Small business accounting can be challenging. There are many misconceptions floating around which makes it difficult to distinguish fact from fiction to understand what you really need as a business owner. In this blog, we’ll dispel some of the myths about small business accounting and arm you with the information you need to find a great accountant.
Myth 1: I don’t need accounting software as a small business owner
A common myth is that small business owners think the benefit of using accounting software doesn’t outweigh the burden of extra complexity and cost. Although accounting software does represent additional costs and small business owners may need to spend time to learn how to use it, the time saved in the long run makes up for this many times over - you’ll constantly have readily available financial information, which couldn't be possible if you were manually keeping accounting records.
With the advancement of technology, there are many cloud-based accounting software solutions (e.g., Xero, Myob) designed for different business needs. These pieces of software can save significant amounts of time processing everyday transactions e.g., the receipts of your business expenses can be uploaded for easy tracking and auditing and produce useful financial reports to aid you in making business decisions. You can also automate invoicing and recurring bills seamlessly through a single interface. Accounting software also helps you to understand your tax position, easing anxiety and helping to provide your accountant with the information they need to keep your business compliant. Accounting software is far more convenient and time-saving than you might think.
Myth 2: Accounting only matters during tax time
Another common myth for small business owners is that accounting only matters during tax time. Many think accounting is just about getting the books right and keeping tax compliant at tax reporting periods. However, accurate financial statements also provide information on your business performance (e.g., calculating payment cycles to your debtors, identifying outstanding debts, monitoring daily cash flow, which clients or products are the most profitable etc.). This will give you insight to show you what you are doing well in and what areas need improving.
Keeping on top of your accounting consistently throughout the year also helps you to ensure that the paperwork doesn’t become overwhelming at tax reporting time. As a business owner, eyes can glaze over when you’re faced with a massive pile of un-entered receipts and this inefficiency takes you away from the core value add of your business.
Myth 3: Accountants are not necessary for small business owners
You can be a DIY tax filer, however, your life will be so much easier if you hire a small business accountant. While all the important information is available via the ATO, understanding it can be difficult, especially if you're unclear about all the jargon being used.
The tax legislation is notorious for being complicated and dynamic as the economy changes. For instance, during COVID, the ATO introduced many subsidies and “help” for small businesses which an everyday business owner may not be on top of.
Misunderstanding jargon and making mistakes (even minor ones) sometimes can result in penalties. You’re also likely to miss out on tax deductions and government grants. Therefore, hiring a small business accountant can be beneficial for small business owners who can help you interpret the tax rules and also help you make sure you don’t pay more tax than you have to.
Myth 4: Managing accounting records are easy for small business owners
Small business owners may believe that keeping accounting records is simple. In reality, this may not be the case. Not only do they need to have a document system in place to record all the business transactions, but also need to comply with regarding record keeping.
Common records include invoices, receipts, wage books, banking records, vehicle logbooks and more. You’ll also need to keep these records for at least 5 years from when you lodge your tax return in case you’re audited by ATO.
Here are some recommendations on managing your accounting records:
● Understand the regulations regarding managing records. You may also want to consult your accountant.
● Choose and implement an accounting software (e.g., Xero) and payroll software (e.g., myHR) that generate records.
● Match records to transactions when reconciling bank accounts.
● Back up and secure your financial data.
● Consistently record your accounting data throughout the year
Myth 5: Accounting is expensive for small business owners
One of the most common accounting myths is that accounting services are often associated with an expensive price tag. It’s true that accounting services are investments but they can also result in cost savings and risk avoidance. With the increased competition in the industry, small business owners can expect more competitive pricing and services.
For example, Beany charges a fixed monthly fee starting from $195 per month depending on your annual income bracket. We also offer a range of services that are customised to your own business needs - meaning you can get more for your money.
Myth 6: I don’t need to have any knowledge of accounting, I can pass it all to my accountant
If you’re already working with a small business accountant, you might already know they’re your resources. They remind you of the tax deadlines and also keep you updated with the latest changes in regulations. Other than keeping track of your books and filing taxes, they can also act as your small business experts. For example, they’ll be able to give you small business advice and offer help in tax planning, tax minimisation, managing cashflows, finding ways to reduce your expenses, and more.
In order to make good business decisions, you should still be aware of the financial aspect of your business. As a small business owner, if you can’t understand the jargon your accountant is talking about, ask them to explain it in layman’s terms, otherwise, it might be a sign to switch your accountant.
Who are Beany?
We’re an online accounting firm that is always right here for you, your accounting pain relief. The most advanced technology lets us work way more closely with you than a normal accountant would.
We have a dedicated team of remote accountants to take care of your business no matter where you are, so you can focus on growing your business. We take out the ‘fluff’, break down the barriers and get things done. Looking out for you is what we are all about. Get started for free today.
