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Pointers to Hack Small Business Accounting Bookkeeping is essential in any business. If a small business owner makes some mistakes in their accounting, it could have serious ramifications. There may be mistakes that the tax authority could see as tax evasion and some of these errors can affect the reputation of your company or even worse, lead to its closure. 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 great amount of cash saved up to pay the fines which may cause you to borrow cash to pay the fines or close down your company. Therefore the significance of proper small business bookkeeping can’t be overstated; it’s critical in the start of your company. Many small business owners think that they do not need any form of accounting maybe because their business is small. They think that they only require 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 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 good bookkeeping, it’ll ensure the long-term success of your company. After you begin your small business, you ought to open another bank account immediately. Sole proprietors have the bad habit of managing their business from their personal account. It then becomes hard and on occasion even impossible to carry out a reconciliation if the business owner cannot separate his private money from that of his company.
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To ensure smooth accounting and avoid errors, the small business owner should ensure that he reconciles his books and accounts often such as weekly or monthly. When the owner does this, he can certainly note and correct figures that don’t add up. It is a challenging task trying to find a receipt from months ago, for instance. This is one such problem that can occur and it would be difficult to correct it if you only check and reconcile 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 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 also notice trends such as periodic increases or decreases in profit which you may not have noticed otherwise.