New entrepreneurs are often optimistic — that trait helps them turn big ideas into something tangible. You may be launching a software business, opening a local ice cream parlor, or starting a consulting firm. No matter your entrepreneurial leanings, every new business venture will face financial hurdles. Unfortunately, blind optimism won’t be enough to pay the bills.
Here are a few accounting myths new entrepreneurs may believe and what you should believe instead.
1. “Accounting isn’t central to my business”
Managing your cash flow is one of the most important aspects of running your business. After all, if you don’t know where your money is going, how can you know how well the company is doing? You can’t.
Read more: we researched free tax software and put together a list of the best options here
That’s why accounting is so relevant to your small business. With it, you can track:
Current top accounting software options
Below are some of our current top picks for small business accounting software that combine value for the cost, combined with the features we consider essential for running your business accounting needs.
Â
- Which products are selling well
- How much money the business has for inventory spending
- If supply costs have increased since last quarter
- How much payroll costs if you add another employee
How to bust the myth: Don’t assume you can do your accounting on the back of an envelope. Good accounting software isn’t expensive, so take advantage of it.
2. “It’s okay to think about accounting only occasionally”
Getting bogged down in accounting details can seem like a distraction. But without regularly tracking how much money your business is spending, your entrepreneurial vision could easily outlast the cash in your business account.
For this reason, don’t think about accounting as an occasional responsibility. Accounting is a lens for viewing how healthy your business is. If you don’t check in on your books regularly, you’ll likely miss upcoming bill payments, mismanage payroll schedules, or order inventory when you don’t have enough cash.
How to bust the myth: Carve out a time on your calendar each week to look at your business’s accounting details. Include a business partner or bookkeeper in the meeting to have a second set of eyes on how the business is doing.
3. “I don’t need a professional to help me”
I put this one on the list because I’m guilty of trying to go it alone. While I’m not an entrepreneur, I have run my own freelancing business for more than a decade. That has meant figuring out self-employment taxes, finding insurance coverage, and managing varying income streams.
While you may be able to do your own accounting for a while, here are a few examples of when to hand over the accounting reigns:
- You don’t have any time to view your accounts
- You ignore financial details
- You don’t have a quarterly or annual financial plan
- You’re overwhelmed by learning to use accounting software
How to bust the myth: Don’t be afraid to hire a professional. Seeking their help isn’t giving up responsibility for your business; it’s hiring the right person for the right job.
4.​​ “I don’t need accounting software until tax time”
This accounting myth is a doozy because it can leave new entrepreneurs unprepared to pay taxes. If you ignore accounting and only examine your books when you’re about to do your taxes, you’ll likely be in for an unpleasant surprise.
I’ve been on both sides of this. I have to take out my self-employed taxes throughout the year and make quarterly tax payments to the IRS. While not complicated, there have been times when I managed the estimated taxes correctly — and other times when I didn’t. But estimating them incorrectly wasn’t the problem. It was ignoring the financial details that made tax time much more stressful than it needed to be.
How to bust the myth: Track expenses, potential tax deductions, and other tax-related items year round. Accounting and tax software options make this easy and help eliminate any surprises during tax time.
Set an accounting goal
Entrepreneurs are good at setting goals and working toward them. That’s a fantastic personality trait, and you could use it to your advantage in accounting. Do you want to improve your cash flow, plan for an upcoming business renovation, or save money for new equipment? Using accounting software or hiring a professional can help you get there.
The only option you don’t have is to ignore accounting and still expect to reach your financial goals.
Alert: our top-rated cash back card now has 0% intro APR until 2025
This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes.