ATTENTION BUSINESS ENTREPRENEURS, A special weekly knowledge series by CA RUPASRI VAKATI, Partner of CARVI AND ASSOCIATES, designed for established business leaders.

Your business may be making crores in revenue. Your accounts may show profits. But are you sure you are not losing money every single month without even realising it?

Introducing BEYOND COMPLIANCE – 52 WEEKS. 52 BUSINESS INSIGHTS.

Our objective is simple:
To help businesses go beyond routine accounting, auditing and tax compliance and understand what actually drives profitability, financial stability and sustainable growth.
Every week, we will discuss one important business issue that can help you make better financial and management decisions.
Let's begin with our first insight!

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WEEK 01: 7 HIDDEN PLACES WHERE YOUR BUSINESS COULD BE LOSING MONEY – EVEN WHEN IT IS PROFITABLE!

Imagine this situation.

A trading company has an annual turnover of ₹10 crore. Its sales are growing every year, customers are increasing and the business appears successful.

However, at the end of the year, the promoter notices that the actual cash available in the bank is much lower than expected.

The accounts show a profit, but the business constantly struggles with cash flow.

What could be happening?

The problem may not be a lack of sales. It could be money silently leaking from different parts of the business.

Here are seven areas every business leader should examine.



1. Incorrect Product Pricing



Are you calculating the actual cost of every product before deciding its selling price?

Many businesses consider only the purchase or manufacturing cost while fixing prices.

But what about transportation, storage, handling, employee costs, finance costs, wastage and other indirect expenses?

A product that appears to generate a 15% margin may actually generate a much smaller margin after accounting for all associated costs.

What to review: Calculate the actual landed or production cost and contribution margin of each major product.



2. Delayed Customer Collections



Your business may be recording sales and profits, but are customers paying on time?

Suppose your business has ₹1 crore in outstanding receivables. Even a small portion remaining unpaid for several months can create serious working-capital pressure.

You may end up borrowing money to run daily operations while your own money remains stuck with customers.

What to review: Prepare an ageing report of customer outstanding balances and identify overdue accounts.



3. Excess Inventory



Does your business have stock that has not moved for 6 months, 1 year or even longer?

Excess inventory blocks working capital, increases storage costs and may eventually result in damage, obsolescence or price reductions.

Having more stock does not always mean having a stronger business.

What to review: Identify slow-moving, non-moving and obsolete inventory. Track inventory turnover regularly.



4. Unnoticed Operating Expenses



Are small expenses going unnoticed because they individually appear insignificant?

Unnecessary subscriptions, repeated purchases, excess travel expenses, avoidable administrative costs and inefficient operational spending can collectively become a substantial amount.

What to review: Compare monthly expenses, identify unusual increases and assign responsibility for expense approvals.



5. Poor Purchase Management


Are you purchasing materials or products at the best available commercial terms?

Businesses sometimes continue buying from the same suppliers for years without comparing prices, negotiating discounts or reviewing payment terms.

Even a small improvement in purchase costs can make a meaningful difference when applied across large transaction volumes.

What to review: Compare supplier prices, purchase trends, discounts, credit periods and procurement terms.



6. Employee and Operational Inefficiency



Are your employees, machinery and business resources being utilised effectively?

Idle machinery, repeated work, process delays, avoidable overtime and lack of accountability can increase operating costs without improving output.

What to review: Monitor productivity, operational costs, resource utilisation and performance against measurable targets.



7. Lack of Regular Financial Monitoring


This is one of the biggest issues in many established businesses.

The promoter reviews the financial position only when the accountant prepares annual financial statements or when tax returns need to be filed.

By then, problems that could have been identified months earlier may have already affected profitability.

What to review: Analyse monthly profit and loss statements, cash flow, receivables, payables, inventory and budget-versus-actual performance.

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THE BIG QUESTION: ARE YOU MEASURING YOUR BUSINESS PERFORMANCE OR JUST TRACKING YOUR SALES?

A successful business should not focus only on increasing turnover.

It should also focus on:

- Improving actual profit margins.
- Controlling unnecessary expenditure.
- Collecting customer payments on time.
- Optimising inventory and working capital.
- Strengthening internal financial controls.
- Reviewing financial performance regularly.

Remember: Increasing revenue is important, but retaining and protecting your profits is equally important.

HOW CAN CARVI AND ASSOCIATES HELP?

At CARVI AND ASSOCIATES, our professional services go beyond routine accounting, auditing and tax compliance.

We help businesses strengthen their financial systems through services such as:

- Financial performance and profitability analysis.
- Internal audit and internal control reviews.
- Working capital and cash flow analysis.
- Accounting system and financial reporting reviews.
- Tax planning and compliance reviews.
- Business financial advisory.

If you are running an established business and want to understand where your money is going, where profitability can improve and how strong your financial systems really are, a professional financial review can be a valuable starting point.

Let's make your business more financially disciplined, profitable and sustainable.

For professional assistance, connect with:

CARVI AND ASSOCIATES
Chartered Accountants

🌐 www.carviassociates.com
📩 Info@carviassociates.com


BEYOND COMPLIANCE
52 Weeks. 52 Business Insights.