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Small business accounting: 6 common accounting myths debunked

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Small business accounting can be challenging. There are many misconceptions floating around, which make it difficult to distinguish fact from fiction to understand what you need as a business owner. In this blog, we’ll dispel some of the myths about small business accounting and provide you the information 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 softwares doesn’t outweigh the burden of extra complexity and cost. Although accounting softwares usually adds extra costs, and require business owners to learn how to use them, in the long run, business owners usually find that good accounting softwares are more efficient and effective than manual processes. es. As a small business owner, good accounting software provides you financial information within a timely manner. This couldn't be possible if you were manually keeping accounting records.  

With the advancement of technology, there’s many cloud-based accounting software solutions (e.g., Xero, Myob) designed for different business needs.  As a small business owner, these pieces of software can save significant amounts of time processing everyday transactions. For example, 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 year-end. Usually, those business owners only meet with their accountants once a year to get IRD filed. However, a good accountant can provide a lot more than that. Meeting with your accountant regularly, you can receive accurate and useful financial information on your business performance (e.g., calculating payment cycles to your debtors, identifying account receivables, monitoring daily cash flow etc). This will give you insight to help you improve the areas your business is not performing well, or focus on the areas that are.

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 IRD, understanding it can be difficult, especially if you're unclear about all the jargon being used. 

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. 

Myth 4: Managing accounting records are easy for small business owners 

Small business owners may think that keeping accounting records is simple. In reality, this may not be the case. Large companies normally hire their own accountants to get the documents tidied up.  As a small business owner, you need to have a document system in place to record all the business transactions, also need to comply with IRD’s rules regarding record keeping by yourself. 

Common records include invoices, receipts, wage books, banking records, vehicle logbooks and more. You’ll also need to keep these records for at least 7 years in case you’re audited by IRD. You can find more details on IRD’s website

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 accounting software (e.g., Xero) and payroll software (e.g., myHR)  that generate records.
  • Match records to transactions when reconciling bank accountants.
  • Back up and secure your financial data. 

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 $139 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 

It’s  your business after all. Use your accountant as a resource for advice to build your business. They remind you of the tax deadlines and also keep you updated with the latest change in regulations. Other than keeping track of your books and filing taxes, you small business accountant 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 accessible 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.

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Tori as a dog

Tori Ma

Performance marketer

Performance marketer at Beany, and into true crime documentaries.

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