Bookkeeping and business irreconcilable contradictions

Any businessman or proprietor, regardless of the size of the company, has no affection for bookkeeping. They find accounting tedious. They don't want to delve into the details, as they are much more interested in dealing with thetheir product, sales, promotion, anything but reports and declarations.

This is why start-ups take on low-cost outsourcing and those who have matured hire a full-time accountant, forgetting with relief about boring bookkeeping processes.

After that, the owners usually:

  1. Employ the first accountant they can find:on the recommendation of a friend / neighbour / business acquaintance.
  2. do not control him/her at all - something is being done, reports are being submitted, the tax authorities are not at the door - and thank goodness for that.

In the meantime, there are accounting 'sins' that can cost an owner his/her company.

Three categories of risk can clearly be identified in such a situation:

  1. Fraud and negligence. Even now, in the age of the digital boom, you can still find accountants who manage to fail to keep records for decades, steal 1C databases, forge expense accounts, etc. When this situation breaks out, they vanish into the unknown.
  2. Laziness and incompetence. This type of accountant seems to work well, but has no initiative, no desire to improve skills and makes accounting mistakes. Over time, such mistakes can lead to serious consequences, in particular, to additional tax charges for previous years.
  3. Cowardice and perfectionism. It might seem there's no problem here, but such accountants are somehow working for the tax office. Their motto is: 'It's better to overpay than underpay'. They ignore tax optimisations, exemptions and deduction opportunities. They are not prepared to argue with the tax office and stand their ground, being driven only by fear. Of course, it is only for the best of motives.

The consequences for business might be the following:

  1. - The owner pays far more tax than he could legally do and is unaware of it. A simple example is when an accountant works solely on the principle of 'as convenient to the accountancy', while totally ignoring the business objectives. This means that, given a choice of accounting methods, accountant will choose the one that is easier and clearer for him/herself, thereby making life easier for themselves at the expense of business. Sometimes tax overpayments result trivially from an accountant who does not keep up to date with changes in legislation, is unaware of special tax regimes or does not know how to apply them.
  2. The entrepreneur is practically "sitting on a powder keg" until the first tax audit, without realising it. There could be a number of possibilities here. From splitting business revenues and expenses between several legal entities before VAT deductions and without supporting documents or on the basis of invoices containing inaccurate information. Thus, according to the Federal Tax Service, the average amount of additional charges for 2019 amounted to about 30 million roubles.
  3. An entrepreneur cannot raise investment or sell a business because of a mess in accounting and documentation. For instance, the owner decides to go out of the business, or sell it. Then suddenly, at the valuation stage, owner discovers surprises that he/she didn't even suspect to have. Receivables or payables remaining on the balance sheet for years, assets that don't really exist, etc.

Is there a way out? Of course, there is. By following a number of steps, it is possible to secure your business. In detail:

  1. You should periodically carry out an internal express audit of your company to ensure that your employees do not make mistakes which will then lead to financial losses and additional tax charges.
  2. Outsource only to those companies that have a good reputation and real feedback from clients. Don't be fooled by the cheap cost of services. Remember, quality consultancy services cannot be cheap.
  3. Consult the experts if you have doubts and questions about accounting, tax or financial planning. The cost of such services is not high, but it can help you save millions that you can spend on business development.
  4. Always ask for expert help, even when it seems like all is lost.

A way out can be found even when the tax authorities are at your doorstep, a former accountant has stolen the 1C database, or you have realised that you have been overpaying taxes for a long time.