Confidential business often manifests particular issues in family law settings. Usually, a single spouse retains active participation in business. Therefore, it is not only the responsibility of the spouse to manage family finance but he/she can even manage the entire business records. When a spouse endeavouring to evaluate the income or value of the business, the spouse actively engaged in business can deliberately (and religiously active) strive to get effective and comprehensive data.
Some of the businesses such as cafeterias and retail stores can have high-risk of exploitation as they retain multiple transactions. Manufacturing industries, real-estate ventures and auto dealerships are renowned for creative” bookkeeping. Professional service providers such as doctors, dentists and attorneys are at risk for financial operation because it is difficult to ensure the level of professional service delivered to clients or patients.
Any business that is confidential and retains finance that can be easily influenced by the owner is at risk. If this befallen “out” spouse will search for the substitutes to get to the bottom line of finance. Methodologies used for analysing personal records can put to use in business to seek the absoluteness of money.
BUSINESS RECORDS
The more widespread business records prepared in the family law cases include ownership records, income tax returns, financial statements, budget, valuation or reviews and list of financial accounts. It may be required to investigate accounting records of business more precisely along with the general ledger and verifying documents such as bank statements to ascertain whether:-
- Prospective revenue and expenses can be assumed.
- Assets and liabilities of the company have been misrepresented
- Write-off or adjustments of the business records are accurate.
- Major customers or traders are fetching the legalised transaction with the company
- Any hefty single payment took place( Which is required to be modified while considering the numbers during divorce case)
- A spouse may used business funds to clear the personal expenses
- Income and expenses of the business are authorised or misrepresented
ANALYSING INCOME
A comparison of prevailing income should always be done with the historical standard as this would help to determine the change in revenue over years. It is not strange for the business revenue to come down significantly during the petition of a family law case. The spouse who is actively engaged in the business should be present during the business downfalls. Liquidation of the business hand over small value of the income to be split among the spouses and also business liquidation implies that the minimum income is left for the support.
If the income of the business declines after filing a claim then in such case similar expenses should be assessed to determine if they are reduced accordingly. This is briefly discussed in the further section of this chapter.
It is imperative to analyse revenue generated through the customers to know either the details of permanent customers maintained in accounting records. It is acceptable that customers’ routine transactions are occurring but revenues are not recorded in financial statements.
Cash business can be certainly distressing to investigate. Some of the generic methods for verifying income in cash-intensive include:-
- Assess the profit margin of the products or services sold and assess the way the valuation of the company can be compared.
- Identify expenses that proceed ordinarily with the income and examine the occurrence of the deviations throughout the years.
- Search for the expenses records that could verify or contradict income. For instance, laundry service may minimise your income after the petition for divorce. Water bills exhibit that the usage of water is not minimised. This may keep an eye on the income that is voluntarily underestimated.
- Review the payroll records to estimate the reduction in staffing following the decline of income.
ANALYSING EXPENSES
There is an inherent tendency to avoid business expenses and assume that they are legally involved in the ordinary course of business operations. This would minimise the business valuation than it is obliged and this can strongly affect spouse at the time of divorce.
It is quite frequently for the entrepreneurs to clear their expenses with the business funds and this is briefly addressed in the preceding parts of this chapter. The professional accountant should examine whether expenses are productive for the business. For instance, the business owner may design an entity privately that receive consequential payments from the primary organisation for “consultation”. This may minimise the profits of the primary organisation which eventually can impact the business valuation and division of assets.
The financial professional eventually modifies distinct items in the business financial statement to align financial statements with the organisation exempted from the whims of the business owner. Even minor variations in accounting section can make a huge difference in the financial condition of the organisation.
LOOKING UP RED ALERT
One of the most significant facts of the modification of the business accounts is the contradiction between the documents. The certified accountant must make a request for the queries of the documents received and question persistently either the documents and numbers are certified or regulated.
The financial records should be assessed by numbers instead of quantity. Is the quality and integrity of financial information fluctuates over time? Is there any clarification for the quality deterioration of financial information? Is quality difference equivalent to the conspiracy of the financial statements of the organisation?
There are numerous ways through which business finance can be unidentified or misrepresented. The professional accountant must investigate accounting records to ascertain either any early warning signs of frauds retain. Since it is impossible to manifest that the books were misrepresented but the professional account may look out varied red alerts of signs that may prove deceitfulness in the long run.
For more information, contact local tax accountants via Call 1300 886 518 or book an appointment with an accountant.
Max Margin Accountants is a registered accounting firm based in Melbourne. We specialize in helping our clients with a full array of Business Advisory, Taxation and Accounting services. We help businesses in all industries and sectors including Automatic Mechanic, Hotel and Bar, Barber & Hair Dresser, Car Wash, Home Builder & Architecture, Cafe and Coffee Shop, Cleaner, Computer & IT Industry, Family Day Care, Gym and Personal Trainer, Small Businesses, Medical Practitioner, NDIS Business, eCommerce, Property Investors, Tradies and Taxi Drivers.
Last Updated on November 22, 2024
