Busted! Three Common Accounting Myths Debunked
If you’ve ever struggled to do your own tax return or even your own accounts, you’ve probably said to yourself, “I really need to get an accountant!”
Instinctively, business owners know they should be working with a chartered professional accountant. After all, this is a globally recognized and respected designation, earned by professionals who are critical to the success of an organization or individual. They help businesses manage their bookkeeping, tax preparation, financial audits, etc., freeing the owner up to concentrate on the business itself.
Unfortunately, there are some prevalent myths and misconceptions about what a chartered professional accountant actually is, preventing many people from hiring one. Below, we debunk three of the most widely believed and dangerous of these myths to help you avoid having them hurt your business.
Myth 1: Bookkeepers and Accountants Are the Same.
An individual or business with simple, uncomplicated needs may not need an accountant. A bookkeeper may be able to maintain a basic set of books that will help them monitor the business. But as the business grows, it becomes more complicated and needs much more than a set of books. Financial analysis, tax advice, business recommendations — these all go beyond bookkeeping and into the province of accounting.
There are two kinds of accountant: licensed and non-licensed. Anyone can hang out a shingle and call themselves an accountant, but they would be non-licensed. It takes a sophisticated eye to immediately spot the difference, but it is huge.
A licensed, or chartered professional accountant, must take rigorous academic courses and pass a series of exams. To maintain the designation, they must put in a minimum number of hours of professional development each year, as required by the governing bodies of the profession.
As non-licensed accountants don’t need to keep up with professional development, they can make serious and costly errors, leading to CRA audits and sleepless nights for their clients.
At Cusimano, we go beyond the requirements. We undertake professional development courses that exceed the minimum required by the provincial Institute of Chartered Professional Accountants, resulting in a deep understanding of the accounting and income tax issues that affect our clients. Should a particular situation not be within our knowledge or expertise, we can consult a loyal group of experts who are just a phone call away.
Myth 2: Accountants Are Too Expensive.
If your circumstances are such that you only need a bookkeeper, then yes, an accountant may be a higher expense than you need. If you bring disorganized materials to your accountant that require many hours to sort out, you may pay a high fee.
You should understand the work that must be done in order to see the value in accounting fees. For example, with a personal tax return, a preparer can often simply put in totals of receipts in various sections of a tax schedule. In corporate accounting, however, properly reconciling and accounting for everything is not only more time consuming but requires a higher level of expertise.
At Cusimano, we will refer clients to a qualified bookkeeper if that’s what they need. We will also educate them on the implications of whatever actions they take.
Over the past thirty years, we have taken a holistic approach to our clients’ work, and our knowledge of the complex Canadian income tax laws allows us to find optimal corporate structures and efficient income tax savings that make the cost of our services well worthwhile.
Myth 3: You Just Need an Accountant to Prepare Financial Statements Once a Year.
Again, this may be true if your business is elementary, and all you need is to file a personal or corporate tax return for compliance purposes.
However, if you are confident in your business and want it to expand, you need more than just yearly financial statements. To grow your business efficiently, you need proper planning and control. You need annual budgets with fair, well thought out underlying assumptions, as well as monthly financial statements that compare actual results to budget. For management purposes, the financial statements should be as detailed as possible. For external reporting, such as banks or the CRA, many revenue and cost categories in the trial balance can be grouped.
The information must not only be input on a timely basis, but it must be accurate. To explain the importance of accurately inputting financial information, I often use the analogy of apples and oranges. If we have a bowl containing a hundred apples and oranges, we don’t know much about the bowl’s contents. If we elaborate, however, and say there are fifty apples and fifty oranges, that is more information. Moreover, if we say that twenty-five of the apples are pristine and beautiful and twenty-five are rotten, we now have a clearer picture of the bowl of apples and oranges, and can make better decisions on how to eat or discard them.
The same applies to inputting information into a meaningful chart of accounts. Cusimano Professional Corporation can help you set up your chart of accounts and guide you through analyzing your monthly and annual financial reporting. This, in turn, helps you grow your business successfully.
Understanding that these myths are just that — myths, if you are now ready to hire an experienced chartered professional accountant in Toronto, you would do well to contact Cusimano Professional Corporation. We offer professional accounting and tax services for individuals and businesses across Vaughan, Richmond Hill, Markham, Mississauga, and Brampton.
If you have accounting questions, we’d love to answer them. For a free, no-obligation consultation, please contact us here.