Small companies are now faced with two major problems, one is failed compliances, the resultant huge penalty payments, and the other is not being able to maintain proper books of accounts. Legal compliances are an integral part of any business. It ensures that the business runs smoothly, avoids penalties or legal actions that hamper operations.
Small businesses include freelancers, professionals, sole proprietorship firms, partnership firms, and private limited companies. Following are some of the compliance areas:
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Goods and Services Tax (GST): Introduction of GST has brought in many compliance issues for small business which are covered under it. Businesses with an annual turnover of over 40 lakhs are required to get registered under GST. There are a lot of procedures like formatted invoices and eWay bills to be issued. Periodic GST returns are required to be filed.
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Tax Deducted at Source (TDS): Similarly there are frequent changes to income tax law related issues like TDS and Tax Collected at Source. It involves collection, payment and reporting within the stipulated dates periodically.
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Payroll deductions and taxes: For any businesses to be covered under payroll deductions and taxes, there are different eligibility criteria for each of the components. It includes professional tax, ESI, PF, TDS etc.
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MCA compliances: Filing of incorporation forms with the MCA like Memorandum of Articles of Association and a common seal of the company; Periodic filing of financial statements with the annual returns and event-based forms, minutes of board meetings with the MCA; Filing of IT Returns and also GST Returns (if applicable).
Limitations faced by small businesses:
Trained staff: Small companies are always limited by financial resources, which has a spiraling effect on manpower resources. Small companies cannot hire highly paid qualified resources like chartered accountants and tax consultants. On the other hand, qualified staff does not want to join smaller companies as they feel they will have limited exposure and it will dent their growth prospects. Financial issues are forcing the small businesses to hire low cost untrained employees, who do not completely understand the ever changing compliance scenario.
Accounting Software Applications: Higher level of compliance can be achieved with the use of expensive accounting software applications like ERPs. ERP software applications involve high cost of installation, implementation, support, maintenance and staff training.
These companies often gets into this paradoxical situation and always ends up paying huge penalties to relevant authorities. Instead, if they are provided with a simple to use and easy to understand invoicing and accounting software application that guides and alerts them to take necessary actions and file required reports and returns, then they can better manage the risk of failed compliances and huge penalty payments.
Cloud Records Private Limited developed a cloud based invoicing and accounting software application to maintain the business records like invoices, vouchers, ledgers and generate required reports as per the guidelines given by various tax authorities governing the small companies. This application is developed in India for Indian companies.
