Busted! Don’t Believe These Myths About Accounting!
Whether it is a large corporation, a small start-up business or a private individual, an accountant or an accounting firm plays a significant role in guaranteeing you or your business success. They are responsible for recording financial transactions, checking accuracy and ensuring you remain financially stable.
While they perform several duties that could add value to an individual or business, many small business owners would still hesitate or think twice before hiring an accounting professional. The most common reason is due to the myths or stereotypes associated with accounting which are usually based on incorrect assumptions.
To help you steer clear of these misconceptions and get the best accounting services available, Your Bottom Line has dispelled three widely believed myths about accounting.
Myth 1: Small businesses don’t need accounting, or I will just wait to handle all of it on my own.
This means that as a small business owner, you would say that you don’t need to budget, forecast financials, learn about trends in your business, or know the latest, greatest tax advantage. We have clients that are as small as a one-person business service making only about twenty-thousand a year as well as clients in the multi-million dollar range, and it is equally important to both of them.
Every business needs an accountant watching their back. Now, this person or company needs to be trustworthy and competent, but you need them, all the same. A business cannot and should not be run based on whether or not there is cash in the bank at that current time. At the end of the year, how do you know if you are going to report a loss or income to CRA or the IRS? You need to report as much damage as you can to pay as less tax as possible, or you would be cheating yourself. Many tax firms will charge you an arm and a leg if you walk in with a box or in some cases, a trash bag full of receipts and ask them to do your taxes. They charge you for the allocated time taken to thumb through these receipts, and most likely, they will not take time to be certain that you pay less tax.
Your accountant will be following your financials for the entire year, and everything should be neat and clean at the time of filing your taxes. Also, your accountant should give you monthly financials specifying areas of improvement, ensure reports are ready for possible loans, help you make financial decisions, enable you to make the most of recent tax advantages and tell you if your business will trend towards lower or higher revenue in certain months based on history. This is all needed information, and once a client jumps onboard and starts using our services, they are often amazed that they were ever able to run their business without our services.
Myth 2: An accountant will cost me an arm and a leg.
While this may be the case if you go to a high-dollar firm but when retaining the services of an attorney named Robert Shapiro, it would not be cheap either. You have to find the right firm or individual. Check references, qualifications, and services. Ensure the price matches the industry standards in your area and be confident that they make you feel good about working with them. You should find a qualified person or an accounting firm that treats you as number one.
Our firm, Your Bottom Line is known for competitive rates because that is the way we designed it. If you noticed, we did not say lowest. It sounds cliché, but as with most things, be careful as you get what you paid for and especially when it is a low price since it can often come back to bite you. We wanted to create a firm which would cater to small and start-up businesses and be affordable at the same time. We have always priced our services less than the cost of hiring a full-time employee and sometimes have gone much less depending on the client, their needs, and their financial situation.
Myth 3: It is no big deal to pay business expenses out of my pocket.
If you own or operate a business, it is a business, not your spouse. You need to keep track of every expense paid from your pocket. This is money that could be returned to you tax-free.
For example, assume a client owns a contracting business. He does not have a business bank account, and all expenses are paid through his account. Now, the record-keeping has become a nightmare because somebody has to spend extra time separating business from personal. Also, there is no immediate way to tell if the company is indeed making a profit or loss. Also remember, his salary is taxable. If the business is breaking even, he has been paying double the taxes he should have. He wasn’t reimbursed for his out-of-pocket expenses correctly which should have been tax-free.
He should be able to be at least refunded for the expenses he has paid for out of his tax-free pocket before taking a salary which is taxable. As his accountant, we would have advised him to open a business bank account. At this point, he will deposit revenues into this account and pay bills from it. If there is not enough cash to pay bills, he will not pay the amount from his pocket, unless necessary, but will transfer money into the business to pay for the expenses. If he does pay personally or with cash, he will be sure to tell us when he does. We record this as reimbursements that are due back to him tax-free, and he will receive this money back when the company cash flow permits this. The bonus is that not only will reporting be easier and more reliable, but the accounting and bookkeeping costs or fees will drop.
If you’re looking for professional and efficient accounting services in ON, get in touch with the experts at Your Bottom Line. We provide personal and corporate tax services, bookkeeping, payroll, quick-book training, HST filing and Virtual CFO services. Our accounting firm works to build a strong relationship with the client. Our super accountants give your business the advantage it needs and demands.