| Faulty information costs you money!
| |
| | business.Running a business without a
|
| Which of these
| |
| | plan is like going on a trip without a
|
| popular business misconceptions do you
| |
| | map,sufficient gas, money, or even a
|
| believe?Popular Misconception #1:
| |
| | destination. Just as you wouldn`t
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| "We Only Need Our Books Done Once A Year
| |
| | go on a vacation without some planning,
|
| For Tax Purposes."
| |
| | no business can be successful
|
| Are Your Accounting Records Adequate To
| |
| | without it. Putting that plan in writing
|
| Run Your Business?Although it is
| |
| | helps you to think out a
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| important to keep records for tax
| |
| | strategy for successfully operating and
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| purposes,
| |
| | growing your business.Where is your
|
| it is not the only reason (or even the
| |
| | business today? Where will it be
|
| primary reason) good
| |
| | tomorrow? What is your
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| accounting records should be kept.
| |
| | mission statement? What product lines
|
| Another frequent reason
| |
| | are profitable? Which ones
|
| clients request financial statement
| |
| | aren`t? What business do you think you
|
| preparation is to obtain
| |
| | are in? What business do your
|
| bank financing. Although important,
| |
| | clients think you are in? Should you be
|
| this also is not the
| |
| | in a different business? Is
|
| primary purpose of keeping good records
| |
| | your product or service less attractive
|
| for your business.Good recordkeeping will
| |
| | to your clients? How are
|
| enable you to extract meaningful
| |
| | competition, global commerce,
|
| financial information for your business
| |
| | technological and social changes
|
| that will help you
| |
| | affecting
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| to manage it properly. If you can`t
| |
| | your company? What is your competitive
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| access this information,
| |
| | strength? What are your
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| you will not be able to manage your
| |
| | weaknesses? Who are your biggest
|
| business properly. Bad
| |
| | competitors? What are their
|
| management leads to business
| |
| | weaknesses and strengths? What is your
|
| failure.Yes, the primary reason good
| |
| | marketing strategy?What are your
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| accounting records should be
| |
| | projected income and expenses and
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| kept is to produce periodic (at least on
| |
| | cashflow for the next
|
| a monthly basis)
| |
| | year? How about the next five years?
|
| financial statements for management
| |
| | Do you have a capital budget?
|
| information purposes.
| |
| | What determines whether you buy an asset
|
| Only with this current financial
| |
| | or not? Do you have an exit
|
| information can you properly
| |
| | strategy? How will you manage growth?
|
| manage your business. This information
| |
| | Do you have a financial plan? Do
|
| can alert you to
| |
| | you have an operations plan? What
|
| declining sales, excessive expenses, tax
| |
| | definite sales and net profit targets
|
| opportunities,
| |
| | have you set for this year and the next
|
| cashflow problems, and many other vital
| |
| | five years? What factors could
|
| concerns for your
| |
| | interfere with the attaining of these
|
| business.To be of value, this accounting
| |
| | goals? What contingency plans have
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| system should be set up
| |
| | you made to deal with such problems?The
|
| with meaningful account categories and
| |
| | purpose of these questions is to get you
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| departments. It may
| |
| | thinking and planning.
|
| be cost-effective to have an outside
| |
| | If you fail to plan, you plan to fail.
|
| accounting service do
| |
| | Although your accountant or
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| the monthly bookkeeping. However, with
| |
| | business advisor can help you prepare
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| accounting software
| |
| | your business plan, only you can
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| that is readily available, you don`t
| |
| | set the appropriate goals and follow
|
| have to be an expert
| |
| | through on them. Yes, you
|
| bookkeeper to do your own books and
| |
| | definitely need a business plan, not
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| extract meaningful
| |
| | just for obtaining capital, but as
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| financial information.If you do your
| |
| | a roadmap for your business.Popular
|
| monthly statements yourself, it would
| |
| | Misconception #6:
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| still
| |
| | "I like bartering with clients
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| be prudent to have your accountant or
| |
| | because it saves paperwork and taxes."
