Accountant’s Advice Prevents Costly Errors

Plenty of tasks that seem easy at a distance are fairly complex when tackled up close – such as playing the piano or operating a small business. Little details that did not concern you in the start-up phase can become complicated matters. Suddenly, you wonder how you’re supposed to play a tune – or create those business bookkeeping ledgers.

Fortunately, most entrepreneurs need only a few lessons to acquire the necessary bookkeeping skills. You should be concentrating on the basics; many of the key factors involved in producing financial records for a business are best left to a bookkeeper.

Enter your accountant: He or she can help guide you in ways that will improve your bookkeeping output. In fact, failure to rely on the wisdom of accounting specialists may result in costly mistakes.

Most small business owners hire in-house bookkeepers or outsource to a bookkeeping service so they can focus on other activities that increase profitability.

In both cases, occasional errors will occur simply because employee bookkeepers or a bookkeeping service may lack complete information about the transactions they are recording. Accountants are trained to recognize data that could result in errors and supply vital adjusting entries to bookkeepers.

Your role is to establish a system for examining financial reports and making needed corrections. You don’t need a full audit of your financial records, but some sporadic checking is advisable.
For example, one common problem is categorizing expenses: Meal costs are often accidentally combined with travel expenses, and depreciable fixed assets are inadvertently recorded as expenses.

Your accountant can group together expenses of a similar type, eliminating confusing records caused by too many accounts. Accountants can also ensure that reimbursements to you or your employees for business outlays comply with tax rules.

Every business with employees needs an accountant to verify its payroll records. Reports for payroll taxes must precisely match accounting records. Separate accounts are required for payroll taxes, and gross wages and taxes withheld from employee wages must not combine with the payroll tax expense of the business.

With excellent payroll records, you can also simplify the process of delivering information to the insurance company that provides your Workers Compensation coverage. As well, payroll accuracy eliminates disputes with employees over withholding and overtime.

Most importantly, tax collection authorities compare payroll tax report totals to the income tax return of the business. Correcting mismatches before they trigger tax notices saves time, money, and aggravation.

Few business owners have the knowledge and experience to correctly prepare business income tax returns. Outsourcing this function to an accountant ensures that you are asked about questionable items before the returns are filed.

Your accountant has the expertise to handle issues such as depreciation expenses or the tax impact of selling equipment, and can help you improve bookkeeping data entry and avoid big mistakes.

In short, your accountant can provide a valuable service by focusing your attention on the most important bookkeeping issues, so you have the time to grow your business.

Don’t Sabotage Your Business Loan: Be Well Prepared

Small-business loans from banks remain at record lows despite general economic improvement. Could it be that entrepreneurs’ own mistakes are affecting this bank rejection rate?

It may well be: For example, you are sure to sabotage your chances of getting a small-business loan if you’re not prepared for the application phase; clear, error-free financial statements are an absolute must. If you’re saving on bookkeeping expenses by simply figuring your results at tax time, you can forget about a business loan. If you want to borrow from a bank, you’ll need business financial statements that are accurate up to the end of the preceding month.

These are not limited to a single report indicating revenue and expenses. Instead, you’ll need a balance sheet as well as profit and loss, and cash flow statements. More importantly, you must be prepared to explain these figures. For instance, if you operate on a “cash basis” of accounting, you must understand the implications and the impact of unpaid items not recorded in your bookkeeping.

Prepare to thoroughly explain the reasons why you want a loan and how you plan to repay it. One of the best tools to help you do this is a report of projected cash flow; arm yourself with this important report, and it will help make your case. Ask your accountant to coach you before meeting with your banker.

By having the necessary financial reports, and by fully understanding them, you may well beat the odds and get that business loan.