The Smart savings method will solve all your business problems and make your company healthy again.

Is your company incurring losses?

You may think it’s happening because you spent money on useless purchases. But shouldn’t that reflect in your accounts?

Or maybe the market was slow and you were unable to sell a lot of products. You may have damaged products during production, and then could not sell them. But if that were the case, shouldn’t that reflect in your accounts? However, that’s not the case.

That’s not the case, because there is a flaw in business accounting that makes it impossible to book missed earnings.

Your expenses are not excessive, but your income is too low. Your expenses are based on an estimate of how much your income should be. However, your earnings are less than that estimate, meaning that your earnings are also less than your expenses.

Missed earnings can result from employee errors, which damage products and prevent them from being sold. Or due to a disappointing market. A company also loses out on turnover when it cannot sell products for other reasons.

Cut-backs do not affect the loss or budget deficit. Employees make mistakes and/or the market is bad, even in years when organizations cut back. Cutting back reduces turnover and causes a budget surplus or profit. After a year of cut-backs, companies, therefore, have both a profit and a loss. That profit, however,  pays the entrepreneur or CEO a bonus and/or allows the company to disburse profits to shareholders. The budget surplus is returned to the subsidizer, which leaves the loss, and it continues to grow.

Business accounting contains a flaw that makes it impossible to account for lost income. At the end of the year, when closing the books, a company will find that revenue falls short of expenses.

Often companies manage to generate extra revenue by offering additional products or advertising. This extra turnover sometimes leads to extra profit. But this extra profit also  pays the entrepreneur or CEO a bonus and/or disburses profits to shareholders. So this extra profit doesn’t affect the loss either.

99.9% of all organisations older than three years, and 100% of all organisations older than eight years incur a loss or budget deficit. It can take 10 to 150 years, but all the companies cutting back, end up going bankrupt.

Shareholders can get very rich from corporate cutbacks. But billionaires also go bankrupt on a regular basis. Often due to the same problems that also cause bankruptcies in companies.

About 800 years ago, the Dutch carpenter’s guild developed a method to control losses. Although hardly anyone understood how it worked, Dutch family businesses have used the method for centuries. Dutch entrepreneurs who immigrated abroad took the method with them. But foreign companies never took advantage of it. The method disappeared by 1969, due to changing economic conditions. The author of this site rediscovered the method and continued to develop it.

To gain monthly insight into the extent of the loss or budget deficit, an organization must include a general ledger for profit and loss in its accounting system as of the starting date of the business, or the start of the automated accounting: Monthly, at the close of the accounting, the company then books the balance of the cash and bank journal against the general ledger for profit and loss. A debit balance for this account is the profit/budget surplus. A credit balance is the loss/budget deficit.

With a general ledger account for profit and loss, a company can get monthly insight into its losses

Check this ledger account by comparing the balance as of December 31 of years you have closed at a loss.

You will find more information below about the causes of losses and budget deficits, the problems caused by cut-backs, and how organizations can bring a loss or budget deficit under control, without creating new problems.

smart savings

The real cause of unemployment and business losses

As unemployment continues to rise, companies regularly encounter problems that threaten their survival. The solutions they have for this, always seem to only work for one year.

smart savings

Cause and solution of business losses

To cover losses without the need for budget cuts, a company needs to apply three techniques:

  1. During the year, it has to gain an insight into its profits or losses.
  2. It has to have reserve capital to which it regularly adds funds to cover losses.
  3. It needs a way to prevent business owners and CFOs from inadvertently spending this reserve capital.
Altogether, 99.9% of companies will see losses at the end of their third financial year. The other 0.1% will make a loss at the end of their eighth financial year. All companies in the world that have been in business longer than eight years make losses.

How big can business losses get?

Altogether, 99.9% of companies will encounter losses at the end of the third financial year. After that, companies incur losses annually, and never use their profits to cover losses. Based on the turnover and age of a company, it is possible to make a fairly accurate estimate of their loss.

smart savings

The accounting method of the Dutch guilds

About 800 years ago, the Dutch guilds developed a method to control losses. But the method was so complicated entrepreneurs didn’t understand what it was doing. In a changing society, in the late 1960s, they no longer wanted this extra work and abolished it.

An accounting method developed by the Dutch guilds still plays a major part in controlling losses

smart savings

Mistakes when cutting back and the cause of high unemployment

When a company starts cutting back, the result can be a number of unexpected mistakes, which means the company never covers the loss. Instead, the money goes to shareholders.

smart savings

Healthy and unhealthy companies

In healthy companies, workers have a high salary so that they can buy high-quality products and keep the economy running.

Unhealthy companies retrench as many of their actual workforce as possible, increasing unemployment and increasing the size of the government.

smart savings

Dutch money management

Because entrepreneurs make mistakes in spending their money, the Dutch guilds have developed a management method that ensures companies always have enough money to survive.

smart savings

Entrepreneurs and CEOs’ salaries after cutting back

A mistake in entrepreneurs and CEOs earnings back in 1985, led to them putting the proceeds of the cuts into their own pockets. This creates problems when their business stops cutting back.

smart savings

The director’s crisis

Entrepreneurs and CEOs carry a lot more responsibility than the average employees. They expect to see that great responsibility expressed in their regular salary; otherwise, they would rather continue making cut-backs.

smart savings

Personal income of a million dollars or more

Billionaires also go bankrupt on a regular basis. Often due to the same problems that also cause bankruptcies in companies.

Wealth doesn’t save you from problems. Even billionaires regularly go bankrupt

smart savings

Fair methods to calculate salaries

Prior to 1980, companies relied on one of three methods to allocate salaries. These methods ensured that the people who were most important in generating the turnover earned the highest salary. Workers who master a lot of skills and do creative work are more important than workers who do regular routine work. But they are more important than employees who do administrative work.

smart savings

Cover Budget deficits

How do you count $100,000,000,000 in cash? Because they did not have safe methods of counting their money, governments have relied blindly on their accounts for centuries. When that went wrong, officials were sent home without pay. When officials had had enough of this, they introduced an accounting method that guarantees them a salary, but it turns out to also cause budget deficits.

smart savings

How slavery causes business losses

In order to deliver a high-quality production, employees require at least food, clothing, housing, and transport to their workplace. This also applies to slaves. Entrepreneurs who did not take this into account created a situation in which their companies suffered large losses. Nations abolished slavery, not only because it was the decent thing to do, but also because it was better for the economy.

America and the problems of the former colonies

To avoid losses, the sales market needs to grow by more than 2% per year. Immigration in America and the other colonies had exceeded 2% for centuries. Which increased their internal market by more than 2% and they never faced losses. However, in the 1950s, the U.S. and colonies abolished immigration; that changed everything.

America’s problems started in the 1950s when they abolished immigration

The budget deficit of the Church

The church has had the problem for 2000 years that the money from the collection could not be counted safely. Their solution causes a budget deficit.

About the author

The author likes to gather information. An investigation into the cause of an industry’s many problems led to the discovery of the cause and solution of losses.

Page views