Every penny that comes in or leaves an organisation matters, and therefore how your money is being spent matters equally, which is exactly why enterprises should hire accountants. A qualified accountant can help ensure money is being spent wisely by monitoring the expenses and by providing detailed insights into a company’s financial posture, thereby helping with financial decision-making.
Accountants will benefit your company in several ways by offloading the burden from your shoulders. However, that doesn’t mean you shouldn’t be keeping an eye on how things are being managed. Though you may not be doing your own taxes, as the business owner, you need not be aware of all financial operations. Your accountant and you should work together, in tandem, to not only ensure that you’re receiving your money’s worth but also to see to it that the financial decisions being taken are in favour of your business. Irrespective of whether you’ve worked together for years or you’re planning to hire a new accountant.
To do your taxes, your accountant will need information and details of financial records, which you will have to maintain throughout the year. Your accountant will also need these financial records if you want to apply for a loan to expand your business. A few of these records might include revenue sheets, employee wage details, tax remittances, records related to the buying and selling of assets and operating expenses. Therefore, it is always a good idea to ask your accountant beforehand what all documents and records he/she would be needing.
Usually, there are four standard business structures to consider: sole trading, partnerships, corporations and LLC. The tax structure and laws vary for each business structure and accordingly does your tax liability. In sole trading, the business and the owner are one and the same entity, thus if the business suffers a loss and can’t pay debts, the owner is held to be directly responsible. In a partnership, two or more people come together to set up a business, and if the business suffers, it is the responsibility of all partners involved to clear the debts. Corporations as entities are separate from the business owners, i.e. the owner will not have to relinquish his/her personal assets in case the business defaults on government payments. LLCs combine aspects of corporations and partnerships. Similar to corporations, owners’ personal assets are not at risk, but the responsibility to clear the debts lies with them. Your accountant will let you know which legal structure suits your business venture, more details about the selected business structure and the correct documentation required to maintain.
Many business owners are not very well aware that any expense that is directly related to their business can be written-off. Expenses and investments made directly in the business, such as services, paid rent and equipment expenses, can be declared while filing taxes. As long as all legal formalities have been followed, most direct business expenses qualify as deductible. Your accountant will help you out with which expenses qualify for deductions. You can use this information to plan your purchases for more tax savings.
Your accountant may be doing your taxes during the tax season, but to make the tax filing process easier, you could take certain steps throughout the year for organising your records and keeping your financial data up-to-date. This will prove to be beneficial, especially for small businesses who usually hire accountants on a per-hour basis.
Also Read – Tax Advice for Small Business and Startup
This is an important question if you work from home. For individuals who work from their home, they can claim certain expenses as home expenses while filing taxes. Broadband connection, mortgage, utilities and stationeries, among others, can be claimed during tax filings.
Also Read- What is corporation tax return?
For every business, it is extremely important to valuate the break-even point, so that a profitable pricing structure can be created. Accountants help identify the break-even point after analysing and comparing hundreds of metrics to determine if the business is running a profit or a loss. Putting a value on your break-even point will help you estimate how much business you should be doing on a periodic basis to cover your costs.
The people you hire could be working for you either as employees or independent contractors, and there are major differences in filing taxes for both of them. With employees, you will have the responsibility of withholding, paying and remitting payroll taxes. However, you do not need to the same for independent contractors. Differentiating between employees and independent contractors can be a task, and misclassification can lead to incorrect tax filing, which will invite penalties from regulatory bodies. An accountant will help correctly classify the people that are working for you.
You might need extra money for a variety of reasons, such as business expansion or renovation. Your accountant will help you out with financing options. They will help you decide whether money should be taken from a bank, an investor, or even a lender. Accountants will also help you throughout the loan application process.
Accountants assess all financial aspects of your business to suggest changes and upgrades that will help your business grow. They can track your progress to highlight spending areas that are bringing your business down. They can also assist with projecting the cash flow, which will help you plan for future expenses.
Getting a divorce, making a retirement decision, or selling/buying property, every decision that you make has the potential of impacting your finances. Therefore, it is crucial to keep your accountant informed about the same, as it will give them ample time to plan for the consequences.
Also Read:- Advantages of Hiring a Local Accountant