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5 accounting myths that negatively impact your year-end closing and how to avoid them?

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Summary: It’s that time of the year when businesses brace themselves up to file taxes. And the tax-filing process can be frustrating if you haven’t sorted your finances. So, it’s essential to note the following points while filing taxes, such as sales tax collected, profits, inventory, and expenses incurred like payroll, utilities, supplies, interest on loans and credit cards, insurance, rent, and much more. This blog will inform you about the various accounting myths surrounding year-end closing and help you discover ways to deal with them.

accounting myths

Are the following questions scaring you?

  1. You lack a full-fledged process to record tax-related data efficiently?
  2. Is filing taxes a cumbersome process for you?
  3. Do you find it challenging to compile data according to government rules and norms?

If yes, then don’t worry. We will bust the top 5 accounting myths that scare finance & accounting professionals and provide solutions on how to tackle them.

Myth 1: Accounting is just counting and compiling numbers!

Completely false!

There’s no doubt that accountants use Maths, but they also need to understand tax codes and laws that apply to the business. 

To make things simple, a bookkeeper collects and compiles financial data. Then, accountants prepare financial statements by making sense of this data. 

Therefore, the primary function of an accountant is to offer strategic advice by analyzing your current financial situation. They produce critical financial statements like general ledgers, trial balances, profit & loss statements, and much more, thereby providing a 360-degree picture of your company’s financial health. 

So, remember that while filing year-end taxes, you are doing much more than preparing a list of income and expenses. You must also have complete knowledge about the state and union laws that apply to your business. 

>>>Also Read: Tips to find the Right Accounting Software for your Business<<<

Myth 2: My accountant does the taxes. The software manages everything else.

Nothing can be farther from the truth!

Accountants help file taxes, but the real benefit of working with an accountant is their expertise on taxation laws and how they may impact your company’s functioning.

You might be well aware that tax laws are not static. Instead, they change now and then. So, the most significant benefit of employing an accountant is that they are well-versed with the changes in the taxation laws. They attend seminars, do online training, read many books, and are part of various professional groups that keep them updated about any change in the tax laws. 

Do you know that an accountant spends about 10-15% of their time each month on professional development to keep a tab on what’s new, what’s old, and what can lead to missed deductions or penalties? 

Now let’s focus on the other side of the picture. There is no doubt that ERP software helps businesses manage their financial health effectively. But an accountant can provide you with valuable suggestions on how this software can help you generate year-end reports quickly. Otherwise, you might spend days or weeks analyzing data distributed across numerous spreadsheets and receipts. 

accounting myths

Myth 3: I don’t require a separate bank account because I’m a sole proprietor.

False in most cases!

Remember that a sole proprietor, such as “Fictitious Busines Name” (FBN) or “Doing Business as” (DBA), doesn’t mandatorily require a separate bank account. But, you can keep your records safely and manage them efficiently if you have one, especially while filing taxes.

An FBN or DBA and you, the owner, aren’t two separate entities. So, the income earned by a sole proprietorship is counted as the income earned by the owner. Therefore, remember that merging business and personal expenses might lead to disallowed or missed deductions, resulting in higher taxes. 

So, it would be best to hire a part-time accountant (if not a full-time) to keep your finances on track and file taxes smarter and faster. 

>>>Also Read: Tips to find the right accounting software for your business – Part 2<<<

Myth 4: Accountants demand a lot of money.

False in most cases!

Consider the following scenarios:

  • You filed taxes incorrectly.
  • You filed taxes late.
  • You missed deduction opportunities.

Remember that the potential cost of making errors in the three scenarios mentioned above might exceed the price of working with a professional accountant. 

Ask yourself: Would you like to pay a 15-20% penalty plus a late filing fee or pay a professional accountant who can help you save those expenses and get the most out of the tax code?

Moreover, an accountant can provide you with crucial suggestions while making policy changes. For example: “How giving a bonus or a raise is different than giving employee benefits?” These changes can negatively impact your business if you don’t have someone to handhold you and provide sound guidance. 

<<<Also Read: 5 Tell-Tale Signs Your Business Needs a Cloud-based Accounting Software<<<

Myth 5: Only men make good accountants.

Completely false!

You will be surprised to know that women are equal or more in number than men in this profession. 

Accounting myths

  • 50.5% of all accountants, auditors, and investment professionals in Canada are women.
  • 63% of all auditors and accountants in the USA are women.
  • 64.3% of all accounting & legal professionals in Europe are women. 

These statistics tell a different story altogether. You can see that most countries have more women working in this field instead of men.

So, you must search the following attributes while selecting an accountant instead of checking their gender: 

  • Examine the accountant’s area of expertise.
  • Check the accountant’s license and certification.
  • Talk to the accountant’s clients and know more about them. 

<<<Also Read: Intercompany Accounting: Benefits of an ERP for Intercompany Accounting>>>

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At Sage Software Solutions (P) Ltd., we are home to world-class ERP software and CRM software that will solidify your business tech support fundamentals and enable you to build a customer-centric organization. You can also write to us at sales@sagesoftware.co.in.

Disclaimer: All the information, views, and opinions expressed in this blog are those of the authors and their respective web sources and in no way reflect the principles, views, or objectives of Sage Software Solutions (P) Ltd.

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