Your Guide to the Ins and Outs of Forex Accounting
You may have been in forex for years, thinking that you’re finances are just fine with you manning the books.
That is until a small mistake, something that you may have seen with just a little bit of foresight, derails your entire account. Or perhaps until the IRS comes knocking on your door.
In a game where numbers are king, having someone well versed in accounting on your side can determine your success or failure.
Who needs forex accounting?
Regardless of your trading experience, you need forex accounting. That's because forex trading is all about making the most of even the smallest margins. Accounting enables you to zero in on your finances, streamline your expenses, and improve your trading decisions.
You could stand to benefit from an accountant if you:
Run a forex trading firm
Provide freelance brokerage services for clients
Actively day trade currencies
A large part of achieving success in any business is making sure your books are in the best possible shape. A forex accountant, more than anyone, is equipped to do just that.
Understanding the issues
Forex trading seems like a straightforward task, but once you figure in tax obligations, broker fees, and other complexities, you’ll quickly realize that there’s more to it than clicking on numbers on a screen. One of your biggest concerns is forex taxation. With the business straddling two or more tax jurisdictions and forex rates changing by the minute, accounting for your taxes will be like juggling glasses of water without spilling a drop.
Aside from knowing the details of every tax law, you have to be aware of even the most minute changes in value as these can add up really quick. FXCM points out that the "exchange rate fluctuates continuously," and even these small changes can impact your tax calculations. You'll be saving yourself a lot of headaches if you delegate the task to an expert.
Moreover, because forex is unregulated, reporting taxes falls into the hands of the trader. While the quality of a tax report can vary from platform to platform, having a dedicated accountant to reconcile your deals and manage your tax obligations is a huge plus, if not totally necessary.
Brokerage fees will also take up a substantial part of your funds. While these are significantly less volatile than forex rates, managing these fees can become difficult if you have multiple accounts with different brokerages.
High volatility and rapid fluctuations on the forex market are precisely what makes forex a high-risk endeavor. What forex accounting actually does for you is to make more sense of these risks, thus helping you make better trading decisions.
How accounting for forex can help you
But how exactly does forex accounting transform these intangible numbers into practical information?
Deliberately manage your expenses and profits
The forex trading community is full of axioms and rules such as “don't forget the 2 Percent Rule” or “use stop-loss”, and other nuggets of wisdom. But these rules are not mantras that apply to every situation. They are just general guidelines that are based on specific scenarios.
If you have a forex accountant, you can get expert opinion that will guide you every step of the way. You’ll be able to get a feel for the market and make informed decisions. You’ll be able to manage your finances with intent and purpose without having to rely on general tips and rules.
Of course, all of the above doesn’t mean anything if they don’t help in making you a profit. With a forex accountant, you’ll be able to not only make informed decisions but also come up with long-term plans to maximize revenue and ensure trading success.
Accounting made easy
Forex accounting can be daunting, especially to traders who are new to the market, but with a professional guiding you, the challenges will not seem as insurmountable. That's where we come in.
We offer full-service online accounting to keep your business on track, from financial reporting to auditing to tax preparation and filing. Want to see what we can do for you? Scrubbed provides free consultation to help you get started.