Delving into SMB-Accounting – 5 Questions to Ask Your Accountant

New business owners have a lot on their plate, especially when it comes to accounting and financing. Mastering and managing each of them requires acquiring some additional skills.

While a rookie entrepreneur should learn how to keep a proper balance sheet, as well as track their expenses and incomes, there are always some vague accounting terms. That’s why you need to sit down with an SMB-accountant and ask them to give you answers to the following questions.

What type of business to register?

Basically, your accountant should inform you that there are four basic business types: an LLC, a sole proprietorship, a partnership and a corporation.

Each of these forms of business has both advantages and disadvantages. Your choice will depend on the size of your business and your business plan for the near future. Also, the selection of your business structure will affect the tax reporting.

A limited liability company (LLC) is a great choice for a businessperson who is planning to grow fast and soon employ some additional staff. The term limited liability here refers to the owners’ assets. Namely, if the company can’t cover its expenses, the owners’ assets aren’t in danger. Still, the owners share their tax obligations.

When you launch a sole proprietorship, you’re a one-man band. This means that the owner and the business are one inseparable unit. That way, in a worst-case scenario, you’ll be personally liable for the debts generated by your business. Still, there’s a great benefit of this business form – you can quickly and easily set up this kind of business.

A partnership is a joint business effort of two or more partners. If your business can’t cover its expenses, the owning partners are charged for the debt their partnership has generated.

A corporation is a business type where owners’ assets are legally separate from business assets.

When your accountant puts all these offers on the table, they’ll take a look at your craftily made business plan and find the most suitable business type for your needs.

How to set apart important from trivial records?

Every entrepreneur needs to know what financial records they should keep and which ones can be discarded.

In a nutshell – the largest portion of the receipts and bills you get need to be properly stored.

That way, every purchase you make pertaining to business equipment is eligible for tax deductions. The same goes for the receipts you get when making business trips, either by car or by other means of transportation. We’ll delve deeper into tax deductions in the next paragraphs.

Apart from that, you should track all your expenses, as well as income bits, so that you always know what amount of money you can count on.

What’s also vital for every new business owner is to save the data about the payments made to your contractors and employees. The tax officials are more than curious about those financial details, so make sure that your accountant applies an equally meticulous approach to the payments.

An experienced accountant will show you some hacks of keeping your financial records in order and getting that work done while saving some time along the way.

In addition to that, you can use some of these record-keeping apps, recommended by the British Government.

How to deduct taxes from my income?

One of the most obvious goals of every entrepreneur is to learn how to keep a few cents on their accounts. This is where tax deductibles can help a lot. However, a novice business owner probably won’t know too much about taxes in the first place.

This is why you should inquire about tax deductions when talking to your accountant.

For instance, you can deduct some expenses if you work from the comfort of your home. What’s important here is to keep your home office separate from the rest of the home. If you don’t do that, you won’t be eligible for these deductions – and they can be substantial. For instance, you can deduct parts of your home-related bills, from electricity and heating to the Internet, as well as some equipment you use in your home office.

Moreover, you can also deduct the expenses incurred by the travels performed for the sake of business negotiations or any other business purpose. Similarly, whenever you use your car to do some business tasks, you can deduct some of the expenses from your tax return.

These are only some of the matters regarding tax deductions you should discuss with your accountant. They’ll give you detailed instructions about some other deductibles, as well.

How to curb late payments?

Not being paid on time is one of the biggest issues that new entrepreneurs are facing these days.

Since this problem could bother your business from day one, make sure to find out more about dealing with late payments in advance. That’s why it’s crucial to talk to your accountant even before you’ve registered your business and made your first professional decisions.

Your accountant will probably instruct you to shorten the payment period. Giving your clients and up to 15 days to make their payments – also known as the NET 15 payment term – is a fair option for both interested parties.

Further, you should always take some up-front money for the project you’re starting working on. That way, you’ll reduce the risk of being paid late, or never.

What’s more, your accountant will probably tell you that you should offer some incentives for immediate payers. These can vary from discounts on the work you’ve done to offering better rates to an early client for their future projects.

When you’re discussing the payment terms you’re going to stick to in your business deals, don’t hesitate to ask your accountant any question you may have. It’s crucial for a new entrepreneur to gather as much information as possible before they enter the business battlefield. As a result, they’ll be well-prepared for the challenges they’ll be facing and the payment problems that might arise.

How to register my collaborators?

Sooner or later every successful business owner has a need to form a group of business collaborators. The only question here is how to register those associates?

Although the rules and regulations are different from state to state and from country to country, there are some common terms that need to be discussed with your accountant.

First and foremost, you should decide whether those people will be your employees or contractors. If you realize that your business goals require having several people by your side for a longer period of time, registering them as employees sounds reasonable.

Still, your accountant will tell you that there will be some additional costs for these employees. You’ll have to take into account all the pros and cons of hiring those workers and make up your mind.

Also, you need to take care of the employee turnover. Your accountant should help you add certain appendixes that will impose the conditions when an employee can leave your business.

As opposed to that, you can register your temporary collaborators as your contractors. They have fewer rights than full-time employees and they’ll affect your budget to a lower extent.

It’s extremely important to already have a certain plan what you want from your business and those collaborators before you start discussing these conditions with your accountant. On the one hand, they’ll be able to quickly come up with the best solution for your needs. On the other, the workers in question will sooner be legally ready to start contributing to your business.

Conclusion

Your accountant will be your greatest business ally. Their knowledge and experience can help your dodge some cumbersome obstacles in your quest to establishing a lucrative business. Before you get in front of the accountant, read the questions from this text once again and add any other dilemmas you might have. Covering as many accounting bases as possible in advance will enable you to run your business in a financially successful way.

Mark Thomasson
Mark is a biz-dev hero at Invoicebus - a simple invoicing service that gets your invoices paid faster. He passionately blogs on topics that help small biz owners succeed in their business. He is also a lifelong learner who practices mindfulness and enjoys long walks in nature more than anything else.
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