A small business can be defined as a privately or independently owned and operated company with fewer employees or less revenue than other businesses offering the same products or services in the industry. Typically, small businesses have less than 500 employees, but there is so much more that defines a small business.
Like any business, small businesses are born from ambition, identifying a need in the community and providing a solution to meet those needs or wants. Small businesses give people the chance to become entrepreneurs and grow with the business, providing job opportunities and bringing communities together. Small businesses create meaningful interactions and job opportunities, with employees often experiencing more independence and a greater sense of team spirit than others working for large businesses or corporations.
Small businesses are an essential and impactful part of any economy. While there are many differences between small and large businesses, one thing they will always have in common is money.
All businesses deal with money in the form of profit, loss, income, expenses, and so forth, and this needs to be effectively tracked and managed by a professional. To ensure all processes are correct, prevent shortfalls, and plan for the future.
Recording the business income and expenses is not an exceptionally difficult task. However, it requires one’s full attention and is incredibly time-consuming. Once again, this seems doable, but it needs to be considered that the business owner may not have the time to do this or the resources to employ a full-time bookkeeper or accountant.
Often, individuals employed by a small business have specific tasks and responsibilities in their positions and do not have the time or skillset to take on extra work, even if they are capable. This is why small business owners often opt for the most cost-effective and efficient solution: hiring accountants for small businesses.
Accountants For Small Businesses: Why Are They Important?
Money plays a significant role in any business, big or small, from profits to expenses and invoices to wages. All money in and out of the business needs to be managed and accounted for, and this is no small task. Accountants are responsible for, and not limited to, the following:
Financial Management
Accountants for small businesses work closely with the business owners to help them keep track of the business’s assets, liabilities, income, expenses and cash flow. The accountant is responsible for handling the paperwork and admin side of the business and reporting back to the owners and other potential investors or stakeholders. The owners or investors use the information they give to guide them in making decisions for the business, and they base their decisions on the business’s current performance, from the accountant’s work and the information that comes from it.
Compliance
Accountants for small businesses aren’t just responsible for keeping the finances in order. Accountants must also ensure that all paperwork and procedures within the business are up to legal standards and error-free. This includes maintaining an up-to-date and accurate record of all the business transactions, which is provided to tax authorities for filing purposes and to ensure that the business is adhering to the law. Tax documents are scrutinised by authorities and must be correct and up to date.
Avoiding Failure
Small businesses often do not have the same safety nets as larger corporations. Poor financial performance is often the most significant reason many small businesses, especially in their first year, go bankrupt and fail. It is of vital importance that a qualified accountant efficiently manage their budget and resources to ensure the financial success of the business and eliminate any risk of errors or shortcomings.
Biggest Accounting Mistakes Made By Small Businesses
Surebooks Accountants for small businesses work to ensure that our clients’ businesses never make the following common mistakes:
Inaccurate Financial Records
Accounting can be overwhelming and confusing for small businesses to manage, but to grow, they need accurate data on which they can base future decisions. Inaccurate financial statements are not only untrue reflections of the business’s performance, but they can also cause critical errors in the future. The business measures the successes and shortcomings of their financial records and uses them to apply for loans. Inaccurate information will result in loans being denied and potentially destructive decisions made based on information that is not true to the business.
Mixing Business And Personal
Business owners invest a large amount of their time and money into the business, and their business and personal lives are easily intertwined. This being said, it is common for business owners to mix up their business and finances, leading to difficulty keeping track of the two individually, incorrectly reporting income and expenses, and battling to analyse the business’s finances to make decisions. Mixing business and personal finances also leads to a range of tax issues, which will be finically costly and could even have legal implications.
Hiring accountants for small businesses is a sure way to resolve this issue and keep finances separate as they should be. Accountants for small businesses are impartial and can effectively analyse and categorise business expenses. An accountant can also assist in setting up individual and correct bank accounts for personal and business finances in the future.
Failing To Reconcile Bank Statements
Having accurate financial records is not only important to see the direction the business is heading and gauge its performance, but it is also essential to identify errors or fraudulent activity. Employees in small businesses often have close personal relationships with the owner and with other employees, which unfortunately makes it easy for theft or fraudulent activity. If nothing is suspected, then it can go unnoticed for long periods, costing the business dearly.
