Accounting Work.. Yes, It Could be a Headache, But Why Not Turn It Over?

Contributed by Bridges Executive Centre, 11 May, 2018

[Based on Client's Life Experience]

When it comes to arranging accounts & audit works for your business, many people may think: I still have plenty of time! Is that really true? According to our experience, if the entrepreneurs (especially expats) didn't have any preparation beforehand and suddenly received their first Profits Tax Return from the HK Inland Revenue Department (IRD), they might feel panic for having 3 months only to finish all financial work – 3 months could be long, but could also be too short, here's a case sharing from one of our friends that you might be interested to hear.

His name is Willis (alias), a smart start-up founder coming from Australia. Yes, he is astute in nurturing his fast-growing online tech business, but he has zero concept of local accounts and tax system, and didn't pay much attention to how to consolidate his corporate financial records in a neat and so-called proper way all along. He faced some challenges after a talk with his friends...

One night he was at a pub during happy hour, and he remembered clearly it was before the HKSAR Establishment Day holiday. He was about to grab a few drinks with his buddies, who are all start-up newbies here. They chatted and suddenly Willis recalled one thing – it looked he had just received a green letter from the IRD that afternoon and his friends reminded him that should be his very first Profits Tax Return, for he had formed his business in HK for nearly 1.5 year already.

WHAT to Prepare?

Since that time he had no clue at all on how or what to prepare for this tax filing, he then actively seek help from his peers group, but the things were not that straightforward. He knew he should start with getting all accounting records ready with his sales invoices, expense bills, receipts, shipping documents, all bank statements, etc., even it's already a year behind. At first he thought it should be quite easy as there are so many accounting report templates online – would not be that hard to find suitable ones to fit in his bookkeeping entries. Then, along the preparation process, his questions popped up one after another.

For instance, he thought his first prepared accounting records were quite good already, or at least this draft had a good direction to base on and follow (for which he really spent some time to figure out what entry should be put and how to put), then, he realized there were so many more of his business entries in different categories he needed to add further, and some of them were quite vague to define where to put, such as how to define which one is cost and which one is expense, and he knew if he put the entry wrong, the impact on his tax computation figures could be quite large.

HOW to Be Well Prepared?

However, the puzzle is yet to solve. When he came to us in last July and showed us his accounts records, he finally recognized what he had prepared were far from the standard. We immediately let him know by submitting these self prepared records, the auditor can't really process the auditing procedure, since it is a requisite for them to receive the full set of accounting records including Profit & Loss Accounts, Balance Sheet, General Ledger, Trial Balance, etc. for assessment and preparation of audit reports in the legitimate and proper format. Plus he might need to carry out a stock take as well for his tech device inventories.

At that moment he noticed he really need an experienced local accounting advisor to guide him through, especially for the first year accounts. It proved worthwhile to spend a few thousands (here please find the rate) to get things done without the hassles. As a start-up who has been doing business for just about a year, everything is so new and he rather put more of his resources in developing his business, instead of consolidating the accounting entries for which a professional could do way better and more efficient than him. And he found out when the accounting records and audit report structure are well built, it will become an important foundation for him to execute his tax efficiency plan in the financial reports when his firm starts to make good profits at a later stage. Not to mention he will be reminded of his HK tax filing dates by the agency and he can be hands-off with these trivial issues.

WHAT Is the Role of a Professional?

Yes, reminding our clients to meet their tax reporting deadlines is one of our jobs, yet what we can do is much more than that. Typically we will suggest our clients to appoint the same proficient firm for handling all accounts & audit works, as well as the tax compliance part. Not only this will help improve the consistency and tidiness of the reports, but also let the advisor provide possible solution on tax computation and optimization, given that the advisor has already gone through your financial statements and known well of your accounting & audit report structure. For example, how would the handling treatment be different for a company generating profits in HK, China or from offshore places?

Tax filing is inevitable for every entrepreneur – there could be a chunk of documents you have to deal with at the last minute if you didn't plan early, and this could become a disaster at last. On the contrary, as a wise business person you should always start it earlier to fit the local compliance requirements. Even if your invoices and expense bills are kind of messy, we will give you precise advice and teach you how to prepare the full set of documents based on our provided checklist. Also, BRIDGES is recognized in the market for what we submit to the auditor is very neat, thanks to our internal team who will organize your documents with great caution and file them properly after you have passed to us. For offshore business owners, we will assist you in communicating with the IRD for submitting your 'offshore claims' if we found your firm is eligible to apply, details please refer here. You can always go back to us and look for our accountant's prompt advice on your accounts or tax queries.

This first step in dealing with the accounting work of your business – could be troublesome, but could also be stress-relieving, depends on which path you opt for. Unquestionably when you have found a reliable yet cost-effective firm familiar with local compliance to handle all your duties from head to toe, you can put more resources and time in focusing on your business development and growth. Any questions on how to kickstart your own accounting work, please feel free to drop us a private message and our in-house accounting and tax compliance team, providing advice not just coming from factual knowledge but also over 10 years of frontline experience in this field, will address your queries straightway and walk you through the whole preparation and submission timeline.

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Tags: accounting | audit | compliance | business | interest | Tax | entrepreneurs | Australia | China | offshore | tax compliance | tax |

 

 





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