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Xero: The most common SMB tax time mistakes
No surprise here: in a survey of accountants, most say that the most common mistake small business owners make is only contacting an accountant at tax time. But they aren't wrong, and they aren't exaggerating - or at least not by much. According to some expert as much as half of SMB owners don't have regular meetings with their accountants and that could create an opening for audits or faulty business practices.
A new survey out from Xero and Zogby Analytics shows that 25% of accountants surveyed believe only talking to accountants at tax time is the most common mistake small business owners make (25%), followed by not understanding tax obligations, having real-time insights into their financial accounts and not having a cash flow forecast. All of which could be set up with - you guessed it - regular accountant meetings.
"The most common question I'm asked is, 'How can I save more money? I'm scared of all the new tax increases,'" said Jody Padar, Xero partner and CEO and principal of the New Vision CPA Group. "I wish I could provide a universal answer, but the fact is no two businesses are alike and there are many factors involved in financial planning. What I can say in all confidence is to keep a close eye on your finances, find an accountant you like and trust, and see them at least once a month."
Other interesting findings include:
• 52% of accountants believe the economy/the fiscal cliff had the biggest impact on SMBs in 2012
• 54% say the 'biggest mistake' SMBs make is not regularly updating financial records
• 36% say SMBs need better annual forecasting/budgeting
• 42% say monthly meetings are the best way to stay on top of a small businesses financial standing
And, most accountants (63%) believe small businesses should remain prepared for tax season year round - that means keeping files up to date, having monthly meetings and knowing what the income to expense ratio is from day to day.
As for staying out of Uncle Sam's radar? Just over 40% of accountants say SMBs would have fewer audits if they had a better understanding of proper expense accounting - including what makes an actual business expense. According to those surveyed audits are most often triggered by excessive deduction to income ratios.
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