This article continues the series dealing with if you are in a scenario where you are an entrepreneur and have two small business entities to maintain the bookkeeping for.

As mentioned in Part 1 of this series, this is a rather common scenario and it is vital that you, as the owner of both of these small businesses, understand simple do’s and don’ts when it comes to maintaining basic ethics and integrity within both sets of books.

Typically, what I have seen, is one small business has been in existence for quite some time; then some years later, for reasons which are beyond the scope of this article, the entrepreneur will decide to create another official separate business entity and thus now is responsible for the bookkeeping here as well.

As always, I would highly recommend you obtain advice from a C.P.A. first, prior to creating this 2^nd business entity.

There is going to be a risk of accidentally confusing the two companies’ books with one another and thus you may end up inadvertently posting one company’s revenues and/or expenses into the other company’s books.

So, here are some practical tips that can help you avoid this nightmare of a scenario down the road:

1. Avoid giving to the 2^nd company a name that is very similar to the 1^st company’s name. Example: if the first company’s name begins with the word “Pro”, then do NOT also begin the 2^nd company’s name with this same word.  Besides posting transactions errors in the books, you also run the risk of, for example, depositing one company’s revenues into the other company’s bank account, and perhaps, this may not be caught until a future audit.
2. Within each company’s books, be sure to use a unique bank name identifier. Example: don’t just say “Wells Fargo Checking” as the name for each company’s bank account within their respective chart of accounts. Instead, utilize each company’s name as part of the bank name identifier within their own chart of accounts. Example: “Pro Company WF Checking” for the 1^st company, and “Premiere Experts WF Checking” for the 2^nd company.
3. If your bookkeeping software and bank allows this, then be sure to utilize a direct bank feeds connection between the bank account and the corresponding bookkeeping software. That way you will never have to worry about accidentally manually posting one company’s bank activity into the 2^nd company’s books.
4. Optional: Utilize a completely different bank vendor for your new company.
5. Optional: If your bookkeeping software allows it, then change the background color of your bookkeeping software for the new company.

Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.