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Pointers to Hack Small Business Accounting Accounting is crucial in any business. If a small business owner makes some errors in their accounting; it could have grave consequences. There may be mistakes which the tax authority could deem as tax evasion, and many of these mistakes can affect your business’ reputation or worse still lead to its closure. Blunders which can be regarded as tax evasion could mean that you pay significant fines to the tax authority. As a small business owner, you may not have a lot of money saved up to pay the fines which could make you borrow money to pay the fines or close down your business. Therefore the importance of proper small business accounting cannot be overemphasized; it is vital from the start of your business. Many small business owners think that they do not need any bookkeeping maybe because their company is small. They believe that they merely require to do some basic bookkeeping, but this should not be the case. It’s very important for any business, whether large or small to begin accounting from the time it starts. The small business should possess an excellent accounting system in place so as have receipts ready when needed and to record all the transaction that it makes. When you start off with bookkeeping that is good, it’ll ensure the long-term success of your organization. You should open a separate bank account immediately after you start your small business. Sole proprietors have the bad habit of operating their business from their personal account. It then becomes difficult as well as impossible to undertake a reconciliation in the event the business owner cannot separate his private money from that of his company.
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To avoid errors and to ensure easy accounting, the small business owner should ensure he reconciles accounts and his books frequently such as weekly or monthly. When the owner does this, he can easily note and correct figures that do not add up. It is a challenging task trying to find a receipt from months ago, for example. This can be one such difficulty that may occur and it could be tough to correct it if you accommodate and simply check your books just before you submit your tax returns.
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Submitting tax returns becomes simpler if the small business owner follows good bookkeeping and accounting procedures like creating monthly cash flow statements. Doing this also benefits the small business owner since you can see when you’re spending too much cash on particular goods and services and know whether you’ll earn a profit or a loss. You can even see tendencies, for example, regular decreases or increases in profit which you may not have seen otherwise.