Are you running a business as a single owner? Or are you running a partnership business?
And your organisation has a small number of staff and most of them are technical persons in the core business. But there is no professional staff to maintain accounting records or bookkeeping and tax compliance. To hire a professional staff is costly for the small business. And that's why you are managing the accounting and tax by yourself.
Guess, you are facing problem in complex issues during recording accounting entries or maintain tax/VAT related issues.
Don't worry. You are not alone. Most of the small businesses in the world are managed by owners. At the very beginning, business owner only keeps record for expenses and income. But after a certain period when he thinks that the business is doing well then he hires an accountant or outsource accounting services.
If he hires an ordinary graduate with no background in accounts, it will hardly serve the purpose as the employee will face the same problem he used to face himself.
Even if a graduate with commerce background but without professional articleship is hired, then he will lack practical knowledge about accounts and tax. There may be chances of mistakes or even non-compliance may arise which will entail penalty.
Every businessman thinks about cost. They want to get quality services by paying less. Your business is small and your volume of transactions is also insignificant. Nevertheless, you may need to recruit two - one for accounts and another for tax. This is costly.
So, what is the solution? Hire a professional accountant, but not as a fulltime employee. Outsource the services. Is it costly? No.
But if you outsource both services of accounts and tax from an accounting firm or individual professional accountant, then the cost will be reduced significantly. And the accounting and tax services for your business will be accurate and of high standard.
Considering the volume of your organisation's financial transactions, the professional accountant will estimate the hours/days required in a week or month to complete the recording of transactions. If they require, suppose, a day in a week, the accounting firm will charge you for four days of a month only. This will reduce your cost, but you will get high-quality services.
The accounting firm or professional accountant has so many clients like your business where the experts are providing same services in that way. So, they can provide you the quality services at a very minimum cost.
Why outsourcing is important? Because you need quality service.
As a businessman, your goal is long term. You always think about your entity as a going concern for the foreseeable future.
Your dream is big. Your organisation will be bigger and bigger year after year. So, you have to comply with laws and regulations. This good track will help you doing business as a good company which will create goodwill in the business sector.
If it is not, then your business will have a bad record and other businessmen or investors will not be interested to do business with your organisation.
Accounting records are important for the preparation of true and fair presentation of your organisation's financial statement. Based on the information presented in the financial statement, the investors will invest in your organisation and regulatory authority will impose tax.
During payment to suppliers, employees and land owner you have to deduct tax at source as prescribed rates and deposit in a prescribed manner and time in accordance with Income Tax Ordinance 1984 and Value Added Tax and Supplementary Duty Act 2012.
Failure to do so will fall into non-compliance and as a consequence of which a heavy penalty will be slapped on your business. As a businessman, you may know that if tax was not deducted where applicable then the amount paid during the year will be disallowed and you will have to pay tax at 35 per cent on that amount.
Your expenses are genuine but as you are non-compliant with tax laws you will have to pay tax on that amount at high rate. This will reduce your profit. Besides, the tax authorities will continue monitoring you as non-compliant which will cost your time and increase legal expenses.
At the year end, you require to complete statutory audit for filing to the Registrar of Joint Stock Companies and Firms (RJSC) and may also require to submit it to your corresponding bank against your hypothetical loan, if any.
After completion of year-end audit, the tax return is prepared for filing to the tax circle. The preparation of tax return is very complex because tax depends on the basis of preparation considering the taxable items.
Besides tax return filing, you may require to submit various tax reports in a prescribed format on different dates during the year like monthly tax deducted report, quarterly advance tax payment, half-yearly withholding tax return, yearly employee tax return submission and deducted report etc.
So, here, you also require tax expert. As a professional accountant, they have the expertise to calculate tax and then return preparation for assessment.
If your financial data recording is accurate and complete then your financial statement will give a true and fair view of your organisation which will help stakeholders take financial decisions about your organisation.
As a businessman, your main focus is to increase your business revenue and smooth operation of business. If you have to remain too much busy dealing with regulatory authorities for non-compliance, then it will hinder your main focus and will also obstruct your organisation's future growth.
So, if you outsource the tax and accounting services then you will be tension-free about all the consequences.
Jasim Uddin is Associate member of the Institute of Chartered Accountants of Bangladesh (ICAB).