Common Accounting Pitfalls to Avoid In April
By Steuart J. Pereira
It is very common for owners and managers to wear too many hats when they run their business. In the long run, this can be an expensive mistake. Here is some simple common sense advice that can help you avoid these pitfalls.
Hire The Right Person For The Job
You would not advise your clients to hire an architect to provide you with accounting services. Using that logic, why would you prepare your own tax returns if you are not a trained accountant? It may seem like you are saving money by hiring someone to work in-house and handle accounting duties, but frequently they are not sufficiently trained or qualified; by paying a few dollars less an hour in the short term, you cost yourself money and profitability in the long term. In addition, you typically pay a full-time employee for less-than-full-time work, meaning that you have to invent work to keep them busy – not to mention training and supervising them. None of this makes logical sense when a successful accounting and consulting firm can solve these problems for you, quickly and easily.
Don’t Cut Corners!
In this economy, it is not at all uncommon to cut corners. Actually, in any economy it is tempting for business owners to try to save money by cutting corners, but it does get worse when the economy is in a tailspin. The problem is that cost-cutting often becomes costly if you cut important corners. When it comes to filing tax returns, preparing payroll, and other general accounting responsibilities, a simple error can cost you thousands of dollars. That's not saving money, that's wasting money!
Develop Internal Policies and Controls
Developing concise accounting policies and keeping accurate internal records is a must for overall financial health and success. If you do not have accurate information, you may report earnings incorrectly or overlook opportunities for saving money on your tax returns, come April 15th. If you work with a professional firm that handles your accounting and other business needs, then this becomes a non-issue. But all too often that is not the case. Usually a lack of understanding, experience, and time causes many small business owners to make the mistake of omitting some fundamental bookkeeping steps, such as recording all transactions, keeping accounts up to date, and maintaining accurate records. This can be a disaster to your bank account come tax time.
Know Your Business – Not The Accounting Business
Tax codes change every year. There are new forms to be filed. Methods of computation vary from year to year. If you are not up to date on current changes, you can miss potential savings. Most business owners cannot keep up on all the changes because their focus is on customer service and business growth; therefore, they miss out on deductions that could save them money. Working with a professional solves this problem! They keep up on all new tax codes and forms, just as you stay current on ideas and trends in your field. Let your accountant focus on these details so that you can be free to focus on your client projects.
Get The Help You Need And Save Money
Ultimately the single most important error that business owners make when it comes to filing taxes is that they do not hire an expert, but rather try and save money by doing their accounting, bookkeeping or taxes in-house. There is a reason why successful companies use professionals: It saves money. The best way to save money come tax time and to avoid costly mistakes is to find someone who understands your industry.