Effective communication and coordination between accounting firms and their clients are pivotal in ensuring accurate financial reporting, government compliance, and overall business resilience. Miscommunication and a lack of coordination can lead to government penalties, misguided management decisions, and potential bankruptcy. This report outlines this collaboration’s critical importance, responsibilities for accounting firms and clients, and the benefits of seamless communication. We also present data substantiating the need for this coordination, highlighting the potential risks of failing.
Key Insights
Growth Secret’s research throws light on the benefits of establishing a clear and accurate line of communication between clients and their accounting firms and the implications of not doing so.
Risk of Government Penalties: Miscommunication between clients and their accounting firms can lead to the inadvertent placement of financial transactions in incorrect ledgers or not being recorded at all, resulting in inaccurate financial statements. Such inaccuracies are a primary driver of government penalties and notices. Our internal research found that 83% of tax authority penalties result from inaccurate financial reporting, often stemming from insufficient communication and coordination between accounting firms and their clients.
Conversely, companies with effective communication and coordination between accounting firms and clients experience an 81% reduction in audit queries during statutory audits.
Impact on Organization’s Financial Health and Decision-Making: Inaccurate financial reporting can mislead management decisions, potentially leading to bankruptcy, particularly for startups. Accurate bookkeeping is essential for business resilience, emphasizing the need for precise and reliable accounting records. In fact, Growth Secret’s research suggests that factual financial statements boost investment odds by 91%.
Fraud and Materiality Risks: Effective communication and coordination between the accounting firm and the client ensures that financial statements are updated and precise. It also lets clients identify challenge areas immediately, helping them enhance their internal financial controls (IFC) to prevent fraud and bolster resilience. Our internal research found that effective collaboration between accounting firms and their clients reduces fraud and materiality risks by up to 77%.
Accurate financial statements enable management to make informed financial decisions and strengthen their resilience. Moreover, correct financial records help clients speed up dispute resolution with customers and vendors.
Recommendations for Clients
Establishing clear guidelines and responsibilities for both parties is imperative to ensure effective collaboration and communication between organizations and their accounting firms. Growth Secret recommends the following actions for its clients:
Share Information Promptly: Given that some taxes and financial processes are time-sensitive, clients must promptly share information that can impact an organization’s financial statements with their accounting partners. Delayed communication can result in missed timelines and subsequently result in penalties.
Notify Significant Events: Inform the accounting firm of significant events such as changes in key personnel, acquisitions, mergers, or IPO listings. In Growth Secret’s experience, clients must communicate all finance-related information, not just those related to spending or revenues, to their accounting firms, as they may have ramifications for the organization’s financial stability. For example, everyone knows IPOs are time and effort-intensive and incredibly stressful! However, looping in an accounting firm about its plans to list an IPO can ensure the client has the proper financial guidance when needed. For example, the accounting firm can help ensure the company’s historical financial data is accurate to avoid steep auditor costs during statutory audits, and the accounting partner can guide clients on avoiding material misstatements post-IPO.
Implement Recommendations: Clients must act on their accounting firm’s recommendations, especially those related to internal financial controls and data processing. For example, if an accounting firm flags concerns about a trend of business expenses without a paper trail, clients must correct the issue immediately. Ignoring the accounting firm’s recommendation could snowball the problem and become a punishable financial irregularity.
Recommendations for Accounting Firms
Accounting firms also need to play a role in ensuring clients recognize the criticality of communicating financial information clearly and in a timely fashion. To do so, accounting firms must:
Enhance Client Understanding: Invest in understanding the client’s business thoroughly to determine applicable accounting standards and compliance measures effectively.
Provide Proactive Communication: Maintain regular, daily communication with clients through various channels to stay updated on their business activities.
Stay Informed: Stay updated on regulatory changes and fintech advancements, leveraging technology for efficiency.
Streamline Data Transfer: Implement processes for seamless data transfer from clients, saving their time and ensuring data accuracy.
Ensure Robust Internal Controls: Design strong internal financial controls for clients to mitigate risks and prevent fraud.
Key Takeaways
In conclusion, the partnership between accounting firms and their clients is paramount in today’s financial landscape. The data-backed insights presented here emphasize the critical need for robust communication and coordination to ensure financial accuracy, compliance, and resilience. While incomplete or incorrect communication between organizations and their accounting firms can result in penalties, inaccurate financial statements, and misguided decisions, seamless collaboration can reduce the time to resolve financial disputes, prevent fraud, and boost investment prospects. Accounting firms and their clients must actively participate in this process to ensure the financial health and resilience of the business. By taking the recommended actions and staying informed, companies can protect their financial health, avoid penalties, and make more informed decisions, ultimately securing a brighter financial future.
