Keeping track of your profit and loss is absolutely necessary to maintaining the financial health of your business. Simply put, without reviewing your books every so often, you have no real way to tell if you’re even turning a profit, let alone if you’re in the red. In fact, a whopping 63% of small businesses don’t survive even six years due to financial neglect and limited financial training-and most work-at-home people fail before six months time!
Further attributing to these small business casualties is the reality that many of them do not have an accountant that understands online business expenses. All accountants are not created equal. While some might specialize in tax representation, others are well versed in the insurance industry. Think about it though, would these types of accountants know what an affiliate payment is, or how much of your bandwidth fees you can reasonably write off?
This aspect of running a business can be intimidating, but don’t be discouraged! This article will illustrate four very effective ways to help prevent losing your business to these common oversights. Please keep in mind that I am not a certified accountant, and that these are only my suggestions to help you maintain the financial aspect of your business.
Find an Accountant That You Can Work With
As mentioned previously, not every accountant is going to be a good match for your business. If you hire an accountant who has years of experience with brick-and-mortar businesses, they may not understand the costs of running an online business.
You could, in turn, pay more taxes at the end of the year because your accountant did not recognize the potential tax write-offs that an online small business could benefit from. Did you know that your home office tools just might qualify as a tax write-off? Your computer, your business telephone line, even the entire room could possibly be written off at the end of the year.
So how would you go about finding the best accountant for the job? Request some referrals from people that you trust, and set up a couple of interviews. One size does not fit all in this case, however. You’ll want to know a few things about your prospective accountant:
- Experience – How long have they been working with online small businesses, and to what extent? Do they understand the difference between affiliate commissions and payroll?
- Hypothetical situations – Write an in-depth list of palpable risks and possible hurdles that you expect your business to be subject to in the long run. Ask the accountant how they can prevent or even benefit from these scenarios. Let them demonstrate why you should hire them.
- Expertise – This accountant is great at crunching the numbers, but can they help you plan your business? Provide helpful and readily applicable advice? A good accountant can accomplish all this and more.
Pay special attention to how the accountants present themselves, and especially how they address your questions and concerns. If the accountant is not receptive to your business concepts, they do not have a place on your financial team.
Ask Your Accountant to Help Advise Your Small Business, Sole Proprietor, or LLC
Additionally, your accountant is a valuable advisor to have when considering important business options. Not only can they set up your business records and books, but they can be indispensable when it comes to deciding whether or not to expand, whether or not to hire new employees, and providing you with a complete financial forecast.
Because your accountant maintains your business finances, they will be able to counsel you about the risks and benefits of forming an LLC, or remaining the sole proprietor. This is a big step for any small business, and your accountant would be best suited to aid you in making this decision.
Meet With Your Accountant Regularly
Your accountant is a great asset to your company, but you cannot maximize your financial potential if you do not meet with them regularly. I cannot stress enough the importance of this-schedule quarterly, if not monthly meetings with your accountant.
Your finances are of the utmost importance, therefore careful monitoring should not be put off until tax season. This is a common folly that could ultimately cost you your business! Your accountant may find ways to save you money on a frequent basis, not just around tax season.
Meeting with your accountant consistently can help you ensure that your accountant is handling your financial needs in an acceptable manner, and keep you abreast of every single detail on your financial horizon.