|
| business advisor help
| |
| | Are You Reporting Barter
|
| you set up your system and, as well
| |
| | Transactions?Bartering is an excellent
|
| review such information
| |
| | way of doing business. However, contrary
|
| with you to discuss problems and
| |
| | to
|
| opportunities.Popular Misconception #2:
| |
| | popular belief, some barter transactions
|
| "Writing My Hobby Off As A Business Loss
| |
| | are taxable, both for income
|
| Saves Me A Lot Of Income Tax!"
| |
| | and sales tax purposes.Legally, you must
|
| Is Your Hobby A Tax Write-Off?If your
| |
| | maintain adequate financial records for
|
| business has no reasonable expectation of
| |
| | your business.
|
| profit, if it is a
| |
| | Barter transactions made by your
|
| hobby and not really a business, you
| |
| | business must be reported to the
|
| will ultimately fail in your tax
| |
| | appropriate taxation authorities and
|
| objective. Since your losses are being
| |
| | taxes paid. However, transactions
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| incurred for a hobby and not a
| |
| | between friends not engaging in business
|
| true profit generating business, the tax
| |
| | with each other may not be
|
| authorities will take the
| |
| | taxable.If you are an auto mechanic and
|
| position that you aren`t entitled to any
| |
| | I am an accountant and I swap accounting
|
| deductions. This is a double
| |
| | services for your car repair services,
|
| blow. First, you`re losing money.
| |
| | the transaction in this case is
|
| Second, you`re denied tax deductions.It
| |
| | most likely taxable, even if we are
|
| is true, however, that if you enjoy what
| |
| | friends. However, your accounting
|
| you`re doing, you`ll do
| |
| | fees should be deductible as a business
|
| better at it. You`ll be willing to work
| |
| | expense and so should the
|
| longer hours and you`ll be
| |
| | business portion of my car expenses.
|
| willing to put up with more hardships in
| |
| | Note also that sales and similar
|
| order to make your business a
| |
| | taxes may apply on this transaction.On
|
| success.Rather than attempting to have
| |
| | the other hand, if I trade accounting
|
| the tax system subsidize your hobby,
| |
| | services for a vacation for my
|
| why not turn that favorite pasttime into
| |
| | family, I should really declare the
|
| a real, profit generating
| |
| | value of such services as income.
|
| business? This is a doubly rewarding.
| |
| | The firm supplying the vacation would be
|
| First, you make money at
| |
| | able to deduct that value as
|
| something you love doing. Secondly, the
| |
| | accounting fees. Any sales or similar
|
| tax authorities legally have to
| |
| | taxes would have to be paid on
|
| allow your reasonable expenses to earn
| |
| | such transaction.Many persons don`t
|
| your now substantial business
| |
| | record such transactions. For some, it
|
| income.Prove that you`re running a
| |
| | may be a
|
| business by running a business. Prepare
| |
| | matter of wanting to believe that you
|
| and
| |
| | don`t need to be bothered with the
|
| follow a proper business plan. Keep
| |
| | extra paperwork or taxes. Remember,
|
| good accounting records with at
| |
| | though, that ignorance of the law
|
| least monthly financial statements to
| |
| | is no excuse. Legally, you must keep
|
| give you the information you need
| |
| | proper records and pay all taxes
|
| to manage your business. Above all,
| |
| | due.Popular Misconception #7:
|
| make money from what you do.Popular
| |
| | "All My Workers Are Self-Employed, So I
|
| Misconception #3:
| |
| | Don`t Need
|
| "I Don`t Make Enough Money to
| |
| | To Bother With Payroll Or Workers`
|
| Incorporate!"
| |
| | Compensation."
|
| Will Incorporating Really Benefit
| |
| | Do You Need To Pay Payroll Taxes?To save
|
| You?Some persons resist the idea of
| |
| | on payroll taxes and workers`
|
| incorporating themselves because
| |
| | compensation premiums, many
|
| the tax savings may not justify the
| |
| | employers arrange their affairs in such
|
| added costs of incorporation,
| |
| | a way that those working for
|
| annual minutes, and extra tax returns.
