Small Business Accounting: 3 mistakes that can sink your small business!
Updated: Dec 19, 2020
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Every large company has a great accounting team that handles all of its expenses, receipts, invoices, taxes, and ensures that books are balanced, but not everyone can hire a small accounting army!
Small business accounting, corporate bookkeeping, they are daunting and often scare but need to be done. So what can freelancers and small-business owners, those with home offices and self-employed, do to solve their accounting needs? Well, if you are taking care of your accounting and bookkeeping yourself, you need to avoid these three accounting issues that can sink your business:
Miscalculations and manual errors
Failure to be up-to-date with regulations
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Read below for the top accounting mistakes to avoid and our recommended 2020 tool.
Thousands of companies are hit every year by hefty IRS fines due to accounting-related issues that showed in their taxes, and we believe many of them are accidental, made by small businesses or freelancers who cannot afford a private accounting team. So what can you do? Avoid these three mistakes...
Let's dive in!
1. Miscalculations and manual errors
When you try to do your own accounting and are not a professional or even someone who practices accounting regularly, you are bound to make a costly mistake sooner or later. While you may save a few dollars in not hiring someone, you make face much costlier IRS fines and risk hurting your business because your financial reports are not accurate. Don't risk it.
A 2015 study argued that human error is the LEADING CAUSE of tax and accounting mistakes. That is unbelievable, simply because it is avoidable! Whether you are a freelancer, small-business owner, or even a large business owner, take the steps needed to avoid manual errors.
2. Failure to be up-to-date with regulations
Tax and accounting regulations change often. If you are doing your own accounting, make sure you spend the time and resources needed to be up-to-date with the latest regulations and changes in your industry, because failing to adhere to them can cost you your business. However, let us warn you, this is difficult unless you do this for a living! To give it a try, take a look at IRS the regulations that apply to you here.
In addition, if your business provides services or products internationally, you need to make sure that you also abide by the tax laws in those countries, which often means registering in those countries, which can be costly. When doing your bookkeeping, you need to make sure that your expenses, taxes, depreciation, and interest are allocated correctly so that you don't think you have more money than you actually do. Again, you in order to scale and grow as a business owner, you need to have your small business accounting done right, or else, it will be the monster in the closet that will rear its ugly head when you least expect it, often with a hefty IRS fine.
3. Time wasted!
You are managing a company, you are busy running your business and either getting it off the ground or helping it stay profitable for the long term! Time is money. You surely have heard that before, but as a business owner, you surely understand the phrase better than most. Your time is too valuable in other areas to spend it doing your own accounting. But what if you cannot afford a professional accountant? Well, luckily, it is 2020 and there is a solution. We recommend using a SaaS (Software as a Service) tool. We strongly advise that you consider outsourcing your small business accounting, your corporate bookkeeping, to an online software provider, most of which do it for a low monthly cost. You are welcome to shop around and see what best meets your needs, starting with a free trial.
To view our recommended Best 2020 Accounting Tool, read below!
At Trusty Home Guide, we personally recommend the tool we have trusted for a long time, FreshBooks. We love their affordable pricing, starting at under $10/month! This tool is great for:
Small-businesses with contracts or employees
For our extensive review, please read our Freshbook, Accounting for Dummies article. Here is a small portion of that article.
Key Freshbooks Links
In their words...
Freshbooks has a great free trial option, which you can see here, to allow you to try out their tool with no commitment. Outside of the free trial, they have three pricing tiers: Lite, Plus, and Premium.
Cost: $ 4.50 / month (billed $135.00/year)
Billable Clients: Up to 5
Key elements: Unlimited estimates and expenses, get paid with credit cards and bank transfers and track sales tax with automated reports.
Cost: $ 7.50 / month (billed $225.00/year)
Billable Clients: Up to 50
Key elements: Key Lite elements plus... automatically track expenses, set up recurring payments, and invite your accountant.
Cost: $ 15.00 / month (billed $450.00/year)
Billable Clients: Up to 500
Key elements: Key Plus elements and... automatically send late payment reminders, bill late feeds, get paid with checkout links, and run financial and accounting reports.
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