Some people try to skip out on an accountant because they feel like they can do the books on their own.
Online PR News – 06-November-2019 – United States – When you first start a business, your needs are small. Most people come into small business life based on an idea that just starts growing and growing until it takes off and needs to go to scale. For small businesses, you are almost always trying to keep costs low, which often means that you are doing things in house instead of hiring a professional. Some people try to skip out on an accountant because they feel like they can do the books on their own. The mindset of trying to keep costs low is a double edged sword. You are able to control costs more, but you are sacrificing your time and could make mistakes. In the world of accounting, those mistakes can not only cost you money, but also sink your business entirely. If you are not shelling out the money for an accountant, at least consider investing in an accounting tutor to teach you the tips and tricks that you need.
People like to say that accounting is boring and that is somewhat true. I would say that the big thing that I did not like when I was taking accounting classes was that there is really only one way to skin the cat. Instead of a system where you can attack from multiple different angles, you are more likely going to face the issue of needing to know the exact rules and processes of accounting to get the work done. For example, there are two different methods of inventory management in accounting called LIFO and FIFO. You can usually choose which one to go with, but you need to know in advance and stay consistent at your company. When you look at a profit margin on products, you often think that it is an easy equation that involves revenue and cost of goods sold, but what if the cost of the goods is not consistent? For example, imagine a scenario where you are selling a new toy that hits the market. You find a manufacturer in China that will make the product for $7. After you reach 50,000 units, they lower the cost to $6 per toy. We will say that you sold 45,000 of the $7 units, but you still have 5,000 left and just bought 50,000 more at the new $6 rate. When you sell the next 5,000 units, are you selling the ones that cost $6 or $7? The answer is fairly important because it affects the balance sheet. Some might try to fudge the numbers, but an accountant know that you might end up costing yourself in the end thanks to IRS penalties.
Having someone that knows the rules is vitally important and it is not something worth wasting your time with as a small business owner unless you have the necessary training. Getting that training through an accounting tutor is a great way to make sure that you are not making mistakes. It might seem like an investment in the short term, but the long term dividends are well justified.