| |
| | them are self-employed, independent
|
| However, incorporation gives
| |
| | contractors. This is good tax
|
| advantages that go far beyond tax
| |
| | planning.On the other hand, some
|
| savings.Insurance may give you some
| |
| | employers take the position that all
|
| protection against loss. However, you
| |
| | those
|
| may suffer business losses and lawsuits
| |
| | working for them are self-employed,
|
| that may not be covered. For
| |
| | whether they are or not. Although
|
| extra protection, consider incorporating
| |
| | it is tempting to eliminate payroll
|
| yourself. The limited
| |
| | taxes and workers` compensation
|
| liability of your own corporation alone
| |
| | premiums, care should be taken to do so
|
| may justify the additional cost
| |
| | legally.Whether those working for you are
|
| and complexity.Corporations may also be
| |
| | employed or self-employed is a
|
| used for income-splitting with your
| |
| | question of fact (which can be
|
| family,
| |
| | determined by the Courts). Do you supply
|
| as well as estate planning and
| |
| |
|
| retirement planning objectives.
| |
| | the tools and vehicles? Do you
|
| Additionally, corporations lend some
| |
| | determine the working hours? Do you
|
| credibility to smaller businesses
| |
| | have the right to control how the job
|
| and may enhance your image and prestige
| |
| | will be done? Do you pay a
|
| in the eyes of clients or
| |
| | flat-rate or by-the-hour or a salary?
|
| suppliers.Lower corporate tax rates will
| |
| | Does your worker have other
|
| generally apply on small business income.
| |
| | clients?By asking several such
|
|
| |
| | questions, a pattern will emerge as to
|
| Even in loss years, wages can be paid by
| |
| | whether
|
| the corporation to you so that
| |
| | your worker is employed or
|
| you may utilize personal tax credits
| |
| | self-employed. If it turns out that your
|
| available. If unincorporated, these
| |
| | worker fits all the criteria of an
|
| credits might be lost forever. The now
| |
| | employee, don`t say he`s
|
| larger corporate losses can be
| |
| | self-employed. On audit, you would still
|
| carried forward to future (hopefully
| |
| | be responsible for the payroll
|
| more profitable) years.A full analysis of
| |
| | taxes (and penalties and interest as
|
| the advantages and disadvantages of
| |
| | well).Even if your workers are considered
|
| incorporation is
| |
| | independent contractors by the
|
| beyond the scope of this report.
| |
| | Income Tax Department, it is still
|
| However, being incorporated may give
| |
| | possible that they will be considered
|
| you more flexibility and advantages than
| |
| | to be "workers" for purposes of Workers`
|
| you originally anticipated.
| |
| | Compensation legislation.
|
| Certainly, it is not prudent to reject
| |
| | Thus, it is the responsibility of the
|
| it as an option simply because it
| |
| | employer to determine whether such
|
| is more complicated and costly. In
| |
| | coverage is necessary or not. Failure
|
| fact, it may be one of the best
| |
| | to obtain proper coverage could
|
| investments you ever made.Popular
| |
| | subject you to substantial (and
|
| Misconception #4:
| |
| | unnecessary) costs.In review, calling
|
| "I really need an office out.
| |
| | someone self-employed, doesn`t
|
| Being home-based makes me look amateur!"
| |
| | necessarily make them
|
| Is A Home Office REALLY
| |
| | self-employed. If you have a dog, call
|
| Professional?Many times small business
| |
| | it a dog. Your position that
|
| persons make the mistake of generating
| |
| | your dog is really a cat will not be
|
| unnecessary overhead in order to impress
| |
| | successful. Likewise, make sure
|
| clients and prospects. Often
| |
| | that your position regarding your
|
| this attitude leads to escalating debt
| |
| | workers is legally correct.Popular
|
| and business failure. One such
| |
| | Misconception #8:
|
| example is getting an impressive, but
| |
| | "My Accountant Charges Too Much.
|
| expensive, commercial office
| |
| | I Can`t Afford It Anymore."
|
| space.Customers aren`t stupid. They can
| |
| | Is Your Accountant Worth His Fee?Many
|
| see when such outside space is
| |
| | business persons view bookkeeping,
|
| necessary or advantageous for them.
