9 Mistakes Made by Do It Yourself (DIY) Accountants
Many small business owners don’t think they need a Certified Public Accountant. Everyone has filed a tax return and has a bank account. How hard can it be? Unfortunately, DIY accounting can lead to bad news for you and your business. The experience and expertise of a CPA is important for making sure that your business is prepared to succeed.
Below we’ll talk about 9 of the most common mistakes we see from businesses that have tried their hand at DIY accounting.
1. Not Thinking About Long Term Success
Certified Public Accountants are trained to look towards the future and plan for their clients’ long term success. When running your business, it can often be hard to look multiple steps ahead. Unfortunately, if you are not looking towards the future, there are opportunities you’re missing.
You might choose the wrong business entity, calculate your taxes incorrectly, or not project the growth of your business properly. With a CPA on your side, you’ll have a partner who can advise you, allowing you to focus on what you do best.
2. Falling Behind On Bookkeeping
Bookkeeping tasks are often pushed aside until “later.” Unfortunately, when you run a small business, your time is limited — and “later” never comes.
Issues that will pop up due to not having up-to-date books:
Loss of profit due to unpaid invoices going unnoticed.
Strained relationships with suppliers due to unpaid invoices, leading to a bad credit rating.
More work come tax season due to financial information not being up-to-date.
All of this will hamper your ability to make sound business decisions and put your business in the best situation.
3. Relying Too Heavily On Software
With a myriad of accounting software options available to businesses today, it can be easy to think you can get by with only software. While there are plenty of tasks that can be handled by accounting software, there are many that can’t.
Here are some tasks that you should be using an accountant for:
Business and complex personal taxes: Software can only handle simple returns. Complex filing for small business owners requires a more tailored solution.
Industry specific advice: While bookkeeping software may be able to send out invoices, it could never give you industry specific financial advice. CPAs know your business and market, giving them the ability to go beyond cookie-cutter solutions.
Troubleshooting: Accountants can look beyond numbers to see what is really going wrong. A CPA will work with you to understand why issues are popping up with your business, and work with you to address them.
Certified Public Accountants provide a personalized solution for every situation.
4. Not Filing Taxes Correctly
While some individuals can get by with using tax software programs, most businesses need a more custom solution. Filing your own taxes can lead to missing helpful deductions. A CPA will help you avoid mistakes on your return that can lead to tax penalties or an audit.
A Certified Public Accountant will make sure you get the best return possible.
5. Mixing Business And Personal Finances
Keeping business and personal finances separated is crucial for financial success. Often small business owners innocently mix the finances of their personal life and business. The result? Scrutiny from the IRS. Simple mistakes such as claiming simple personal expenses on business taxes can lead to an audit.
Due to this, it is crucial to:
Have separate checking accounts for your personal and business activities.
Get a business credit card. It will help build your business credit and make categorizing expenses easier.
A CPA can help guide you to a clear distinction between your personal and business finances.
6. Waiting Until The Last Minute
Accounting is a year-round job — not one to be rushed through during tax time.
As a business owner, you likely think of accounting as a chore. Often this leads to important deadlines being missed and crucial tasks falling through the cracks. Some common mistakes we see when DIY accountants wait until the last minute:
Missing deadlines. Tax penalties are expensive, unnecessary, and common when you wait until the last minute.
Math mistakes. When in a rush you will make innocent mistakes that normally you would not make. Typos and incorrectly entered entries will frustrate you when balancing the books.
Lack of long-term planning. When stressed and under pressure to complete a task, you will not have time to recognize opportunities that could help your business in the long term.
7. IRS Communications
Every business owner dreads a letter from the IRS. Even just a small error on a tax return or one missed payment can lead to a big problem that will cost you time and money.
In the digital world it may seem like there is a record of everything at your fingertips. That said, when it comes to receipts, it’s best to keep paper records. Keep a hard copy of all receipts and invoices. During an audit you will be asked to produce hard copies to validate business expenses. Not having them can lead to headaches and tax penalties.
9. Spending Too Much Time On Accounting
As a business owner, your time is valuable.
You should focus on what you want to be doing. If you are a business owner it means you are passionate about your business. Your business is successful because of your hard work. Partner with a CPA you trust and you’ll have more time to spend on the things you want to be doing like running and growing your business.
How Opsahl Dawson Can Help
Don’t spread yourself too thin. The CPAs at Opsahl Dawson can help with the business and personal tax needs that you need help with. Check out the services we provide and contact us about how we can become your trusted accounting partner.