Many Business owners, especially small business owners prefer to do their own bookkeeping rather than hiring a professional accountant. Availability of online accounting software and other tools has made it easier for small business owners with more or less accounting knowledge to handle bookkeeping of their business themselves. Despite all benefits of handling your own bookkeeping, there are many shortcomings to watch out.
Depending upon the size and nature of small business, business owners should consider whether hiring an experienced accountant might be better than doing it yourself.
Why Small Business Owners Prefer Doing bookkeeping themselves & how it could affect them?
One apparent advantage of doing your own bookkeeping is saving the money that you would pay to the accountant. Additionally, you will be aware of everything happening with your business, including revenue and expenses.
If you have no or a few employees, you may go ahead with this option, but in case, you have employees under you, here are some problems that you might face while doing it yourself:
Not everyone has required knowledge and expertise. The time you invest in entering and maintaining your books will keep you away from focusing on other business operations, including running and growing your business.
Unless you have spent years in bookkeeping, you may not have enough knowledge about the various tax laws and codes that could harm of benefit your business.
Small business owners hesitate from hiring an accountant mainly due to two reasons- first, they don’t want to spend money on it, and secondly, they don’t want to share confidential information about income and expenditure with anyone else. An expert and experienced personal accountant can benefit you in multiple ways, and overcome all your worries by providing tax credits, and accurate accounting.
Ways a Personal Accountant Can Benefit Your Small Business
When you are busy running your business, managing different operation and have a personal life too, there are chances you lose control over the bookkeeping and have no or less time to think about doing your tax return. Having a professional personal accountant will relieve you from your stress and worries about deadlines, accuracy and investigation. Just pass this job to an expert, and focus on your core business.
Accountants are educated and trained when it comes to finding out ways to save money. They are expert in reducing taxes. It is possible that you do not like paying an account initially, but in long run, you may it worth doing so, as you would have saved a lot of money due to your expert accountant.
Tax law and clauses keep on changing, therefore, it would be hard for a small businessperson to monitor such frequent changes, and do bookkeeping accordingly. In order to have a complete peace of mind and complete your tax return, you would need an accountant who is familiar with the latest laws.
Let us discuss the pros and cons of having a personal accountant in detail to help you in decision-making.
Filing Your Own Taxes Consume Most of Your Time
The IRS estimated that an average spent approximately 24.2 hours in completing the tax return procedure. If you try to file a schedule C for business or a schedule E for rental properties, this number would quickly increase to 52.2 hours, which would cost you up to thousands of dollars. Money and time that you could be saved or invested in better way for growing you business, instead of filing returns or bookkeeping.
A personal accountant works efficiently, quickly and helps you in saving your time and money.
Tax Preparation Fees Can Be Complicated
Filing tax returns can be challenging and confusing. The tax laws keep on changing, and for a business owner, it is not easy to get a grip over everything. The Federal tax code changes every year, which makes it almost impossible for an average taxpayer to have a complete knowledge of all changes that may apply to them.
If you claim any of the following situation, it is highly advisable to immediately talk to a professional personal accountant in order to prevent situation getting more complicated-
- You own, began or sold a business
- Unmanaged capital asset transactions
- Too many investment gains and losses
- Real estate transactions
- Change in Marital Status
- You do not have income and residence in the same state or country
- Trust Fund transactions
- Prepare a schedule for self-employment income
Get Deductions or Credits
Accounts have years of experience of filing tax, and therefore, they are well-aware of tax laws, rules, and regulations. They can find many ways to get every deductions and credit relevant to your situation. No matter, how many years experience you have in bookkeeping, there are some deductions and credits not every business owner is aware of.
If you are audited in an unfavorable condition, a personal accountant will work with you to organize all necessary paperwork, and deal with the IRS directly on your behalf. Although, less than 1% tax payers are audited every year you should still not take any chance and handle IRS alone.
Reduce Chances of Mistakes
No matter how experienced and confident you are, there are strong chances to make mistakes while filing your taxes for you. Many small businesses us automated software to file tax have double check things themselves.
Based on the complexity of your tax return, the cost of hiring a professional accountant may be overwhelming. You have to some hundreds of dollars for a simple tax return, but you will save your time. Apart from paying high hourly fees, the price can instantly increase depending upon the complexity and paperwork required by your return.
Tax Preparation Software
Computer programming software can be a great alternative to hiring an accountant. Tax preparation software is inexpensive and may help you through your tax return in case your tax return is not complicated.
When Should You Hire a Personal Accountant?
Every small business owner hires a personal accountant from very beginning. A professional accountant will help you with managing money that you set aside to start your business or make any significant business investment. He or she can also advise you on purchasing the things that may give your huge tax breaks, especially environment- friendly things.
Starting a new business is really tough and may face problem in filing returns if you are not experienced. One biggest advantage of having a personal assistant is that he can help taking some of tensions off your head. Hiring a personal accountant will help your in managing all financial aspects of your business and maintain a positive cash flow.
Using software for bookkeeping or using a software would be more or less identical. Using a software for bookkeeping will consume much of your time, because you have to verify everything in that accountant.
Overall, there is not specific reason to convince you whether you should hire a personal accountant for your small business. If you have not changed anything in the past year, or have a very simple tax return, you can do bookkeeping for your business on your own or using a tax preparation software. But, if you want to entirely focus on the growth of your business, and have a complicated tax return, better hire a personal accountant, and save you money and time while giving your business a new dimension.