Bookkeeping, Payroll & Outsourcing

Bookkeeping is judged twice: once a month by whoever reads the numbers, and once a year by a bank, an investor or an Assessing Officer. Books kept only for the first test fail the second one.

• A chart of accounts built for what it feeds: Ledgers designed so the GST return, the TDS return and the financial statements come out of the same data rather than being assembled separately each time. Most reconciliation work exists because this was not done at the start.
• Cadence: Daily entry of purchases, sales, receipts and payments; bank reconciliation weekly rather than at the year end, when an unexplained entry is eleven months old and nobody remembers it.
• The software: Tally Prime, Zoho Books or QuickBooks, set up and run properly. The choice matters far less than whether the masters, the tax ledgers and the opening balances were configured by somebody who knew what they would be used for.
• Receivables and payables ageing: Maintained as a working document, because it drives collection, the micro and small enterprise position, and the working capital a lender will lend against.

Payroll is where an error repeats every month until somebody checks, and where the liability accrues with interest while it does.

• Processing: Gross to net for every employee, with the structure reflected correctly — particularly for employees on the default tax regime, where several allowances that used to be exempt are now simply taxable salary.
• Provident fund and employees' state insurance: Monthly challans and returns, on the correct wage base. The definition of wages for contribution is the recurring dispute and the recurring arrear.
• Tax deducted on salary: Computation under section 192 taking declarations and proofs into account, quarterly Form 24Q, and Form 16 that agrees with both the return and the employee's annual information statement.
• Professional tax and contractor compliance: Where the state levies it, and the provident fund position of contract workers, which falls on the principal employer when the contractor has not complied.

The most common cause of a notice is not a position taken. It is two returns prepared from two different sets of figures by two different people.

• Invoice-level reconciliation: GSTR-1 against GSTR-3B, and input credit claimed against what GSTR-2B supports — matched at invoice level rather than at summary level, because a total that agrees by coincidence will not survive the next question.
• Mismatch intimations: DRC-01B and DRC-01C arrive on the portal, give seven days, and block the next GSTR-1 if they are not answered. What they are and what a Part B reply can properly say is set out in our note on them.
• Withholding: Deduction at the right rate and section, deposit by the due date, quarterly returns, and correction statements where a PAN or a challan is wrong. A default here costs the expense as well as the tax, through section 40(a).
• Form 26AS and the annual information statement: Reconciled during the year rather than at the return, when a mismatch becomes an intimation under section 143(1) and the credit has to be argued for.
• Micro and small enterprise ageing: Tracked monthly, because under section 43B(h) an amount paid outside the period the MSMED Act allows is deductible only in the year of payment — a tax cost created entirely by the payables ledger.

A report that arrives in the second month is history. The purpose of monthly accounts is to change a decision while there is still a decision to change.

• A monthly pack within a fortnight of closing: Profit and loss against budget, cash position and projection, debtor and creditor ageing, and the two or three operating numbers that actually drive the business.
• Profitability where it is earned: By product line, service or branch, which is almost never visible in a statutory profit and loss account.
• Variances explained rather than restated: A number that moved and no account of why it moved is not information.
• Where this becomes a finance function: Budgeting, forecasting and internal control sit with our virtual CFO engagement.

Two balances that are usually taken on trust, and both are tested the moment anybody examines the business.

• Stock valuation: Perpetual records on a consistent basis — first in first out, weighted average or specific identification — with the basis disclosed and applied the same way each period.
• The fixed asset register: Every asset from acquisition to disposal, with depreciation maintained on both bases, since the Companies Act useful life and the Income Tax Act block of assets rates are different computations on the same assets.
• Physical verification: Counts performed, reconciled to the books and the differences explained. An unexplained shortage is an addition waiting to be made.

For a foreign parent with an Indian subsidiary, or a non-resident holding assets here, the problem is not the work. It is not being in the room when something goes wrong.

• Reporting to your hours: Deliverables and calls aligned to the United States, United Kingdom or Gulf working day rather than to ours.
• Multiple entities, one engagement: Subsidiaries, limited liability partnerships and branches run together, with intra-group balances reconciled rather than discovered at the audit.
• A compliance calendar somebody owns: GST, withholding, ROC, FEMA and income tax dates tracked and filed, with the exchange control reporting that a foreign shareholder's own filings depend on.
• Records that answer the next question: The same books satisfy an investor's diligence and a scrutiny notice. Keeping one set that does both is less work than keeping neither properly, and it is the difference we are most often engaged to repair.