Accountants for businesses are impartial and do not have a bias towards anyone, meaning they can effectively pick up mistakes or discrepancies that others may have overlooked. Hiring an accountant ensures that all bank statements are reviewed regularly and that no errors slip through the cracks. Efficient accounting and finance management does not prevent fraudulent activity. Still, it does ensure that no irregularities or mistakes go unnoticed and that every profit and expense is accounted for accordingly.
Overlooking Tax
Tax is one of the more complex financial aspects of the business to deal with, and small businesses often end up making mistakes or overlooking their tax deductions and credits and paying more taxes than necessary. In some cases, businesses also pay less tax than they are meant to, and this can result in incurring legal troubles and fines, which could jeopardise the future of the entire business.
Surebooks Accountants are well suited to help you with your businesses with any tax deductions and/or credits you may require. This is because many of our accountants have a lot of experience working with taxes. But that is not all. At Surebooks, we can also make sure that the business’s taxes are handled with care, that your business does not pay more tax than is needed, and that everything is compliant with the current laws and regulations in place.
Why Small Businesses Can’t Afford Mistakes
Small businesses are at a higher risk of experiencing harsher negative consequences by making accounting mistakes than larger firms. There are many reasons for this. Let us look at some of the most important in the section below:
Limited Resources
Unlike larger businesses, small businesses do not have multiple investments, which leads to being able to access more money when it is needed. Therefore, they have fewer resources to fall back on if errors occur. Small businesses do not have the need or the resources for a dedicated accounting team and often rely on the owner or another employee to take on the task.
If something were to go wrong, which is expected, multiple individuals would need to investigate and rectify the issue, which pulls resources away from other essential operations of the business. For example, suppose the admin staff or accounts department are needed to help sort out an accounting error. In that case, they are distracted from their primary roles and can slow down business operations. Large businesses or corporations have a far better chance of recovering from financial losses or legal suits and have the workforce and money to rectify these situations.
Mistakes Have A Greater Impact
Small businesses will battle to recover from mistakes, whereas larger businesses have backup plans and capital to fall back on following mistakes or fines. If a small business misses a tax deadline or fails to complete and submit all the necessary forms properly, it will face heavy fines, which are difficult for the business to absorb.
Trouble Applying For Loans
Errors in financial statements and records will also cause difficulty in future endeavours. Acquiring a business loan can often make the difference between a business failing or succeeding. However, this can be exceptionally difficult if the financial records provided to the bank are not 100% accurate and up to date.
Not having a qualified accountant could result in bank loans or investments being denied or forfeited, which would be detrimental to any business seeking additional funding to invest in growth or expansion or to pull them out of a financial hole.
Legal Issues
Accounting errors are not the only worry small businesses face when it comes to managing their finances and compliance. Small businesses are far more vulnerable to legal issues arising from accounting mistakes often made by overworked or inexperienced staff. Legal disputes are common in the business world and must be avoided at all costs. Simple errors like listing the business incorrectly, choosing the wrong ownership structure, or failing to keep documents up to date could lead to legal and financial problems.
Large businesses and corporations have legal teams and advisors to assist in any legal issues that may arise, whereas smaller businesses are rarely equipped to handle such situations and, therefore, have to pay for legal services, which is hugely costly.
Small business owners are not just responsible for the success of their businesses. They are also responsible for the livelihood of their employees. The risks and consequences that come along with improper accounting and financial management are not worth costing the business money and potentially costing employees their jobs.
For many small businesses, hiring a full-time accountant is unnecessary or affordable. However, everything must be kept in order. This is why Surebooks Accountants for small businesses exists – to provide a necessary service affordably and conveniently that benefits the small business.
Accountants For Small Businesses: Here To Help
Surebooks accountants for small businesses are ready to help your business grow by delivering high-quality, error-free accounting services that give you valuable data and insights to make decisions for your business and allow you the time to focus on managing and growing your business.
Surebooks accountants for small businesses are dedicated to growing your business and offer a variety of services and packages, including accounting services, bookkeeping services, payroll services and more, so that you can choose which is best suited to your business’s needs and budget.
