Popular,Business,Misconception business, insurance Popular Business Misconceptions Cost You Money! -Part 2

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Faulty information costs you money! Which of these popular business misconceptions do you believe?Popular Misconception #5: ------------------------- "Since we're not seeking financing, ----------------------------------- we don't need a business plan." ------------------------------- Do You REALLY Need a Business Plan? ----------------------------------- To obtain financing, many persons will prepare a business plan. Although entrepreneurs will go to great lengths to get their loan or capital, these same business persons will not bother to plan ahead very far or analyse their business. Even if you required no additional money, preparing a business plan can help you to succeed in your business. Running a business without a plan is like going on a trip without a map, sufficient gas, money, or even a destination. Just as you wouldn't go on a vacation without some planning, no business can be successful without it. Putting that plan in writing helps you to think out a strategy for successfully operating and growing your business. Where is your business today? Where will it be tomorrow? What is your mission statement? What product lines are profitable? Which ones aren't? What business do you think you are in? What business do your clients think you are in? Should you be in a different business? Is your product or service less attractive to your clients? How are competition, global commerce, technological and social changes affecting your company? What is your competitive strength? What are your weaknesses? Who are your biggest competitors? What are their weaknesses and strengths? What is your marketing strategy? What are your projected income and expenses and cashflow for the next year? How about the next five years? Do you have a capital budget? What determines whether you buy an asset or not? Do you have an exit strategy? How will you manage growth? Do you have a financial plan? Do you have an operations plan? What definite sales and net profit targets have you set for this year and the next five years? What factors could interfere with the attaining of these goals? What contingency plans have you made to deal with such problems? The purpose of these questions is to get you thinking and planning. If you fail to plan, you plan to fail. Although your accountant or business advisor can help you prepare your business plan, only you can set the appropriate goals and follow through on them. Yes, you definitely need a business plan, not just for obtaining capital, but as a roadmap for your business. Popular Misconception #6: ------------------------- "I like bartering with clients ------------------------------ because it saves paperwork and taxes." -------------------------------------- Are You Reporting Barter Transactions? -------------------------------------- Bartering is an excellent way of doing business. However, contrary to popular belief, some barter transactions are taxable, both for income and sales tax purposes. Legally, you must maintain adequate financial records for your business. Barter transactions made by your business must be reported to the appropriate taxation authorities and taxes paid. However, transactions between friends not engaging in business with each other may not be taxable. If you are an auto mechanic and I am an accountant and I swap accounting services for your car repair services, the transaction in this case is most likely taxable, even if we are friends. However, your accounting fees should be deductible as a business expense and so should the business portion of my car expenses. Note also that sales and similar taxes may apply on this transaction. On the other hand, if I trade accounting services for a vacation for my family, I should really declare the value of such services as income. The firm supplying the vacation would be able to deduct that value as accounting fees. Any sales or similar taxes would have to be paid on such transaction. Many persons don't record such transactions. For some, it may be a matter of wanting to believe that you don't need to be bothered with the extra paperwork or taxes. Remember, though, that ignorance of the law is no excuse. Legally, you must keep proper records and pay all taxes due. Popular Misconception #7: ------------------------- "All My Workers Are Self-Employed, So I Don't Need -------------------------------------------------- To Bother With Payroll Or Workers' Compensation." ------------------------------------------------- Do You Need To Pay Payroll Taxes? --------------------------------- To save on payroll taxes and workers' compensation premiums, many employers arrange their affairs in such a way that those working for them are self-employed, independent contractors. This is good tax planning. On the other hand, some employers take the position that all those working for them are self-employed, whether they are or not. Although it is tempting to eliminate payroll taxes and workers' compensation premiums, care should be taken to do so legally. Whether those working for you are employed or self-employed is a question of fact (which can be determined by the Courts). Do you supply the tools and vehicles? Do you determine the working hours? Do you have the right to control how the job will be done? Do you pay a flat-rate or by-the-hour or a salary? Does your worker have other clients? By asking several such questions, a pattern will emerge as to whether your worker is employed or self-employed. If it turns out that your worker fits all the criteria of an employee, don't say he's self-employed. On audit, you would still be responsible for the payroll taxes (and penalties and interest as well). Even if your workers are considered independent contractors by the Income Tax Department, it is still possible that they will be considered to be "workers" for purposes of Workers' Compensation legislation. Thus, it is the responsibility of the employer to determine whether such coverage is necessary or not. Failure to obtain proper coverage could subject you to substantial (and unnecessary) costs. In review, calling someone self-employed, doesn't necessarily make them self-employed. If you have a dog, call it a dog. Your position that your dog is really a cat will not be successful. Likewise, make sure that your position regarding your workers is legally correct. Popular Misconception #8: ------------------------- "My Accountant Charges Too Much. -------------------------------- I Can't Afford It Anymore." --------------------------- Is Your Accountant Worth His Fee? --------------------------------- Many business persons view bookkeeping, accounting, and tax preparation as necessary evils. In their view, accounting fees are an expense to be reduced, deferred or even completely eliminated. A good accountant, however, can give you benefits far in excess of the fees charged. Well-designed accounting systems will enable you to extract meaningful financial information for your business that will help you to manage it properly, avoid business failure, and alert you to declining sales, excessive expenses, tax opportunities, cashflow problems, and many other vital concerns for your business. Your accountant can save you lots of money with the advice you receive on tax and other business matters. As well, a competent accountant can be a valuable resource in discussing business problems and opportunities with you. Popular Misconception #9: ------------------------- "Nobody Makes Money On The Internet." ------------------------------------- Can You REALLY Profit From The Internet? ---------------------------------------- Many people feel that the internet is all hype. Many others feel that it is overrated. Still others are of the opinion that it may be good for some types of business, but not theirs. Typical comments heard include: "I've lost money on the internet...Major corporations have lost millions...Do you personally know anyone who has made money from the internet?" However, if you check out the list of recent billionaires, a high proportion of these are internet-related, and many of them under forty years of age. As well as the very rich, you can find many cases of more modest financial prosperity resulting from internet commerce. It is true that many are losing money on the internet. It is also true that many don't know what they're doing. However, with the proper assistance, you, too, could profit from the net. Article Tags: Popular Business Misconceptions, Popular Business, Business Misconceptions, Don't Need, Business Plan, Popular Misconception, Barter Transactions, Accounting Fees, Workers Compensation, Payroll Taxes, Those Working