Every month, your profit and loss report shows positive figures, yet your business account balance is dwindling. This is not a sign of incorrect bookkeeping. On the contrary, proper bookkeeping is indeed designed not to answer questions about cash.
Profit and cash measure two different things
The Financial Accounting Standards for Micro, Small, and Medium Entities (SAK EMKM), effective January 1, 2018, uses a accrual basis. This means that sales are recorded when the transaction occurs, not when the money is received.
This choice was made consciously. In the Basis for Conclusion paragraph DK16, it is noted that there was a proposal from the working group and the public for SAK EMKM to use a cash basis, considering the resource limitations of MSMEs. DSAK IAI rejected that proposal and maintained the accrual basis, as accrual-based reports are deemed more accurate in representing business conditions and activities, including for creditors analyzing financial ratios.
The consequence is clear: the profit figures in your report are statements about business activities, not about the contents of the account.
The report that answers the most is not required
Here lies the problem. The minimum financial reports according to paragraph 3.9 SAK EMKM are only three: the statement of financial position, the profit and loss statement, and the notes to the financial statements.
The cash flow statement is not included. Paragraph DK22 notes that there was public input for the cash flow statement to be mandatory, and that proposal was not adopted for three reasons: the limited users of financial reports, the relevance of the information produced, and considerations of ease of implementation. Entities are still permitted to present it voluntarily if deemed beneficial.
Thus, a business can fully comply with SAK EMKM, have complete and accurate reports, and still not have a single page showing when the money runs out.
Outflows have specific dates, inflows do not
The next imbalance is legal, not accounting. Outflow obligations are tied to non-negotiable dates:
- The 15th of the following month, for the payment of Income Tax Article 21, Article 22, Article 23, Article 25, Article 26, Article 15, and Article 4 paragraph (2). This is stipulated in Article 94 paragraph (2) PMK 81/2024, effective from January 1, 2025. Previously, the due date for withholding and collecting was on the 10th.
- The end of the following month, for VAT and luxury goods tax, to be paid before the VAT Period Tax Return is reported.
- The 15th of the following month, for BPJS Employment contributions. Late payments are considered overdue, with a penalty of 2 percent of the billed amount per month.
In contrast, the date customers pay is not a rule, but rather a result of negotiation, and often shifts without any penalties for them.
Also, note the number of entry points. Inflows generally come only from sales and a few other revenues. Outflows occur through purchases of materials, inventory, salaries, rent, electricity, marketing, business trips, and tax and contribution obligations. One entry point faces dozens of exit points, many of which have fixed dates.
A page you can create yourself
Just because it is not required does not mean it cannot be done; create your own 13-week cash projection:
- Beginning cash balance for the week.
- Estimated receipts, arranged by customer payment due dates, not invoice dates.
- Expenditures, with the mandatory dates above included first before items that can be shifted.
- Ending cash balance for the week.
The first week where the ending balance is negative is your real deadline, and it usually appears long before the profit and loss report shows any issues.
Signs that appear first
- Profit increases, but accounts receivable rise faster than sales.
- Inventory increases without a corresponding rise in sales.
- Tax and contribution payments are always made exactly on the due date, never earlier.
- Short-term loans are used to cover routine costs, not to finance growth.
This topic is also discussed by Resi Thatas Mahesa in the Financial Crisis Management Strategy class. If you prefer to see the explanation directly, there's a clip available.
Sources
- Indonesian Institute of Accountants, SAK EMKM, Basis for Conclusion paragraph DK16 on the choice of accrual basis. iaiglobal.or.id
- Indonesian Institute of Accountants, SAK EMKM, Basis for Conclusion paragraphs DK21 and DK22 on the components of minimum financial reports and the reasons why the cash flow statement is not required. iaiglobal.or.id
- Indonesian Institute of Accountants, About SAK EMKM, effective date and historical cost measurement basis. web.iaiglobal.or.id
- Ortax, details of tax payment due dates according to Article 94 PMK 81/2024. ortax.org
- BPJS Employment, provisions for late payment of contributions and a 2 percent penalty. bpjsketenagakerjaan.go.id