Are you better looking than your friends?
Are you smarter than the average person?
Are you an above average driver?
It is human nature to overestimate our knowledge, overrate our attractiveness, and overprize our skills. One study found that 94% of college professors considered themselves above average in the classroom, while another study found that 93% of student drivers believe they are better than average. There are many benefits to be gained from positive illusions; they make us feel good, help us foster happiness, and helps us function under stress. Confidence is so vital for our day-to-day activities that we often take it for granted. Self-assured people make good decisions, are able to continue on and learn from failures, and have the capability to be good leaders by getting better outcomes from the people around them. Confident people are able to rally support, win allies, and deter competitors.
For entrepreneurs, having a high level of confidence is fundamental to the success of their business. At the same time, misplaced or reckless confidence can be dangerous. Confidence implies realistically trusting one’s abilities, while overconfidence generally implies an overly optimistic appraisal of one’s knowledge or control of a situation. Some people are so successful at living their lives and running their business, they think they can do it all. They may be playing with fire.
Remember the fable about the Tortoise and the Hare? The Hare was extremely confident in his abilities, but allowed himself to be beaten by his own cockiness. He had the opportunity to take the race seriously, but he chose to overestimate his skills, and the Tortoise ended up winning the race. So to can entrepreneurs get an over-inflated sense of self, thinking they can do it all, and it can end up being their undoing.
A strong level of confidence is important for getting ahead in business. Entrepreneurs have to be confident in their abilities, confident in their company, and confident that they are making the best decisions to make their company successful. However, overconfidence contributes to grim rates of entrepreneurial failure, and it’s possible that you’re falling victim to overconfidence if you are attempting to do your own accounting. There are times when overestimating your abilities can pose serious threats to the health of your business. The right CPA can help you save money, anticipate important issues before they arise, and plan for the future to minimize taxes.
Your focus should be on core business needs
Most business owners are extremely busy. There are daily demands that need your attention, and it’s very easy to fall behind on your books. While meeting client demands should come first, this can lead to many problems. The risks of an accounting backlog are great. Reduced cash flow, unpaid bills, and possibly even negative items on your company credit are a few risks you’re taking by doing your own books. Without accurate, real-time accounting and bookkeeping, you don’t have the tools to know how your business is truly performing. Your time should be devoted to your business strategy, funding, marketing, and other key areas, instead of on non-revenue producing functions.
If you don’t really understand it, stay out of it
Not many entrepreneurs have a background in accounting and finance, or knowledge of accounts payable or accounts receivable. It’s better to have a professional handle the bookkeeping and accounting for your business. Mistakes will be less likely, and you’ll be avoiding issues that could cost you more money. Even with the best accounting software, you need some knowledge of bookkeeping, especially to stay compliant. Even if you’re staying up to date with your books, if they are not done accurately there are many problems that can happen down the road. Keeping inaccurate records is one of the reasons that businesses fail.
Keeping up to date with tax filings
Depending on your business structure, you will have various tax requirements, including corporate tax payments, estimated tax payments, and 1099 reporting for freelancers or contractors. Finding an accountant that can handle these taxes and keep you on track with deadlines is ideal. Income and payroll taxes are far more complex than one would think. Without a trusted CPA or accountant, you run the risk of using outdated payroll tax schedules, or not making payroll or income tax deposits on time. Late payment of payroll taxes results in penalties and loss of revenue.
Reduce the cost of financial obligations
It’s common to think that by doing everything yourself you’re saving money. The truth is that having a CPA do your accounting actually saves you more. There is a reduced level of risk for human error and lack of knowledge when a professional is handling your books. Also, one of your most precious resources is time. How much of your time is being taken up by doing your own accounting? Handing these tasks over to a CPA will take a huge load off of your plate.
Business finances aren’t something you want to leave up to chance. Having a trusted CPA to do your accounting, bookkeeping and taxes is key to the success of your business. Abedian + Totlian has the experience and expertise to help your business grow! You may or may not be better looking than your friends, but by outsourcing your accounting, at least you’ll know that your books will be done accurately.