Small business bookkeeping in Rhode Island

Two places it usually goes wrong

Neither of these is exotic. Both are common enough that a business can run for years on books that look fine and are quietly wrong.

Professional practices

A practice with three or four employees looks simple from the outside. Three things make it not.

Client and trust funds

A law firm holding client money in an IOLTA or client trust account is holding funds that never belonged to the firm. That account gets a three-way reconciliation every month: the bank balance, the trust balance in the books, and the total of every individual client ledger all have to agree. When they don't, the answer is to find the difference, not to plug it. The attorney remains responsible for the account under the Rhode Island Rules of Professional Conduct — the bookkeeper does the reconciliation and reports exactly what it shows.

The same discipline applies anywhere client money is held short-term: retainers not yet earned are a liability, not revenue, until the work is done.

Owner draws are not payroll

A draw is the owner taking their own equity out. It doesn't touch the profit and loss statement, isn't a business expense, and isn't taxed through payroll. A salary to an owner-employee is the opposite — it runs through payroll with withholding and payroll tax. Which one applies depends on how the business is taxed, and mixing the two is among the most common reasons a file needs cleanup before a return can be filed. Where an owner takes both, the books have to keep them cleanly apart all year.

Revenue that arrives late and in pieces

Practices bill on matters, cases, or treatment plans, and get paid on someone else's timetable — a client, an insurer, a closing. Accounts receivable is where the real cash picture lives, and it needs to be aged monthly so an owner can see what is genuinely collectible before deciding they can afford a hire.

Property owners and landlords

Rental bookkeeping is where well-meaning owners lose the most money, because several of the natural-looking entries are wrong.

The mortgage payment is three things

One payment leaves the account, but it has to be recorded as its parts: principal pays down the loan on the balance sheet, interest is the deductible expense, and the escrow portion sits as a prepaid asset until the escrow account pays the tax and insurance bills. Booking the whole payment as an expense overstates costs, understates equity, and guarantees the balance sheet won't tie to the lender's year-end statement.

Security deposits are a liability

A deposit is the tenant's money being held, so it goes on the balance sheet as a liability — never as rental income. It only becomes income at the moment it is lawfully applied to unpaid rent or damages. Recorded as income, it inflates revenue and generates tax on money that may have to be handed back.

Repairs and improvements are not the same account

Fixing the furnace is a repair, deductible now. Replacing the furnace is a capital improvement that gets depreciated over years. The bookkeeping doesn't make that call — the CPA does — but the books have to be categorized clearly enough that the CPA can make it without reconstructing a year of invoices first.

Every property gets its own statement

Properties in one entity are tracked as classes or locations, so each address produces its own profit and loss while the tax filing stays consolidated. Properties in separate LLCs get separate books, with transfers between entities reconciled on both sides. Either way, the question "is the Cranston building actually making money?" should be answerable in a minute, not a weekend.

Contractors mean 1099s

Plumbers, landscapers, cleaners, and handymen paid $600 or more in a year generally need a 1099-NEC by January 31. That deadline is met by collecting a signed W-9 before the first check, not by chasing phone numbers in January.

What the monthly work covers

• Every transaction categorized across all bank, credit card, and loan accounts
• Monthly reconciliation of those accounts — plus three-way trust reconciliation where a trust account exists
• Per-property or per-location reporting where it applies
• Payroll coordination for W-2 staff — each run coordinated with your payroll provider and booked to the ledger, their filings reconciled to the books — see Rhode Island payroll
• Accounts payable and receivable, aged monthly
• A monthly close with a profit and loss statement and balance sheet
• 1099-NEC preparation from records kept all year
• A year-end package the CPA can file from without a cleanup invoice

Signs the books have fallen behind

• The trust account is reconciled annually, or by the person who writes the checks
• Mortgage payments appear as a single expense line
• Owner draws and owner payroll are in the same account
• You can see total rental income but not which property produced it
• W-9s get chased in January
• The CPA's first invoice each year includes the word "cleanup"