Small business accounting: 6 common accounting myths debunked

Small business accounting can be challenging. There are many misconceptions floating around, which make it difficult to distinguish fact from fiction to understand what you need as a business owner. In this blog, we’ll dispel some of the myths about small business accounting and provide you the information to find a great accountant.​

A common myth is that small business owners think the benefit of using accounting softwares doesn’t outweigh the burden of extra complexity and cost. Although accounting softwares usually adds extra costs, and require business owners to learn how to use them, in the long run, business owners usually find that good accounting softwares are more efficient and effective than manual processes. As a small business owner, good accounting software provides you financial information within a timely manner. This couldn't be possible if you were manually keeping accounting records.  ​

With the advancement of technology, there’s many cloud-based accounting software solutions (e.g., Xero, Quickbooks) designed for different business needs.  As a small business owner, these pieces of software can save significant amounts of time processing everyday transactions. For example, the receipts of your business expenses can be uploaded for easy tracking and auditing, and produce useful financial reports to aid you in making business decisions. You can also automate invoicing and recurring bills seamlessly through a single interface.  Accounting software also helps you to understand your tax position, easing anxiety and helping to provide your accountant with the information they need to keep your business compliant. ​

Accounting software is far more convenient and time-saving than you might think.​

Another common myth for small business owners is that accounting only matters during tax time. Many think accounting is just about getting the books right and keeping tax compliant at year-end. Usually, those business owners only meet with their accountants once a year to get their tax returns filed with HMRC and accounts filed with Companies House. However, a good accountant can provide a lot more than that. Meeting with your accountant regularly, you can receive accurate and useful financial information on your business performance (e.g., calculating payment cycles to your debtors, identifying account receivables, monitoring daily cash flow etc). This will give you insight to help you improve the areas your business is not performing well, or focus on the areas that are. ​

You can be a DIY tax filer, however, your life will be so much easier if you hire a small business accountant. While all the important information is available via HMRC, understanding it can be difficult, especially if you're unclear about all the jargon being used. ​

Misunderstanding jargon and making mistakes (even minor ones) sometimes can result in penalties. You’re also likely to miss out on tax deductions and government grants. Therefore, hiring a small business accountant can be beneficial for small business owners. ​

Read more: How to find the right accountant for your small business​

Small business owners may think that keeping accounting records is simple. In reality, this may not be the case. Large companies normally hire their own accountants to get the documents tidied up.  As a small business owner, you need to have a document system in place to record all the business transactions, you also need to comply with HMRC’s rules regarding record keeping by yourself. ​

Common records include invoices, receipts, wage books, banking records, vehicle logbooks and more. You’ll also need to keep these records for at least 7 years in case you’re audited by HMRC. ​

Here are some recommendations on managing your accounting records: ​

One of the most common accounting myths is that accounting services are often associated with an expensive price tag. It’s true that accounting services are investments, but they can also result in cost savings and risk avoidance. With the increased competition in the industry, small business owners can expect more competitive pricing and services. ​

For example, Beany charges a fixed monthly fee starting from £85 per month depending on your annual income bracket. We also offer a range of services that are customised to your own business needs - meaning you can get more for your money. ​

It’s  your business after all. Use your accountant as a resource for advice to build your business. They remind you of the tax deadlines and also keep you updated with the latest change in regulations. Other than keeping track of your books and filing taxes, you small business accountant can also act as your small business experts. For example, they’ll be able to give you small business advice and offer help in tax planning, tax minimisation, managing cashflows, finding ways to reduce your expenses, and more. ​

In order to make good business decisions, you should still be aware of the financial aspect of your business. As a small business owner, if you can’t understand the jargon your accountant is talking about, ask them to explain it in accessible terms, otherwise, it might be a sign to switch your accountant. ​

We’re an online accounting firm that is always right here for you, your accounting pain relief. The most advanced technology lets us work way more closely with you than a normal accountant would. ​

We have a dedicated team of remote accountants to take care of your business no matter where you are, so you can focus on growing your business. We take out the ‘fluff’, break down the barriers and get things done. Looking out for you is what we are all about. Get started for free today.​