person bookkeeping. Even using Zoom as your ‘phone call with the client’s isn’t quite the same as being in the same room with them (or at least the same office). But Ce Le Vie, or as my mother used to say, “It is what it is”. There’s not much that I can do about it. I sometimes complain about it, but most of the time, I’m actually OK with this new ‘normal’ in the bookkeeping field for small businesses. Today, I realize, is not one of those days. So, I rant a bit. I did, and I’m done ranting.  At least for this episode.  

Actually, I’m not.  I’ve said it before, and I’ll say it again -- Business owners out there --- communicate with your bookkeeper!  You are on the same side! You aren’t adversarial or at least you shouldn’t be!   

On a totally different note -- when I finished the first quarter books for one of my larger clients, I sent them all the ASK expenses for Jan., Feb, and March in separate emails. This was the beginning of the second week in April. It is May 9th, as I write this, and I haven’t heard a word from them. If I were working there in person, I’d be in their face every half hour until I got what I needed. But ahh -- I’m 50 or 60 miles away from them, so it’s not that easy.  Bookkeeping is sure different than it was when I started in 1994. And so are people, I guess, too.  Any remote bookkeepers having similar situations out there?   Drop me a line at the email or leave me voicemail. All in the show notes.  

Be in your ear next week with our ‘short’ episode. About what, you ask?   I don’t know yet.  But I promise a new short episode is coming soon.  

I’m Paul Rosenblum