Earlier today I wrote out two checks to the IRS and neither of them were for the current tax season. Both were for mistakes that were made in last year's filing. The mistakes were made by my CPA at the time. Despite my efforts my filing was done literally at the last minute. The accountant was also responsible for my bookeeping which made it difficult to pick up and go to another consultancy. Furthermore, it's not like good CPAs are everywhere. It takes time to gather recommendations, get introductions, and go through an interview (the good ones always work from word-of-mouth, not advertising). So, there I was running right up to the last minute when I finally got my return.
"Good news," I was told. "Looks like you're going to get a refund and a hefty one." My gut said that this was all wrong. Though I am not an accountant, I've been in business long enough to know that when you have money in the bank at the end of the year the IRS gets some. Instead, I was told that I would be receiving a five-digit refund. Assurances were given that all the numbers lined up and so the filling was made.
Two weeks later a paper check arrived in the mail. It felt wrong just to have it.
Weeks later I found a new tax professional. After having passed the interview process I hired them to audit my PNL and tax fillings for the year. After their initial review I was asked to make introductions to the former CPA. A slew of accounting questions soon followed. Some of it I recognized, a lot of it was like a foreign language.
Eventually a meeting by phone was requested with the former accountant. I was there too, but primarily as the audience, trying to pick up words I understood. The meeting was mostly a boring review until it came to a discrepancy that the new accountant could not reconcile.
"Hright, shughtyt," questioned the new guy.
"Aie! K, ms osjup jsjughe!, " answered the old.
"F-me," I thought.
Turns out the old CPA forgot to carry over revenue from the previous year. The submitted PNL and income tax filling were off by a lot. As in, a lot, a lot. Just weeks before I had received a low five-figure refund. Now, after the accounting correction, I owed the United States close to six-figures. Though my gut knew it all along, the revelation still felt like being relentlessly hit in the abdomen for the better part of an afternoon.
Fortunately, I had prepared for this conclusion and was able to write the IRS a new check with a lot of zeros without having to liquidate anything. Years ago, this would have kicked off a Defcon 1 level stroke, but after being in business for nine years I have come to learn that there is only one real way to look at events like these: Mistakes were made, thankfully no one died.
After close to a decade as a business owner, I have learned a lot from mistakes. I have lost a year of sleep from anxiety attacks at 2AM--reminding myself that I wasn't having a heart attack and to just relax and go back to bed. I've had to cancel vacation or worked through holidays because of mistakes made by contractors, employees, or clients, or all three. It's just part of being an entrepreneur and an owner.
My business partner Greg Hoy and I were invited to host a half-day workshop on running a business at ConvergeSE. In about 30 days are going to share many of the mistakes we made staring, growing, and managing our business and how we got through all of it. We'll be there to share our experiences, laugh, cry, hug, answer questions and do what we can to help other shop owners learn from our experiences, good and bad.