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Pointers to Hack Small Business Accounting Bookkeeping is essential in any business. In case a small business owner makes some mistakes in their accounting, it could have serious 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. Mistakes which can be considered as tax evasion could imply which you pay heavy fines to the tax authority. As a small business proprietor you might not have lots of money saved up to pay the fines that could cause you to close down your business or borrow money to pay the fines fully. Therefore the importance of proper small business accounting cannot be overemphasized; it is vital from the start of your business. Many small business owners believe that they do not want any accounting maybe because their business is modest. They think that they just need 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 have a thorough accounting system in place so as to record all 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 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 or even impossible to carry out a reconciliation if the business owner cannot separate his personal money form that of his business.
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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 endeavor looking for a receipt from months ago, for example. 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 even find tendencies such as seasonal decreases or increases in profit which you might not have found otherwise.