Blanket Application of Accounting
Tasks and Procedures
One mistake I am noticing business owners are making in accounting is one blanket procedure for accounting across different types of businesses. I know it’s easy to say I know how to handle this accounting because it works in this business.” but each company is different, and it will require different practices. Each business owner has to learn to account for their business because each business is different. You may say, but we are in the same industry. Perhaps but the key focus of each business it opens is to stand out and offer something different unless you are a franchise. If you buy into a franchise, you have to use their practices because they give you the authority to use their idea. Essentially you are another location for them, but you pay them to use their business idea and processes because it worked for them. You can’t just add something to this blueprint without permission.
I like the business owner that is willing to be different. You will need plans and processes for each structure and don’t get stuck in the “this is how everyone else is doing it” or the “this is how the industry-standard says to operate.” Let me give you an example. How I sell a service can be different from past normal. I am a virtual accountant, but most accountants have walk-in locations. I don’t need to travel to clients anymore to work, but in the past, accounting firms would send accounts to work “on location.” We can’t do that anymore, especially when we are in, and for me, keeping costs down was important. I know people like to travel, but honestly, it’s not cost-effective for a profitable business. You see, I know the “industry normal” is to have a physical location, but the pandemic has shown us working online is possible too.
Accounting involves bookkeeping and taxes, but things change across your business. The type of deductions must match the business type. You can not deduct expenses from one business on another business to create a loss. If you have a flow-thru entity, you still have to make multiple forms for each business. You can’t just lump it all into one tax form. If you have multiple businesses, make sure each business has its own process, and yes, each fee requires a separate cost and expenses to set up and run (maintain).