Client purchased scrap metal, worked it and then sold to a metal foundry. Did not keep any books and came to me when he received an IRS letter 4 years after starting the business. He purchased scrap for cash and did not keep any records of the purchase and also did not differentiate between business and personal expenses. Made this project a little challenging.

My approach was:

1) Gain a understanding of his business. Using current data build a supportable model reflecting what the sales, gross margin and approximate scrap purchase values are.

2) Using the foundry receipts, bank statements and model mentioned above determined an estimate of what the scrap metal purchases were for the past 4 years.

3) Entered this data in the accounting software and generated financial statements that were then delivered to the tax consultant.

4) Worked with client and made sure he understood the importance of splitting business and personal. Also helped him to add workflows where he at a minimum issued a hand written, later electronic receipt every time he purchased scrap metal.

5) Using data in the General Ledger assisted the client in identifying those types of scrap metal that together with the transport, labor costs etc. were getting sold at a loss. By correcting this we increased his revenue and profitability.