“While it’s true that many business owners forget to record expenses, a bigger problem is business owners that are so focused on avoiding paying taxes that they forget that the goal is to be profitable.
Jefferson City, MO (PRWEB) March 30, 2016
Bert Doerhoff CPA, founder of AccuBiz, recently responded to an infographic appearing in Entrepreneur that lists common missteps that business owners often make. There are six mistakes that Entrepreneur discusses, and following are Doerhoff’s insights about each problem:
Paying too much in taxes: The infographic highlights that many business owners lose track of receipts or forget to include certain expenses in their records. They may end up with a higher tax bill than they should be paying. It’s important to carefully track each expense and understand what deductions apply to a business.
“While it’s true that many business owners forget to record expenses, a bigger problem is business owners that are so focused on avoiding paying taxes that they forget that the goal is to be profitable. If a company is making a profit, they will pay taxes, and that’s a good sign that the business is on the right track. The end goal is not the avoidance of taxes; it’s the growth and profitability of the business,” says Doerhoff.
Getting distracted by the number at the top: It’s easy to be dazzled by the total amount of sales, whether a business owner is looking at their own numbers or those of a competitor. However, while it’s easy to be distracted by big sales numbers, that number has little to do with the health of a business.
Doerhoff responded by stating, “The value of a company is rarely decided by sales alone. A company can sell anything if they disregard areas like expenses and profit. The bottom line is the crucial number, not the total amount of sales.”
Spending too much at start-up: The infographic highlights that it’s easy to get caught up in purchases that make a business look established, like beautiful office furniture in the lobby, fancy devices emblazoned with a logo and drink machines in the break room. It’s important, though, to evaluate the impact of each purchase on profitability and determine whether it has a direct impact on the company’s ability to grow sales in the early days.
“The entire U.S. economy is built around the consumer’s perceived need of the latest and greatest. Business owners need to determine the core needs of the company to get started and only make purchases that support those needs,” says Doerhoff.
Diversifying too soon: Once a new company is profitable, it is tempting for a business owner to look to the future and begin brainstorming about new ideas and areas where they could apply the same principles in a new industry.
“Most business owners get in business because they are good at a particular product or service,” says Doerhoff. “Then they try and expand into horizontal or vertical markets where they have less experience and less of an advantage. This detracts from their focus and profitability generally suffers.”
Mistaking busy work for productivity: Business owners are typically busy, but that doesn’t mean that they are working in a way that is efficient and productive.
“It’s important to set aside portions of the day, both for busy work and for the kind of work that only the business owner can do: planning and perspective. The smart business owner spends time working on the business rather than in the business. The key is to set aside some time when you put out daily fires and some time when you focus on the big picture and the unique ability you bring to the business as the business founder,” says Doerhoff.
Failing to keep an emergency cash account: Cash flow tends to go up and down, and the smart business owner keeps approximately two months’ expenses saved in an easily-accessible account. Otherwise, it will only take one cash flow difficulty to place the business in peril.
Doerhoff’s responds to cash flow challenges by reminding business owners about simple cash flow facts. “Businesses that don’t keep cash on hand will constantly be forced to decide which fire to put out that day, rather than planning for the future,” he says.
About Bert Doerhoff:
Bert Doerhoff, CPA, works closely with small business owners to minimize income tax and fill the gaps so the owner has more time to work on the customer centered core services. Doerhoff and his team can outsource all functions of an accounting department, from bookkeeping to CFO services. The CPA firm has multiple QuickBooks advisors to help clients maximize the benefits provided by their accounting system. Doerhoff is co-author of Six Steps to Small Business Success available on Amazon. Contact Bert Doerhoff, CPA, by email at bdcpa(at)AccuBiz(dot)net; by phone at (573) 634-4006; or learn more at http://www.AccuBiz.net.