Uncovering Phantom Income & Securing Franchise Fee Refunds
A Dissection of the General Ledger
Standard monthly reconciliations failed to catch the issue because bank balances appeared to align with top-level reports. However, a deeper forensic review revealed a peculiar variance between the gross profit recorded in the company's third-party application and the QuickBooks Online (QBO) General Ledger.
By performing a dissected examination of the Chart of Accounts, we identified a double-billing logic error. The system was recording duplicate deposits for the same transactions, creating phantom income that inflated the company's revenue on paper.
This error didn't just complicate the books; it had two major cash-flow consequences:
Overpaid Taxes: The company was paying federal and state taxes on $27,000 of income that never actually existed;
Inflated Franchise Fees: Because many regulatory and franchise fees are calculated as a percentage of gross revenue, the company was paying significantly higher fees based on the phantom income.
The Result: $27,000 Recovery & Franchise Fee Refunds
By identifying the root cause within the ledger integration, Lease and Ledger Advisory successfully:
Reversed the ghost entries to align the books with actual cash flow.
Secured a refund for overpaid franchise fees, directly improving the company's net operating income.
Corrected tax filings to recover overpaid income tax.
If your systems are automated but your data hasn't been forensically verified, you may be paying taxes and fees on income that doesn't exist. Find out if your portfolio has Phantom entries.
