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Popular Business Misconceptions Cost You Money!

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
"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
important to keep records for tax strategy for successfully operating and
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
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
to manage it properly. If you can`t your company? What is your competitive
access this information, strength? What are your
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
accounting records should be projected income and expenses and
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
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
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
the monthly bookkeeping. However, with business advisor can help you prepare
accounting software your business plan, only you can
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
extract meaningful just for obtaining capital, but as
financial information.If you do your a roadmap for your business.Popular
monthly statements yourself, it would Misconception #6:
still "I like bartering with clients
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
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.




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