Last time I shared with you the importance of choosing a proper business structure for your home-based business. Today let’s talk a little more about best business practices – specifically, two things that can be a real chore: accounting and taxes.
Like it or not, accounting and taxes are a vital part of your business. It’s critical that they be handled correctly. When your business reaches a certain size, you may decide to handle these functions in house, but for most startups, it makes more sense to outsource accounting and tax filings.
Time is Money
Unless you have an accounting or tax background, you’ll likely spend far too much time in “do-it-yourself” mode. That’s time you could have spent marketing your business and serving your customers instead. In most cases, it’s probably cheaper for you to hire an expert than it is to struggle through it yourself.
For example, let’s say you’re a graphic designer who charges $75 per hour. You could easily waste four or five hours of your own time on accounting tasks that would take a professional an hour to do. You could have earned $300 in that time frame. Instead of doing it yourself, you could have paid a pro half of that or less to get the accounting done for you.
No one likes to spend money on what seems like such a waste of good profits. Accounting and tax preparation are two areas that don’t exactly scream “luxury!” But the savvy entrepreneur knows this is indeed an area where money is well spent.
Complexity Invites Costly Mistakes
Tax laws are complex, and they vary from state to state. You could get into trouble if you incorrectly prepare and file your taxes on your own, without the help of a professional. A tax professional not only knows the ins and outs of federal tax law, but he or she is also up to speed on the unique laws that apply to the state and locality where you do business.
Hiring a professional will give you the peace of mind that your accounting and tax filings have been done correctly. In fact, most CPA and accounting firms will guarantee their work. That is, if you’re ever audited, they’ll be there to walk with you through every step of the auditing process. In most cases, your CPA or accounting firms can even speak with the auditor on your behalf.
Keep More Money In Your Pocket
Hiring a professional for accounting and tax filing can actually save you money. When you hire a CPA or bookkeeper, they’re working for you. They’re running a business just like you are, and they want to make you a happy customer. Most tax and accounting professionals go out of their way to find you every deduction possible, and offer tips and special ways to save your business money. They take continuing education classes to keep abreast of the latest changes in the tax code. Be honest – would you take the time to do this each year? The fees you pay for tax preparation can end up saving your business thousands of dollars.
Choose With Care
When you outsource bookkeeping and taxes, you’ll be revealing private financial information about your business to another party. Therefore it would be wise to do some research first. Get recommendations, and don’t get just one. Ask around. Depending on your line of business, there may be a tax professional that specializes in your area, so don’t be shy about asking. Do your research well, and make sure that you’re working with someone of good character. Interview a few accountants or bookkeepers until you find the best fit for you and your business. You want someone you can really trust.
Always ask for references – and check them. You want to choose a firm (or an individual) with positive customer satisfaction ratings. If you go with a large accounting firm, you’ll want to ensure that you won’t be treated as “just a number.” Actually sit down and meet with the person who will be assigned to your business accounts.
A final word of caution: some CPAs and accounting firms may not have expertise in all the areas you need. Some services may come with an extra charge. Ask ahead of time for a full, written explanation of exactly what services are included and those that are not included. It would be wise to have everything spelled out in a service contract so that there are no unexpected surprises when the bill arrives.
Next time: 10 things that can trip you up when working from home.