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Suggestions 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 could be mistakes which the tax authority could deem as tax evasion, and some of these mistakes can affect the reputation of your company or even worse, the closure of your business. 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 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 is crucial for practically any business, whether large or small to start accounting from the time it begins. 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 must open another bank account immediately once you begin your business. Sole proprietors have the bad habit of operating 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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Avoid errors and to ensure accounting that is easy, the small business owner should ensure he reconciles his accounts and books frequently 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 example. This can be one particular difficulty that may happen, and it will be challenging to correct it if you just assess 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 benefits the small business owner because you can see when you are spending too much money on specific goods and services and know whether you will make a profit or a loss. You can even see tendencies, for example, regular decreases or increases in profit which you may not have seen otherwise.