But because you must have accounting and taxation functions in place from the beginning doesn’t mean you have to do them. All too often, business owners take accounting and taxation functions upon themselves. You might think that invoicing isn’t that time-consuming and that taxes are only due once a year, right? A few late nights prior to April 15 (or May 17, in 2021) should whip your taxes for the year into shape.
Well, no. Neither of those assumptions is completely true.
Five Reasons Why Your Small Business Should Outsource Bookkeeping and Tax
The importance of accurate accounting and compliant taxes doesn’t mean that you must hire a dedicated accounting and tax employee on either a part- or full-time basis. Often, the initial employees you hire first as a small business owner should, in fact, be closer to the heart of the business.
If you own a restaurant, for instance, your key employees could well be chefs and waiters rather than accountants. You need to make sure the business runs robustly and smoothly in terms of providing products and garnering sales before hiring accounting and tax professionals.
In fact, often, the best solution to accounting and tax needs is to use small business accounting services, outsourcing the accounting and tax services you need. Why? Here are the top five reasons.
1. Outsourcing Lets You Spend More Time Managing and Growing Your Business
The first task of every business owner needs to be managing and growing their business. That can include everything from creating the product and ensuring the production of goods and services to selling, people and process management, and expanding the business in multiple ways.
Accounting and taxes are certainly part of managing and growing the business. But they are primary only in the sense that they must be done by a qualified person. It doesn’t have to be you.
In fact, both accounting and taxation functions are prime candidates to be among the first to be outsourced. Why? Because they are easily broken out separately from the rest of your business functions.
In a restaurant, for instance, you need a location, food, cooks, and service providers such as a waitstaff. You may have to oversee the performance of all these tasks. But you don’t have to oversee the accounting and taxation. That can take place in the background, and you can meet with those outsourced professionals at a time convenient for you.
Not only that, but if you try to handle all accounting functions or all tax functions yourself, they can become a time suck that drains too many hours in a day – not to mention your energy and focus. Your business can end up suffering or even going under if you don’t manage your time effectively.
Accounting alone, for example, includes processing invoices and payments, managing vendor relationships, and keeping track of cash flow and profit and loss. Long-term, it can include reviewing and assessing financial trends and projecting assets and liabilities. Don’t think these all add up to minutes in a day. It’s far more. Outsourcing small business accounting services can save you time.
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2. Bookkeeping and Taxes are Complicated and Best Handled By Professionals.
Accounting and taxation are not only discrete processes; they’re complicated. Both are far better left to specialized professionals than to any business owner, no matter how knowledgeable they may be.
Twenty-two percent of small business owners don’t know their tax rate. The tax rate is only one of the myriad elements (and among the most basic) that go into the amount of taxes owed. No business owner can be expected to know all accounting and taxation requirements and all elements of the tax code.
Accounting practices and the tax code are not only complicated; they change frequently. Major changes to the tax code occurred a few years ago with the Tax Cuts and Jobs Act. It is very likely that changes in taxation are coming in the future as well. A qualified accountant will help your business keep up with the changes.
Failure to pay taxes appropriately can trigger an audit. Audits can be extremely time-consuming and may result in penalties (and taxes owed, of course). Over the past several decades, the number of audits has fallen. However, concern with underpayment of taxes is also growing in the halls of government. As a result, the number of audits may start to rise going forward.
3. Professionals Help You Avoid Negative Consequences and Harness Positive Ones.
Mistakes in accounting and taxes can be costly to you and your business. If you end up owing taxes, for example, your profitable business may suddenly face a sea of red in back taxes and penalties. Your business can even end up going under. An outsourced accountant can help you avoid negative consequences.
Mistakes aren’t restricted only to those that can cost you directly, of course. The tax code contains multiple potential deductions and other types of advantages for business owners. Some of these can save you thousands of dollars. But if you don’t know about them, you may pay far more than the IRS requires. Never think that just because you know some standard deductions, that you know them all. Rely on small business tax services.
4. Professionals Provide Insights Into Your Cash Flow to Make Improvements and Become More Efficient.
Beyond taking accounting and taxation processes off your hands and preventing costly mistakes, professionals can optimize your business cash flow going forward.
If you’re in the market to expand, for example, your decisions can have significant tax consequences. Tax benefits exist for small businesses that relocate in economically depressed zones, for instance. Include your accountant in future planning.
When you outsource your taxation and accounting functions, you will reap the benefits of proactive insights and recommendations from the professionals.
5. Providers Who Know Your Business Increase Your Security and Confidence.
When it comes to taxation and accounting, it’s not uncommon to feel like potential issues requiring attention pull at your attention all the time. In fact, if you’ve had any issues with accounting or taxation (and they are very frequent among small business owners), you might come to feel that landmines await the unwary business owner – because they can!
But working with outsourced accounting and taxation professionals sets time pressure, fear, and anxiety at rest. Your security and confidence increase because you know that the requirements are being taken care of. Not only that but proactive enhancements are being taken care of as well.