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Small Business Accounting 101

If you are in business, then guess what you are either an

accountant by default or you need to hire one. Why? People ask

that question while letting the year roll by until taxes come

due. Oh no! Why do I have penalties?

Simple, you are not an accountant and you should have hired on.

So the first rule of business accounting is to hire one if you

are not one. Second rule of business accounting is to hire an

accountant to review your accounting before filing taxes.

Most individuals starting a business are unaware that the

filing deadlines for corporations and small businesses are

different from personal filings. While personal income tax

returns are due in April. Corporate and business tax returns are

due in March. His often leads to many late fees and so forth

associated with late filing penalties.

Keeping good records is another concern for most new business

owners starting out. Many new business owners do not understand

the tax code and do not understand what can be written off as an

expense and what cannot be written off as an expense. These

small errors will also lead to penalties and additional fees

associated with your filings.

Make sure to keep all receipts or online order forms for later

reference and keep them organized. There is nothing worse than

the end of the year sorting festival. Receipts get lost and

records can be incomplete if not taken seriously. Do under

estimate the power of organization and the process of organizing

your records. Keep them tight!

Giving to charity must also be carefully monitored and accounted

for by both parties. The philanthropist and the charity should

both get a receipt and have good records. If you give time then

keep good logs of your time and have the charity you donate to

accept and sign for your log. You need a receipt!

Warning! Take great care not to fabricate or provide false

deduction information. If you claim a deduction make sure your

records are in order and you are prepared to be questioned if

such questions arise. The practice of over filing expenses with

the federal government and fabrication of records is a federal

offense and can carry legal ramifications beyond penalties and

fines.

In fact you can be imprisoned for fabrication of any information

regarding your taxes. Going to prison for bad record keeping?

Now that is a bad way to end a fiscal year.

Keeping track of money coming in is as much of an issue as

keeping track of money going out. Simple bank statement

preservation can go a long way to keeping things on track for

your new business. Keep them in a "safe" place preferably a fire

proof safe if possible. Remember all the responsibility rests

squarely on your shoulders no on else's. The federal government

does not care if your building burns to the ground before the

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tax year is over. You are still responsible for your taxes and

the ramifications for not filing can be expensive ones.

Good accounting software should be your first stop if you plan

to keep you own accounting records.

There are several packages out there some are expensive and some

a cheap. Pick one that meets your needs best not the biggest

just because it appears to be the most expensive or the one with

the most features. Remember, you have to learn how it works in

order to keep good records. So keep in mind your own personal

limitations when purchasing accounting software.

Finally, if you accept cash then document the transaction with

a receipt. Never take cash without a receipt and always claim

your cash receipts at the end of the year. After all, the

greatest Mafia bosses and organized criminals of our time were

not prosecuted for murder or the other hideous crimes they were

in charge of. They were imprisoned for not filing taxes on cash

receipts.

A good accountant can help you to avoid penalties and over

taxation. Hire one they are worth every penny in the long run.

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