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The 7 Most Common Misconceptions About Accounting

4 min read • Aug 26, 2020 • Barry Eitel

Unless your small business is an accounting firm, you might find accounting a frustrating mystery—but it doesn’t have to be. In fact, accounting can allow you to imagine what your business will look like in the future and understand how to reach your small business goals while staying profitable. Here are some common myths about accounting that should be debunked for small business owners.

1. Accounting Is Just Bookkeeping

One of the biggest misconceptions about accounting regards the actual definition of accounting, which is sometimes confused with bookkeeping. Bookkeeping—the recording of revenue and expenses for a business—is an ancient skill that goes back to the beginning of human civilization. While bookkeeping is a critical element of accounting, accounting goes beyond just keeping accurate books. Accounting also involves analyzing the past financial records of your company and using this data to make forecasts for your future. Essentially, accounting involves categorizing and understanding your bookkeeping and predicting what your books will look like down the line. Part of your accounting practice should include analyzing your records as well as conducting regular business planning.

2. Accounting Is Too Hard for You

Even though becoming an expert accountant requires years of education and experience, many small business owners take on at least part of their accounting responsibilities. Depending on the size of your business, you may not be able to afford to hire an accountant or outsource the job to a firm. With some research and practice, you can do at least some of your accounting. Using software, you can also keep detailed, organized records that will require fewer billable hours from an accounting professional if you do still choose to go that route.  

3. You Have to Be a Math Expert to Do Accounting

For many centuries, bookkeeping and accounting required extraordinary math abilities. Errors meant money went missing or the business received unwanted attention from tax authorities. In the past few decades, though, the math part of accounting is now almost entirely digitized, and—as long as you can use a calculator—you now have enough math skills to do basic accounting. But being able to understand and double-check your business’s books by hand will help immensely, especially if you encounter numbers that don’t add up. Still, software and calculators make this much easier today. There are many resources available for free that cover what figures, equations, and formulas you should be paying special attention to as a small business owner.

4. You Only Need to Worry About Accounting During Tax Time

April doesn’t need to be so stressful. While your business’s taxes require time and energy to file accurately, Tax Day becomes far less painful if you follow accounting best practices all year round. Many small business owners—especially many new entrepreneurs, gig workers, and freelancers—might not really think about the financial side of their enterprises until taxes are due. Even if you can’t afford a professional, you should be continually focused on accurate bookkeeping and accounting to avoid winding up on the wrong side of the Internal Revenue Service. However, accounting is not just for the IRS—it’s also so your business can thrive and expand.

5. You Don’t Need Professional Help

While you might find that hiring a financial professional is not currently in your budget, you should still find room to make it a priority because the expertise is well worth it. While you can get by with doing all your accounting, your best bet to improve your revenue—and avoid an IRS audit—is to get professional help. Even if you only see an accountant or tax preparer once a year around Tax Day, that can still relieve a tremendous burden on your business.

6. Accounting Is a Big Expense

Depending on how much accounting work you’re willing to take on yourself, accounting doesn’t have to be a big-budget item. Especially with the many free or inexpensive accounting software options available today, your business’s accounting doesn’t have to cost anything at all. However, investing some money in this side of your business is smart, considering all the money and headaches an audit can cost. Furthermore, even a little accounting can vastly improve your cash inflow and business-planning ability.  

7. Accounting Is Boring

Even if you aren’t a fan of math, accounting doesn’t have to become the boring part of running your business. In fact, it can be extremely engaging, especially since it allows you to translate your bookkeeping data into strategies for best expanding your business in the future. There is definitely a stigma about accountants, but the field counts FBI agents, MMA fighters, and football players amongst its ranks. Once you understand how accounting can help your business grow, you may gain a new appreciation for the skill.

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Barry Eitel

Barry Eitel has written about business and technology for eight years, including working as a staff writer for Intuit's Small Business Center and as the Business Editor for the Piedmont Post, a weekly newspaper covering the city of Piedmont, California.