As a small business owner, don’t be tempted to do your own bookkeeping and tax preparation. Many small business startup owners may decide to try do everything they can themselves—in an effort to try and save money—and only contract out what is absolutely necessary.
However, just because you can do something doesn’t mean you should.
The mistake many small business owners make is that they do not consider indirect costs (such as their time and supplies they had to purchase when doing something). Experts advise that at some point early on in the life of your business, you should hire a professional to handle preparing and filing your tax returns. You should also consider someone who can handle at least some of your bookkeeping as well.
Why, you may ask. The main reason is that tax pros are more than just tax preparers. In addition, they will know more aspects of tax law than you will—unless you were previously an accountant or tax preparer yourself.
Furthermore, it is important to consult with an accountant before the crunch of filing season. First, because tax season will be a busy time and they may rush through your information. In addition, you should do this early to make sure you are doing what you can to reduce the tax bill—with time to correct it if not.
Bookkeeping that is accurate and in good order is not only a smart business practice, but it is imperative to keep you and your business from having legal problems. For this reason, you should either hire a professional—who can be either in-house or hired from the outside—who is knowledgeable. Your bookkeeper at very least needs to be versed in double entry and how to make a journal entry in order to be effective, for example. In addition, your books need to be organized so the tax pro can do their job effectively and in the least amount of time.
Along with having a tax professional and a bookkeeper, you need to ensure that these two professionals work together on behalf of you and your business. This is because there will be aspects of your business that need the expertise of both professionals to work properly. For example, a bookkeeper may not have the knowledge about how assets are depreciated; however, the accountant will and will need to advise the bookkeeper.