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Tips to Hack Small Business Accounting Accounting is critical in any business. In case a small business owner makes some mistakes in their accounting, it could have serious consequences. There could be mistakes which the tax authority could deem as tax evasion, and some of these mistakes can affect the reputation of your company or even worse, the closure of your business. Mistakes which can be considered as tax evasion could mean that you pay heavy 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 form of accounting maybe because their business is small. They think that they just need to do some basic bookkeeping, but this should not be the case. It is crucial for practically any business, whether large or small to start accounting from the time it begins. The small business should have a great accounting system in place so as to record all of the transactions that it makes and have receipts ready when needed. When you start off with bookkeeping that is good, it’ll ensure the long-term success of your organization. You must open another bank account immediately once you begin your business. Sole proprietors have the bad habit of operating their company 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 proprietor does this, he can notice and correct amounts that usually do not add up. It is a challenging task trying to find a receipt from months ago, for example. This can be one particular difficulty that may happen, and it will be challenging to correct it if you just assess and reconcile your books just before you submit your tax returns.
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Submitting tax returns becomes easier only if the small business owner follows good bookkeeping and accounting procedures such as producing monthly cash flow statements. Doing this also helps the small business owner since you understand whether you may make a loss or a profit and can see when you’re spending an excessive amount of money on unique goods and services. You can even find tendencies such as seasonal decreases or increases in profit which you might not have found otherwise.