How I improved my business and avoided these mistakes
For small businesses, the New Year simply is the time to file last year’s taxes. So do you have all your numbers ready for year-end closing?
If you answered “no” and you’re probably feeling overwhelmed, it could be that believing any or all of these five misconceptions made running the financial side of your business more complex than necessary.
The good news is that it’s not too late to simplify and it’s the perfect time to get the facts on how to make the next year-end closing a lot smoother.
Let’s look at the top five misconceptions about accounting and uncover the truth behind each one.
Myth #1: Accounting is pure math.
Accountants certainly use math, but accounting encompasses understanding the law, tax code, and how they apply to your business.
An accountant can analyze the big picture of your financial situation and offer strategic advice. He or she can produce key financial documents, such as a profit-and-loss statement, and can file taxes for you.
Myth #2: An accountant is only good for filing taxes and one can have software for the rest.
As we just mentioned, an accountant can help with and file taxes, but the real value of working with an accountant is their expertise and on-going training.
Tax codes and laws change constantly and a good accountant stays current through professional groups, seminars, online training, and lots of reading. To stay current on what’s new, what’s old, and what can lead to penalties or missed deductions, an accountant can spend as much as 10-15 percent of their time per month just on professional development.
When it comes to software, the right solution set up the right way not only helps with the year-end process but allows you to monitor the financial health of your business throughout the year. An accountant can advise you on setting up your software so that you can generate a year-end report in less than a day, rather than losing a few weekends to shoeboxes full of receipts and Excel spreadsheets.
Myth #3: I’m a sole proprietor or running an online shop so I don’t need a separate bank account.
The answer depends on the nature of your business, your current financial situation, where you live and do business and your long-term plans.
Note that limited liability corporations (LLCs), partnerships, and corporations are legally required to have separate bank accounts for business and personal finances.
Even if you don’t “hire” an accountant full time, a one- or-two-hour consultation can help keep you on track and help you understand if a sole proprietorship or S-type corporation, for example, is your best option.
Myth #:4 Accountants are unaffordable.
Why? This answer depends on the value you place on working with a professional compared to the potential cost of making errors because you either filed incorrectly, did not file on time, or missed opportunities for deductions. And, of course, the value of your time spent on myths one, two, and three, and dealing with KRA if there is a discrepancy.
For example, would you rather pay a 10 to 25 percent penalty plus late filing fees or pay a professional accountant to help avoid those fees and get the most out of the tax code?
So, for this year and next year, here’s some simple advice:
Make an accountant part of your success team, even if it’s a consultation to set up your business or for a review yearly.
Source: From Sage website