Audit, Accounts & Other Greek Words

Dr Saurabh Bhatia

12 years ago

Upon registering the company, One thing I was confident about was managing accounts.

I had maintained government accounts for years and had ample knowledge. I was comfortable with double entry systems and was never confused between debit and credit 😉

First Year: I went on a software searching spree which could help us maintain accounts accurately and quickly. Right from paid ones to free SaaS ones, and the ones in google apps, I saw many. Then finally zeroed on to GnuCash.

It is a fabulous software, Open Source, Free (as in beer), and if you have the basics in place, then it is quite easy to keep record. Releigiously I maintained first year accounts (it was easy coz most was expense).

Then I exported reports and balance sheet and sent it to my CA after the Fin year ended.

Audit: My CA told me that best practice would be to keep collecting all possible recipts and just give it to him at the year end for expense accounting. (Ahem !!). Income was not much but giving an annual bank statement of accounts would suffice. (OK). Then came the trickier questions if I had deducted any TDS and what about service tax.(Blank)

Second Year I shifted to Wave Accounting in Google apps as it promises to remain free forever. Further it can directly pick the entries from my bank account(s) and sync them with manual entries. Easy peasy. We did second year records, too.

Then came audit. The CA had same questions, same time was spent again with him, irrespective of software.

And then I saw the detailed returns he had filed. And then i saw them again.

My Learnings:

Don’t bother too much with software. Maintain an excel sheet of expense and income. CAs will anyway cook such a different broth at year-end, that it is not worth re-inventing this wheel, not to mention the mild blush of feeling silly, when you see how professionally he did it and had created so many headings that you did not even know of. (He even claimed depreciation on that useless 1 GB ram machine you run on Ubuntu)
- All losses can be carried forward for 8 years so don’t write off any loss or take it personally now. When you make it big, you will be able to “Keep it” and not pay 30% tax.

All expenses are important. I collect parking tickets worth 5 rs also. My own car’s monthly parking ticket collection reaches 250, which is 3000 in a year. Since i will save 30% tax on it, I can reclaim 900 rs. from Government later. Don’t ever return that parking ticket to mall guard. Show it and take it back, even if half-torn.
- Yes, Domino’s pizza eaten while trying to woo a potential client is a legit expense. But their damned thermal printer receipt will fade over the yearend. Xerox all thermal printer receipts and keep them.

Service tax: Don’t register for it till you don’t cross a million in turnover. This is not a vanity exercise. Government allows you to wait till you hit the million mark. Period.
- Once you register, then service tax that you charge can be set off against the service taxes you have paid at under various bills like 84 rupees in phone bill and 36 rupees in data card bill. They all save you money. So any bill which has that 12.36% death-note written should be kept earmarked for september.

Keeping contractual workers is good for both you and him, till you don’t cross the law. You will save hassle while he will save taxes.
- I keep 3 tiffin boxes in an almirah where i just dump those expense bills for year-end retrieval.

Now Let’s talk about Invoices (or Income, if there is any 😉 )

Invoices can be a tricky deal when trying to create. Use Excel sheet to keep a standard template but print them with pdf-printer so that you send only a pdf file.

Digital v/s Physical Invoice: I now send ONLY digital invoices to save printing and courier cost. I sign them digitally using SignNow online signature service or DocuSign. Both are legal (to the best of my knowledge).

And no, pasting the image of your signature at the bottom of word file is not the right way of doing it. You may, however choose another service call DigiSigner for invoices (and not for contracts)

Paying companies keep asking me a copy of PAN card of my company with invoice. Sending a PAN copy image can be dangerous. I give a link in my invoice where people can verify our PAN no and Never send the company Pan card scan. Make sure you include your date of incorp on the invoice. We just write “PAN no can be verified from Government of India at https://incometaxindiaefiling.gov.in/e-Filing/Services/KnowYourPanLink.html“

Lastly, try to generate as much income as you can (wasn’t that the basic purpose?) and accept minimum possible in cash.

MONEYMETER: INR 0 till now

Original Post at Author’s Blog