Accounting is one of the key aspects for the smooth operation of your business, regardless of the industry you are in or the size of your business. Unfortunately, accounting errors are among the most common ones made by Romanian entrepreneurs, especially in the case of those operating businesses with revenues exceeding 1 million euros. To raise awareness about the risks posed by accounting slip-ups, here are the most frequent errors and how you can avoid them.
By Adriana Codin, Head of Accounting Accace Romania
Underestimating the importance of accurate and real-time updated financial records, as well as not involving your accountant and your lawyer in strategic and operational decision-making, are among the most common entrepreneurial errors. Neglecting the periodic reconciliation of bank statements, receivables, and payment obligations follows next. All of these are essential tools for proving that accounting records are in line with reality and for accurately estimating cash flow.
Another common mistake is the incorrect interpretation or lack of knowledge of relevant tax legislation, which can lead to errors in calculating and properly declaring taxes and fees.
All these mistakes or “omissions” lead to business destabilization and hinder business development. Firstly, they lead to making inaccurate decisions; incorrect financial information can lead to incorrect strategic and operational decisions, with a direct impact on performance and profitability levels.
In the end, there will be financial losses. Non-compliance with tax and accounting regulations can attract significant sanctions and penalties, which will have a negative impact on cash flow and profit.
Another immediate effect of accounting mistakes is the loss of credibility and tarnishing of reputation among investors and business partners. The absence of accurate and transparent accounting may deter them from getting involved in your business, thereby limiting growth opportunities and collaboration.
However, let’s return to the legal and fiscal risks posed by these accounting errors. In addition to substantial penalties and sanctions from the tax authorities, accounting errors can lead to costly legal disputes and lawsuits, with a series of negative consequences for the reputation and resources of the business, as well as for entrepreneurs personally.
Here are the main tax rules and regulations you need to comply with as an entrepreneur, and the resources you can access to stay informed continuously:
Accounting Law (Law 82/1991): Ensure that you are in compliance with the provisions of the Accounting Law and that the financial statements of the company are prepared and presented accurately.
Order No. 1802 of December 29, 2014, approving the Accounting Regulations for individual annual financial statements and consolidated annual financial statements, issued by the Ministry of Public Finance
Fiscal Code (Law 227/2015): Stay up to date with the provisions of the Fiscal Code (including subsequent norms, amendments, and additions) to correctly understand tax requirements and obligations regarding taxes and fees.
Fiscal Procedure Code (Law 207/2015): Keep your information current with the provisions of the Fiscal Procedure Code (including subsequent amendments and additions) to understand the procedural obligations related to taxes and fees.
To stay updated with the latest legislative changes and tax regulations, you can follow the official websites of relevant institutions such as the Ministry of Public Finance and the National Agency for Fiscal Administration, as well as the websites of consulting companies.
Ensure you have robust and up-to-date accounting. You’ll find that it helps you make informed decisions when it comes to strategic moves, leading to increased business efficiency and profitability with minimal risks.
You’ll experience a significant benefit in your relationship with investors and business partners. Accurate and transparent accounting boosts trust and opens doors to additional funding and successful collaborations.
Efficient accounting entails documenting and identifying optimal tools and resources, such as a fast invoicing software that aids in providing swift responses to clients and seamless integration into the market. Furthermore, a digital information transfer platform accelerates communication within the company and enhances production workflows. You can also opt for specialized accounting software; it requires a higher investment, but powerful accounting software tailored to your needs and business volume simplifies the recording and efficient management of financial transactions. Additionally, it generates financial reports that help you monitor and manage all financial aspects of the business, including transactions, inventory, and payroll.
Another solution, which comes with long-term cost savings as well as saving time and personnel resources for recruitment, is outsourcing accounting services to specialized firms that can provide expertise and professional support in managing accounting and tax obligations.
Whichever option you choose, it’s important to understand the role of accounting in the smooth operation of the business and undertake the necessary steps to organize your accounting efficiently:
- Allocate resources and competent personnel in the accounting department: This way, you’ll have access to consultation and assistance in interpreting and correctly applying tax and accounting legislation, as well as in underpinning strategic and operational decisions. A skilled accountant will take care of bank reconciliations, receivables, and payables, as well as verify the accuracy of accounting records. Additionally, they will regularly monitor and report on the financial situation to identify and prevent potential discrepancies or errors.
- Seek advice from accounting specialists when making business decisions.
- Implement clear internal procedures and policies regarding recording, reconciliation, and financial reporting.
- Stay updated on relevant tax and accounting legislation and ensure that employees in the accounting department have access to training courses for skill enhancement.
- Full-service consultancy and outsourcing companies can also offer tailored solutions for your business, helping you avoid common accounting mistakes that could negatively impact business stability.