Five mistakes in financial accounting that can cost you a company

Kirill Kunitsky, the founder of the group of companies “Business Constructor”, tells about the most popular mistakes that may prevent the company from becoming financially successful.

Mixing personal and business funds

Such a phenomenon occurs when the owner lets the business cash flow through his own pocket. For example, when a prepayment comes to the company's accounts, and the owner decides that it is free working capital, which he can spend at his discretion, and he can cover future expenses from the following receipts. Such an error leads to an erroneous feeling of a large state, when money becomes a lot and the owner spends more than the company can afford. When it comes time to pay bills (salaries, office rent), it turns out that there is not enough money, there are cash gaps.
Tip: Make sure that the funds of the owner and the business are separated. All profits also cannot pass to the owner - this is the capitalization of the company, without which its growth is impossible. In case of cash gaps, use overdraft.

Lack of financial accounting

Financial accounting is not only reports that need to be submitted to the tax. There are several types of financial accounting that should not be confused:

• Accounting: ensures that financial information about transactions, the receipt and expenditure of funds was collected systematically and included in the necessary reporting forms.
• Financial: preparing for owners and other interested parties when it is necessary to attract investors and get a loan. It reflects key business performance indicators using accounting data.
• Managerial: considers pricing, profitability and budgeting. It is the most important type of accounting and is used by the owner to make organizational decisions. It helps to demonstrate how the indicators for one day will affect the performance of the entire month.
• Tax: determines the amount of taxes that must be paid. At the same time financial data are interpreted in such a way as to comply with the standards of the tax report. In addition, tax accounting helps to analyze which taxes will be levied on certain agreements and, thus, reduce the tax pressure on the business.

If your company does not keep financial records, sooner or later you will have problems of a different nature. It may turn out that your expenses are “bloated” or the margin has fallen, and you did not notice this, and the like. The lack of financial accounting gives rise to the regular appearance of new problems in the field of finance. In order to avoid such problems, you should learn three types of financial internal reports that business owners often forget about - balance, Cash Flow and P & L.

• Profit and Loss statement (P & L, PNL), it is also a profit and loss statement (financial results): shows how much the business as a whole earns and, in particular, how it earns income, and what it loses. It is compiled once a month. It allows you to plan expenses and reduce losses on activities with low margins and avoid possible cash gaps. Mandatory elements of the report are gross income, expenses (variable and fixed), depreciation and taxes.
• Cash Flow Statement (Cash Flow, CF), cash flow statement: displays the cash flow structure and cost goals. It takes into account where the money was spent and where it came from. It helps to assess the ability to pay bills, issue "real" money. It shows the balance of money in the company for a certain period, is compiled by the direct (cash) method and is calculated indirectly. The report always takes into account receipts and payments in the operating, investment and financial activities of the company.
• Balance. It gives a complete picture of how much money was invested in a business (liabilities) and what they were invested in (an asset). Makes it clear for whose money the business was created. Liabilities are current liabilities (for example, a buyer's advance), long-term liabilities (loans) and equity. Assets are what the company has, and they can be both non-negotiable and negotiable. Negotiables can be easily sold, non-negotiable ones - not.

Lack of financial planning

From the previous error often follows the following. You can even adjust your financial accounting, but do not use it to look beyond the horizon. Lack of cash flow planning and a revenue component of the business are traumatic. It is very important to establish effective planning in your company as soon as possible. So you can predict the financial situation and take appropriate measures in advance.

Rough burden of business loans

This error is most often made by companies in the small and medium business segment. This is especially dangerous when the business has just started, something went "wrong", but because of over-binding to the company, the owner is looking for the means to keep it afloat. Such emotional actions can cost the entrepreneur in the lost years he spends on the payment of the loan. Also, it is not necessary to collect loans in order to pay off previous loans - it is better to recognize the company as bankrupt.

Inflating business expenses

The problem arises when a business becomes profitable and there is excess cash. Often, the owner begins to spend money on articles that do not affect the profitability of the company. This may be too expensive office, an excessive number of secretaries and the like. It is necessary to avoid this as much as possible.