5 Myths About Small Business Accounting
25 May 2022, 3:35AM
Myth #1: Small businesses don’t need to worry about accounting
Many small business owners believe that they don’t need to worry about accounting because their business is too small. However, this couldn’t be further from the truth. All businesses, no matter their size, need to keep accurate financial records. This will allow you to make better business decisions, track your progress, and avoid any legal issues down the road.
While it's true that many small businesses don't have the same level of financial complexity as larger businesses, that doesn't mean that small business accounting isn't important.
In fact, small businesses need to be especially vigilant when it comes to their finances. Because they don't have the same financial cushion as larger businesses, small businesses can be quickly overwhelmed by financial problems.
Myth #2: Accounting is too complicated for small business owners
Another common myth is that accounting is too complicated for small business owners to understand. While there are certainly some complex concepts involved in accounting, small business accounting doesn’t have to be overly complicated. There are plenty of resources available to help small business owners learn the basics of accounting and bookkeeping.
There are a few different areas of accounting that small business owners need to be aware of:
1. Financial statements: These are reports that show how much money your business has earned or spent over a certain period of time. The two most common financial statements are the balance sheet and the income statement.
2. Accounts receivable: This is money that your customers owe you for goods or services that they’ve received.
3. Accounts payable: This is money that your business owes to suppliers or other creditors.
4. Inventory: This is a record of the goods or materials that your business has on hand.
5. Depreciation: This is an accounting method that is used to spread the cost of a long-term asset (such as a vehicle or piece of machinery) over its useful life.
Learning accounting can seem daunting, but it doesn’t have to be. There are plenty of resources available to help you understand the basics. Once you have a handle on the basics, you’ll be able to make better financial decisions for your business.
Myth #3: Small businesses don’t need to hire an accountant
Many small business owners believe that they can save money by doing their own accounting. However, this is often not the case. Unless you have experience with accounting and bookkeeping, it’s easy to make mistakes that can end up costing you money. Hiring a professional accountant can actually save you money in the long run by ensuring that your financial records are accurate and up to date.
A small business accountant can also provide valuable insights into a small business's financial health and offer advice on how to improve profitability. And, if a small business ever runs into financial trouble, an accountant can help negotiate with creditors and lenders.
Myth #4: All accountants are the same
Another myth is that all accountants offer the same services. While it’s true that small business accountants all have similar core responsibilities, the reality is that there is a lot of diversity within the profession. Here are four things that set accountants apart from one another:
1. Educational Background: One of the most obvious things that set accountants apart is their educational background. While most accountants have at least a bachelor’s degree in accounting or a related field, some may have gone on to get their master’s degree or even their PhD.
2. Area of Expertise: Another thing that sets accountants apart is their area of expertise. Some accountants specialize in auditing, while others focus on tax preparation or financial planning. There are even some accountants who specialize in forensic accounting, which involves investigating financial crimes.
3. Work Setting: The work setting can also be a factor that sets accountants apart. Some accountants work in traditional office settings, while others may work remotely or from home. Additionally, some accountants work for accounting firms, while others work in-house for businesses or organizations.
4. Personal Style: Finally, each accountant has their own personal style. Some accountants are very detail-oriented and analytical, while others may be more creative and intuitive. Some accountants are very outgoing and people-oriented, while others may be more introverted and reserved. Ultimately, the way an accountant approaches their work is unique to them and can vary greatly from one individual to the next.
Be sure to do your research to find an accountant that offers the services that you need.
Myth #5: Accounting software is too expensive for small businesses
Many small business owners believe that they can’t afford to purchase accounting software. However, there are many affordable options available. In fact, there are even some free accounting software programs available.
Small businesses can benefit greatly from implementing accounting software, but the perceived cost can be a deterrent. However, there are many affordable options available that can save small businesses time and money.
Accounting software can automate many of the tedious tasks associated with bookkeeping, such as invoicing, tracking expenses, and preparing financial reports. This can free up small business owners to focus on other aspects of their business. In addition, accounting software can provide valuable insights into a business’s financial health, helping to identify issues early on.
The cost of accounting software varies depending on the features and functionality required. There are many affordable options available, including cloud-based accounting software that can be accessed from any device with an internet connection. For small businesses, the cost of accounting software is a worthwhile investment that can save time and money in the long run.