The Email That Asks You to Make the Numbers Look a Certain Way

Hi [Client],

Thanks for laying this out - I want to be straight with you about all three before we touch the file.

The lens. A $4,300 lens that lasts five years is equipment, not a repair, and recording it as repairs would misstate both your profit and your balance sheet. The good news is that the tax outcome you want is probably available: equipment can often be expensed in the year of purchase under the depreciation elections, but the asset still has to be recorded first and the election gets made on the return. If you'd like, we can set a written capitalization policy with a dollar threshold so this stops being a judgment call every time.

Invoice #219. I can't change the date. The shoot was April 1, the invoice is April 2, and the revenue belongs in April under either method. A backdated invoice is a document that says something untrue, and that's the one thing I can't produce.

Distributions. Distributions aren't an expense, so they never touched your $61,000 of net income - leaving them off the P&L changes nothing a landlord looks at. What a landlord actually wants is profit relative to debt service, and your distributions are already modest against profit. I'll prepare an accurate P&L plus a year-over-year comparison and a note on seasonality, which will present you far better than a doctored one.

Happy to walk through any of this by phone. If the lender needs a specific format, send me their request and I'll meet it.

Best, [You]

Tone matters here: neutral, no lecturing, no accusation, restate the request accurately, and end with something the client can actually use.

Lens as "repairs." An asset with a five-year life that produces benefit beyond the current period is a capital asset. Recording it as repairs overstates current expenses, understates current income and understates fixed assets and equity - the balance sheet the landlord will also look at. The legitimate choices live at the edges: the capitalization threshold, the depreciation method, and whether to elect immediate expensing on the return. All three still require the asset to be recorded and the treatment applied consistently and disclosed. Relabeling is not an election.

Backdating #219. This is not a timing judgment, it is a false record. Under any method the revenue is earned in April - the work was performed April 1 and the invoice is dated April 2. Creating a document bearing a March 31 date misrepresents when the transaction occurred, and it hands the lender a document that is knowingly false. The legitimate version of this request is a discussion about cash versus accrual, which is set at the entity level, not per invoice.

Omitting distributions from the P&L. A misunderstanding rather than a misstatement. Distributions are an equity transaction; they are not deductible, do not reduce net income, and do not appear on an income statement at all. Removing them from a P&L removes nothing. If the client wants a package for the landlord, the equity statement or a schedule of distributions is the right place, and it can be presented with context.

Ranked by severity: backdating is a records-integrity problem; the lens is a misstatement with a legitimate substitute; the distributions request is a miscommunication.

Document, in one thread or one memo: the client's request verbatim and dated; your response and the accounting basis for it; any alternatives you offered; and any phone call summarized back in an email so there is a written record both parties have seen. Keep it factual - the record should read as a professional exchange, not a defense brief.

The line: the first "no" is ordinary bookkeeping judgment and belongs in the file. It becomes engagement-level when the client, having been told the reason, insists anyway - because at that point you are being asked to prepare a document you know is intended to mislead a third party, and that is a different risk category:

• Consult the tax preparer or CPA on the file. They may be making related representations on the return and need to know.
• Assess whether any work product you previously issued has already been affected.
• Consider whether the engagement can continue on terms that keep you from producing statements you know are false. If it cannot, resign in writing, state the effective date, return the client's records, and follow state rules on records and unpaid fees.

Also worth naming plainly to the client, once, without theatrics: a lender relying on altered financials creates exposure that reaches past the business. Say it once, in writing, and move on - the goal is a corrected file, not a confession.