You’ve been told many times that hiring an accountant is an investment for your business. Still, you chose to do the job yourself thinking that it’s not that hard to manage your finances anyway. But did you know that chartered accountants do more than just that? Here are five common business mistakes that only an accountant can see and fix before it hurts your bottomline:
Errors in Your Inventory Costs
Determining the selling price of your product is crucial because it will determine if you’re going to earn profits or not. Unfortunately, you could be committing an inventory costing error that’s making you lose money even if you think you’re earning it. The Cost of Goods Sold is such an important factor in making profit and an accountant can help you determine the ideal selling price of your product after considering factors like overhead costs, raw materials and shipping fees.
High Operating Leverage
Managing your finances is more complex than you think, especially since you have to consider your fixed costs versus the variable costs. When your business has a high operating leverage, you’re at risk of losing money faster because you’re not capable of adjusting expenses to cope up with the low revenue. But when you have an accountant on your side, you’ll be able to determine any hiccups in your operating leverage and make adjustments to accommodate any dips in your profits.
Lack of Familiarity in Basic Accounting Concepts
Running a business isn’t just about selling a product, knowing how much you earn and getting your profits. Accounting is such a highly technical area that requires a lot of knowledge and expertise to get right. For instance, something as simple as mis-labeling a purchase as an expense and not an asset could make a huge impact during tax season. With the help of an accountant, you can reduce these errors and make sure that all your books are straightforward.
Mixing Personal and Business Finances
This is quite a common mistake committed by a lot of entrepreneurs thinking that it’s going to be their money anyway, so there’s no harm in mixing both. But when you mingle your personal and business finances, it would be hard to determine the boundary between the two, which also puts you at risk for limited liability protection losses. An accountant can help you separate business and personal funds, so when one goes south, you can still stay afloat.
Of course, an accountant can help you make sure that all your documents are correct and that you can file your taxes diligently every year. If you’ve already tried doing it yourself, you know how hectic and stressful tax season is. But with the help of an accountant, you can leave the job to a professional who will make sure that all your taxes are filed properly and that you can avoid any deductions and penalties.
So if you still haven’t hired an accountant, make this year the time to do so. Call us now, and we’ll talk about your needs.
