The most expensive financial mistakes are usually not big or dramatic. They are small habits that cost money and time month after month and that you notice only when the consequences arrive: tax interest, a loss-making client, an empty account or accounts that have to be sorted out years after the fact.<\/p>
Here are the ten mistakes we see most often in companies, and what to do to avoid them.<\/p>
When personal expenses are paid with the company card or vice versa, the accounts become confusing and tax risks appear, including fringe benefit tax. Keep the company\u2019s money separate and pay yourself in an agreed way.<\/p>
If you do not know the cost of your product or service including all expenses, every new sale may actually bring a loss.<\/p>
Without a forecast, cash shortages come as a surprise. Even a simple 3\u20136 month table with incoming payments, salaries, taxes and bigger payments shows the problem months in advance.<\/p>
A client who pays 60 days late is financing their business with your money. Track incoming payments every week and send a reminder as soon as the due date has passed.<\/p>
The Estonian Tax and Customs Board charges interest of 0.06% per day on unpaid tax. It sounds small, but it adds up to more than 20% a year, plus the time spent and uncomfortable letters.<\/p>
If taxable turnover exceeds 40,000 euros in a calendar year, the company must register for VAT. Registering late can mean paying the VAT out of your own pocket. Read more in the article when to register a company for VAT<\/a>.<\/p> Profit in the report doesn\u2019t mean the money is free. If a dividend is paid before it is clear how much money will be needed in the coming months, the company may end up paying its bills late.<\/p> An expense without a document or a clear link to the business can lead to additional tax. Keep documents in order right away, for example with the CostPocket app, and review your expenses line by line at least once a year.<\/p> When documents pile up for months, the annual report is put together in a rush and there is no management information during the year. If the annual report is late, the registrar can impose a penalty payment and eventually delete the company from the register. If several periods are already in disarray, accounting clean-up<\/a>.<\/p> The most expensive mistake is when the accounting exists but no decisions are based on it. The company then pays for the numbers but gets no benefit from them. Monthly financial controlling<\/a> turns the numbers into management information, and a CFO<\/a> helps you make decisions based on them.<\/p> Liina-Mai P\u00fc\u00fca ordered a clean-up of the accounting for earlier periods and the liquidation of the company. At first she feared the process would be painful, but she received a thorough overview of every stage.<\/p> I ordered the accounting clean-up for earlier periods and the liquidation service, and the whole process was well thought out and smooth. I really liked how you thought along with me and gave me a thorough overview of every stage.<\/p>Liina-Mai P\u00fc\u00fca, Doktor Konstruktor O\u00dc<\/cite><\/blockquote> When a company operates between the rules of several countries, mistakes cost more. We helped Hoole Group understand the differences between Estonian and UK law and accounting.<\/p> KL Raamatupidamine helped us understand the various nuances of Estonian and UK law and accounting. The cooperation has gone very well and we always get answers to our questions very quickly.<\/p>Oscar Hoole, member of the management board, Hoole Group O\u00dc<\/cite><\/blockquote> If you want to know whether any of these mistakes are costing your company money, do this check once a quarter:<\/p> If any answer raises doubts, that is where to start. A more thorough one-off review is provided by business controlling<\/a>.<\/p> The registrar can impose a penalty payment and eventually delete the company from the register. If the report is late, it is worth filing it as soon as possible. If the accounting has not been done for several periods, start with a clean-up.<\/p><\/details> Interest is charged for every day the tax remains unpaid. The safest approach is to keep a tax calendar and set aside the tax money in your cash flow. If you cannot pay a tax by the deadline, you can agree a payment schedule for the tax debt with the Estonian Tax and Customs Board.<\/p><\/details> A good sign is that reports and returns are filed on time, you get quick answers to your questions and the accountant tells you on their own initiative when something needs attention. If you only get your numbers at the end of the year, it is worth reviewing the cooperation.<\/p><\/details> Most of these mistakes are not hard to avoid. What you need is proper monthly accounting<\/a>, a simple cash flow forecast and someone who tells you in time when something needs attention. If you\u2019re not sure where your company is losing money right now, this is shown by business controlling<\/a>.<\/p> Free and with no obligation<\/p> Let\u2019s look together at whether any of these mistakes are costing your company money right now and what can be fixed straight away.<\/p> Book a time and send your latest monthly income statement and balance sheet to kaideliis@klraamatupidamine.ee before the call. If you don\u2019t have reports, we\u2019ll start with what you have.<\/p>7. Dividends before cash flow<\/h2>
8. Expenses without a document or business purpose<\/h2>
9. Accounting is left until the end of the year<\/h2>
10. Numbers are not used in decisions<\/h2>
Two stories from our clients<\/h2>
Doktor Konstruktor: earlier periods sorted out and the business closed properly<\/h3>
Hoole Group: making sense of Estonian and UK rules<\/h3>
A 30-minute financial health check<\/h2>
Frequently asked questions<\/h2>
What happens if the annual report is late?<\/summary>
Can tax interest be avoided?<\/summary>
How can I tell whether my accountant is doing a good job?<\/summary>
Summary<\/h2>
A 30-minute review of your numbers<\/h3>