5 Business Accounting Myths Dispelled
Accounting may be a daunting and often challenging aspect of running a business for many entrepreneurs. To make matters worse, there are so many myths, misconceptions, and misleading information floating around the internet that it can be difficult to distinguish the facts from the noise. However, if you are unaware of the facts of a situation, you may face unfavourable consequences.
Below are five of the most prevalent business accounting myths, busted, to help business to focus on driving growth.
Myth #1: Accounting only matters before tax season
Tax season might be the most crucial few weeks for bookkeepers, but it is certainly not the only important time. Actually, it’s important that you keep track of your books at all times of the year. If you stay on top of your finances throughout the year, not only will filing be much easier, but you’ll be able to take advantage of growth opportunities while mitigating risks from any source. Staying current on the books is one of the best ways to ensure business accounting continuity.
Myth #2: A business forecast only needs to be reviewed at the beginning of the year.
Forecasts, like any good business plan, must be reviewed on a regular basis. If things change or your company pivots due to factors beyond your control, you will need to double-check your inputs to ensure they still accurately reflect your scenario. Changes in market pricing, governmental policies, or the loss of your first-mover advantage are examples of such factors. Furthermore, positive feedback may inspire you to revise your company’s strategy, pricing, or cost structure, so keeping your projections up to date will help you position yourself for success.
Myth #3: R&D only applies to developing new products or services
The most common types of research and development we see being claimed are for new product or service developments, but these are not the only way to make a claim.
For starters, research and development can be applied to your internal processes. So, if you’ve created a new and more efficient method of producing your product or service, you may be able to claim process improvement. Secondly, your product development does not have to result in the creation of a new product. You can also aim to improve an existing product, which counts as research and development.
Myth #4: There are ways to avoid paying taxes if you set up a limited company
If that were true, everyone would follow suit. The misconception results from the fact that profits up to the £2,000 dividend allowance threshold (formerly £5,000 until April 2018) are not subject to income tax. Over the dividend allowance threshold, dividend income is taxed at the rate appropriate to your income tax bracket (basic rate: 8.75%; higher rate: 33.75%; additional rate taxpayers: 39.35% in 2022–2023). No dividend income is subject to national insurance. It is important to keep in mind that dividends would have been distributed to shareholders after Corporation Tax had been subtracted, meaning that tax has already been paid, albeit by the corporation.
Myth #5: Liability lies solely with the accountant
Unfortunately, this is incorrect. As the business owner you are the one who signs the accounts and tax returns, making you ultimately responsible. It is critical that you understand your accounts and tax position and go through everything with your accountant. At Hysons, Chartered Accountants you can trust the combination of your company knowledge and our transparent business accounting services will help your business to grow and increase profitability.
Accounting Done Right
Prioritising and comprehending your company’s accounting requirements is critical to business success. At Hysons, Chartered Accountants we try to break the mould by approaching things from the standpoint of customer support. In our opinion, we are there to support you as the business owner and your company; we just happen to do so through our knowledge and experience in accounting, tax, and business. We value building relationships, we enjoy sharing our clients’ passions, and we relish the opportunity to be a part of something really special, and this is what distinguishes us.
If you have any questions about our business services, contact us now for a free accounting consultation. Our aim is to provide the best possible accounting service to all our clients, whether they are a multi-million pound turnover company or a small business.