Cash shortfall: how to manage it and prevent it from occurring

Calculation of cash shortfall

Have you experienced a difference, in the negative, between the value of what you sold and what you actually collected? At such times, what you face is a cash shortfall.

How to manage the cash shortfall without it becoming a real cost to the company?

In this article we give you some tips on how to identify the causes of the cash shortfall, how to account for it and, finally, on how you can avoid it.

What is cash shortfall?

According to the resolution 54/E 2010 of the Internal Revenue Service, the cash shortfall, also referred to as passive insubstantiation, è the difference between the amounts available in cash and the corresponding accounting records.

In other words, the cash received in a given time interval is less than the cash recorded.

Let's take an example.

In large-scale distribution, a sector that is particularly prone to bad debt, the occurrence of the cash shortfall can be traced to everyday circumstances such as:

  • rounding granted by the operator for lack of change after the receipt has been issued;
  • errors made by the employee in handling valuables at the cash register, such as in the case of a change given more than it should have been or in the issuance of an incorrect receipt;
  • thefts carried out by employees.

But in the case of a small-medium enterprise? 

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How to manage the cash shortfall

When the company does not have direct contact with the public, unlike the large-scale retail trade, the cash shortfall becomes apparent when the preparation of the financial statements.

The first step involves declaring the shortfall, taking care to comply with the principles of preparing the financial statements themselves and the previously mentioned AdE Resolution 54/E/2010.

In order for the shortfall to be recorded as an expense and thus be deductible-that is, returnable with the tax return-the shortfall must meet the relevant criteria under Italian law.

In summary, the shortfall must fall into one of the following categories:

  • physiological;
  • unavoidable;
  • inherent in the activity.

And it will also have to be stated on an
ad hoc, signed by the head of corporate internal controls.

How to avoid cash shortages?

Do you still use Excel for cash flow management? Manual compilation, in addition to increasing the possibility of error, takes a lot of time!

By relying on Sibill for cash flow management, you will have a detailed, complete and timely view of your cash flow at all times, monitor income and expenses of all your current accounts from a single screen, and categorize income and expenses according to your rules, in just a few clicks.

Its features will enable you to optimize the timeframe dedicated to budget control and minimize events that hinder the profitability of your business, such as cash shortages.

Why should you choose Sibill?

In just a few minutes-and without the need for complicated integrations-with Sibill you can:

  • Link all bank accounts to analyze balances and transactions in one place;
  • Automating cash forecasting and anticipate cash flow problems;
  • Carry out the automatic reconciliation of invoices saving hours of manual labor;
  • Set up notifications to remind all payments to be made.

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