What They Didn’t Fix… Broke Them: A Real Case of Financial Mismanagement
- Renee Bartee
- Jun 21
- 4 min read
By Renée Bartee | Bartee Accounting Services & Integrated Corporate Solutions
Most professionals love to share glowing client success stories. I wish I had one to tell. But I don’t. Instead, I have a cautionary tale about a client who experienced the harsh consequences of ignoring professional advice. It's a story of declining cash flow, overwhelming debt, staff turnover, disciplinary action, and losing the office space they had occupied for about 30 years.
This is the case study I never wanted to write — but it’s the one business owners need to hear.
A Real Case Study on Financial Mismanagement in a Small Business
In September 2019, I was referred to a local business owner by a trusted former manager. The client was well-established — in business since 1998 — and seemed to have operated exclusively by word-of-mouth referrals.
At first glance, the request was straightforward: review and finalize 2018 financials before the extended tax filing deadline. But from the moment we started, the red flags began
waving.
The client had no financial records on hand
Claimed to have fewer than 50 transactions a month
In reality, there were over 260 monthly transactions across three business accounts
No reconciliations. No reports. No general ledger.
The deeper I went, the more I realized this wasn’t just a simple cleanup — it was a full-scale forensic reconstruction, very bad financial mismanagement.
The Real Numbers Didn’t Lie — But the Owner Denied Them
After days of manually entering over 3,000 transactions and building a general ledger, I generated a Profit & Loss Statement and submitted it for his review for tax filing. But the client didn’t even review it for approval.
When they finally did? The reaction was classic denial:
“I didn’t make that much money.”
Yet every dollar of reported income came directly from bank statements. The real issue wasn’t earnings — it was misuse of business funds. Over 90% of the net profit was spent on personal expenses taken directly from business accounts.
To make matters worse, the client couldn’t provide a single source document — no invoices, and no receipts. The only cancelled checks that existed were the image reflected on the monthly bank statements. Everything accounting-related was missing.
From Financial Cleanup to Chaos Control
By December 2019, I found myself thrust into the role of de facto in-house accountant. One office visit revealed a complete lack of infrastructure:
No historical accounting records (2017–2019)
No reconciliation reports
No vendor invoices — but canceled checks showed payments
No itemized client invoices
No SOPs. No internal policies. No timekeeping system.
No structure — just survival.
This business wasn’t being managed — it was coasting on habit and hope.
Then Came the Audit
In 2020, the inevitable happened. The client was audited — not just any audit, but one involving a state-monitored bank account that had been unintentionally overdrawn.
The audit spanned Q3 2019 through Q2 2020. While the client scrambled to locate industry-specific documentation over a weekend, I had to recreate the accounting records from scratch. It was exactly the scenario I had worked to avoid — and it cost them dearly.
The Vendors Weren’t Paid, Either
In May 2020, I uncovered a vendor accounts payable nightmare. The client had never filed vendor invoices — not electronically. There were paper invoices but it was the disorganization and having to locate those invoices. Those that were found were very few in comparison to outstanding balances. I had to initiate third-party confirmations to retrieve account histories directly from vendors.
The results were damning:
Invoices dating back to 2015 remained unpaid
No system to match payments to bills
No centralized email or documentation process despite repeated recommendations
I even suggested creating an accountspayable@ email to streamline this process. That never happened. And to this day, I still can’t close out a year of financials because of the missing records.
Unpaid State Unemployment Tax… Since 2009
To fast forward. There was a debt going back to 2009. Yes, you read that right.
In June 2022, I had to clean up a decade-plus of unpaid State Unemployment Insurance (SUI). The client misclassified workers as contractors instead of employees. There were no employee records, and a blind state assessment overstated the balance drastically.
The process to clean it up:
Review bank statements from 2013 onward
Manually match canceled checks to staff
Classify each worker by legal employment status
Manually complete SUI reports for submission to the attorney
The good news? I reduced the assessment by 53%. The bad news? Only one payment was made. The client now claims the issue is resolved — but the balance is climbing again.
Organic Doesn’t Mean Operational
This case study highlights the clash between operational efficiency and what I call “organic operations” — where businesses survive day-to-day without structure, strategy, or systems.
If you’re not tracking vendor bills...If your invoices aren’t itemized...If you’re mixing business and personal funds...If your staff classification is unclear...
…then you’re walking the same path as this client. And eventually, that path leads to audits, penalties, debt, and breakdowns.
Final Thoughts
This isn’t a story about a bad business owner. It’s about a smart, well-known professional, and an expert in chosen industry who failed to put the right systems in place. They had every opportunity to fix it. They were advised. They were warned. But they didn’t act.
If this feels familiar, don’t wait. Because what you don’t fix now… will break you later.
🔗 Want help before things spiral?
Visit barteeaccountingservices.com or send me a DM with the word “DIAGNOSE.” Let’s fix it.
Comments