There are common myths related to accountants and accounting that have been around for years and year. Where they originated from we can only guess at. But in the following articles we will delve into some of them and try to explain them and also show why they are not exactly true.
#1 Accounting Myth: Accounting is about maths.
This could not be further from the truth. Yes, you use math, but so does an engineer, salespeople, marketing people, hair stylist, etc. If you want to get paid, you will have to calculate the amount you are owed, the change if paid in cash, your commission percentage, etc.
Accountants use math similarly. Accounting is accounting for assets, liabilities, income, expenses, etc. However, at the core of accounting is research and storytelling. When an accountant looks at numbers they are looking at the story they tell about a business. Accountants use numbers to tell the owner of a business, shareholder, bank, or manager what they mean; how they can use them; and what to expect in the future. Accountants seek to use accounting and turn it into understandable language for clients. Accountants can teach their clients how their numbers can tell them the stories they need to hear and what their futures may hold.
#2 Accounting Myth: Accountants are introverted or boring and really don’t like working with customers.
Even a tax accountant has to be a people-person. All accountants have a need to work with clients, employees, vendors, client’s customers. And much like any other group of people there are always going to be those who enjoy working with people more than others. Accountants as a group of people are no different.
#3 Accounting Myth: Small Businesses don’t need accounting.
(or it can just wait until it’s get to be too much for me to handle myself.)
Many small business owners feel they can manage without an accountant or even a bookkeeper. So this means that as a small business owner, you would say that you don’t need to budget, forecast financials, know about trends in your business, or know the latest tax changes impact your business. Accountants can help clients that are as small as a one-person service business making only about 20K a year, right on up.
Every business needs an accountant watching their back. A business should not be run based on whether or not there is cash in the bank at that current time. At the end of the year, how do you know whether you are going to report a loss or income? You need to report as much loss as you can to pay as little taxes as you can or you are just cheating yourself.
Your accountant will be following your financials the entire year and everything should be neat and clean come time to file your end of years. Also, your accountant should be able to give you monthly financials that tell you where you can improve in an area, have reports ready for possible loans, help you make financial decisions, help you make the most of recent tax advantages, and tell you if your business will trend towards lower or higher revenue in certain months based on history.
#4 Accounting Myth: An Accountant will cost me an arm and a leg.
Well, this might be the case if you go to a larger firm. So it is very important to find the right firm or individual for you. Check references, qualifications, and services. Be sure the price matches the industry standards in your area and be sure they make you feel good about working with them. You should be number one to them and you should be able to find a qualified person or firm to work with.
#5 Accounting Myth: I pay business expenses out of my own pocket.
It’s really no big deal. WRONG. If you own or operate a business, it is a business, not your spouse. You need to note when you have paid an expenses out of your own pocket. This is money that could be returned to you tax-free.
If you are running your business like this and not separating your personal and business accounts then you need to stop this immediately. You would be well advised to open a business bank account. This means you can deposit revenues into this account and pay business bill from here.
#6 Accounting Myth: I don’t have time and don’t need to set goals for myself and my company.
Every successful company out there has used goal-setting as an intricate part of running their business. Life as we know it moves at a head-spinning speed. No matter the industry, changing times can cause chaos and in many cases put a company out of business if they do not stay up-to-date with trends, technology, and consumer information.
If you have neglected this vital business success tool then it is advisable to make time for this without delay. Sit down and write out 10 goals for yourself and your company. Once completed, put these goals in priority order from highest to lowest. Put them in a place where you will constantly be reminded of your goals.
Each month sit down and review these goals. Write down what you have done to come closer to each one and if you have reached any of them. As you reach your goals, cross them off the list. Do not remove them. This gives you a sense of accomplishment and shows you that your hard work is paying off.
#7 Accounting Myth: I really don’t need accounting reports to know how my business is doing.
Just because you are busy does not necessarily mean your business is doing well. You need reports to tell you if your prices are where they need to be in comparison to the expenses you are incurring. You need to run reports to show problem areas like theft, loss, waste, profitable areas, etc. Once you run these reports, you then need to understand how to use them. If you run a report that shows that you have a major area of waste in your manufacturing process, you then need to come up with a solution to the problem and either find a way to reap income from the waste material, find a way to reuse the material, or better the process to lessen the amount of waste.
In the service industries, reports can show how time is allocated. If time is allocated poorly, money is being lost and as 99% of businesses in the country, I am sure you are trying to make a profit. These reports can help reveal the problem area and help to shift employee duties or activities in a way that will bring profit back or increase the profit of your company quickly and efficiently.
#8 Accounting Myth: I can handle my accounting myself.
I have QuickBooks so I don’t need an accountants is a common statement accountants hear. QuickBooks is an awesome program and used by many businesses, and there are many other fantastic accounting software out there. But it does not take the need for an accountant away. As a matter of fact, most business owners get some form accounting software to help run their business, only to become overwhelmed and confused.
Having accounting software is very good and can become an awesome tool, but your accountant needs to help you set it up, educate you on how you can and should use it, and come in periodically to be sure everything is in order, run reports, and fix problem areas.
You can be wonderful in business but unless you know how to operate the accounting side of your business perfectly, you should really do yourself a favor and at least get advice from an accountant on this process.