| |
| | accounting, and tax preparation
|
| They can also see when it is a
| |
| | as necessary evils. In their view,
|
| waste of money and designed to fuel your
| |
| | accounting fees are an expense to be
|
| ego. What matters most to
| |
| | reduced, deferred or even completely
|
| clients is whether they are getting
| |
| | eliminated.A good accountant, however,
|
| cost-effective results or not. If
| |
| | can give you benefits far in excess of
|
| your product or service delivers such
| |
| | the
|
| excellent value, your customers
| |
| | fees charged. Well-designed accounting
|
| will be impressed and come back. In
| |
| | systems will enable you to
|
| contrast, if one allows his ego to
| |
| | extract meaningful financial information
|
| get in the way of satisfying the
| |
| | for your business that will
|
| customers` needs, they will go
| |
| | help you to manage it properly, avoid
|
| elsewhere.With the move to
| |
| | business failure, and alert you to
|
| telecommuting, downsizing, networked
| |
| | declining sales, excessive expenses, tax
|
| communications,
| |
| | opportunities, cashflow
|
| and home-based businesses, operating
| |
| | problems, and many other vital concerns
|
| from your home office is actually
| |
| | for your business.Your accountant can
|
| smart and trendy. Can you think of a
| |
| | save you lots of money with the advice
|
| more appropriate location for a
| |
| | you receive
|
| consulting firm specializing in
| |
| | on tax and other business matters. As
|
| home-based businesses? They of all
| |
| | well, a competent accountant can
|
| businesses should set the example in
| |
| | be a valuable resource in discussing
|
| cutting unnecessary expenses and
| |
| | business problems and opportunities
|
| operating efficiently.This is not to say
| |
| | with you.Popular Misconception #9:
|
| that there aren`t any disadvantages to
| |
| | "Nobody Makes Money On The Internet."
|
| being
| |
| | Can You REALLY Profit From The
|
| home-based. One certainly must be well
| |
| | Internet?Many people feel that the
|
| organized, disciplined, and
| |
| | Internet is all hype. Many others feel
|
| willing to follow good time management
| |
| | that
|
| principles. This alone could
| |
| | it is overrated. Still others are of
|
| mark you as more professional than other
| |
| | the opinion that it may be good
|
| businesses, home-based or not.Expensive
| |
| | for some types of business, but not
|
| office space is not the answer to
| |
| | theirs.Typical comments heard include:
|
| reflecting a professional
| |
| | "I`ve lost money on the Internet...Major
|
| image. If you are truly concerned about
| |
| | corporations have lost millions...Do you
|
| your image, offer quality
| |
| | personally know anyone who has
|
| service. Make sure that all your
| |
| | made money from the Internet?"However,
|
| corporate communications (telephone,
| |
| | if you check out the list of recent
|
| websites, printed materials, et cetera)
| |
| | billionaires, a high
|
| reflect the professional nature
| |
| | proportion of these are
|
| of your business.Popular Misconception
| |
| | Internet-related, and many of them under
|
| #5:
| |
| | forty years of age. As well as the very
|
| "Since we`re not seeking financing,
| |
| | rich, you can find many cases
|
| we don`t need a business plan."
| |
| | of more modest financial prosperity
|
| Do You REALLY Need a Business Plan?To
| |
| | resulting from Internet commerce.It is
|
| obtain financing, many persons will
| |
| | true that many are losing money on the
|
| prepare a business plan.
| |
| | Internet. It is also true
|
| Although entrepreneurs will go to great
| |
| | that many don`t know what they`re doing.
|
| lengths to get their loan or
| |
| | However, with the proper
|
| capital, these same business persons
| |
| | assistance, you, too, could profit from
|
| will not bother to plan ahead very
| |
| | the net.J. Stephen Pope, President of
|
| far or analyse their business. Even if
| |
| | Pope Consulting Inc.,
|
| you required no additional
| |
| | has been helping clients to earn
|
| money, preparing a business plan can
| |
| | maximum business profits for over
|
| help you to succeed in your
| |
| | twenty-five years.
|