We all are aware of the current health crisis which has gripped not just India but the entire world and it would be some time before we all get back to normalcy. Every business, whether big or small, has been affected due to Covid-19 and the impact has been more or less uniform all across the companies in every part of the globe.
Taking care of all aspects of your company can be quite challenging and one of the reasons why several companies are now hiring external agencies to manage many of the in-house processes including Accounting and Taxation, Human Resources and Public Relations to name a few. If you are also planning to outsource your accounting processes, we at Growth Secret are more than happy to help you with the best of services. Our team offers cost-effective financial solutions and dedicated support to our clients.
“Some Tidbits on why do you need to outsource your accounting and taxation processes to Growth Secret:”
Cost-Effectiveness While it is always good to have an in-house finance team, it comes with its set of issues as well, especially during these tough times. If you are outsourcing your accounting process to Growth Secret, one of the major advantages is that it is going to be cost-effective as the company has a fixed slab for its different services.
Minimum Investment If you are outsourcing your accounting data, you don’t have to worry about the big investments that come in the form of buying expensive laptops and latest softwares for the same. All you have to do is to just share the required details with Growth Secret and the expert team will take care of everything in the best possible manner.
Focus on Core Business Accounting and taxation are the backbone of any company and managing these processes on your own can be a time-consuming and tiring task. This is when Growth Secret would perfectly fit the bill and will take care of all such things. The biggest takeaway is that you can focus on your core business, without worrying much on the accounting part of your company.
Data Security and Compliance When you tie up with Growth Secret for the accounting and taxation outsourcing of your company, you can rest assured of top quality services including the most crucial factors such as Data confidentiality and security along with company compliance.
Expert Advice and Consultation We all have our core strength and weak areas and it might be a case where you don’t have much knowledge about the accounting aspects of your company. There is no need to worry as the team at Growth Secret will take care of all your taxation and accounting worries and you will get the best services and consultation at charges that are not too heavy on your pocket.
No Staff Management Another important aspect of taking help from outsourcing agencies like Growth Secret is that you don’t have to manage much of the workforce within your company. There is no need to take that pressure of hiring and managing staff and you can focus on growing and expanding your business, while the accounting work is being taken care by the experts.
So, now you know why seeking help from Growth Secretwill be a game changer for your business.
Growth Secret: Looking Through the Crystal Ball
With a global presence in countries like the UK, Singapore and the USA, Growth Secret has carved a niche for itself in the Financial and Accounting domain. The comprehensive list of services offered by the company include Tax Advisory, Payroll Outsourcing, Operation Audit and Financial Strategies among others. Connect with us.
Know about Wishfie?
Well, they have carved an identity as a social video app, where as a social bug you can share your opinion on topics floating in the air or things that concern the mass.
To understand the several tax and accounting complications that the company went through, let’s walk through their process of operation first.
Wishfie’s approach to work is highly professional, and hence, they wanted to put in place a highly accurate accounting system right from the start, to avoid complications at a later stage. For this, they consulted Growth Secret to extend assistance.
Here’s what Wishfie’s Co-founder, Akshay Pruthi has to say about Growth Secret:
“Working with Growth Secret has been a great experience. The way they handle any of your queries and assist you on multiple other things, which you might not know as a founder/owner of the company.”
– Akshay Pruthi, Wishfie
Let’s have a look at the multiple areas Growth Secret addressed.
Goods and Services Tax (GST) Ever since July, 2017, GST became the talk of the town! Indian companies saw a sudden and drastic tax reform, the execution and implementation of which was no child’s play. Reconciliation in GST mandatorily sought details of all inward & outwards supplies. For the sake of filing returns both GSTR1 & GSTR2 coupled with GSTR3B had to worked upon. This is where, we as a part of Growth Secret extended our best and successfully filed all GST return for Wishfie and that too bang on time!
TDS Compliance — the vindictive compultion As the Income Tax Act states, a private limited company, responsible for making payments, are required to deduct TDS at prescribed rates under section 194J, 194I & 194C etc. But, the catch is, as a founder of a tech startup, one may not have a clear know-how on which payments you are likely to deduct TDS and that too under which section. This was the dotting point of issue my client was facing. We intervened and proposed to conduct an internal scrutiny check. In no time we were able to hit the bull’s eye! Well, Wishfie had missed depositing TDS on salaries and the filing of TDS return 24Q for the financial year 2017–18. No wonder, this was a legal obligation for for the company. We regularized all potholes following all rules & regulation as per Income Tax Act, 1961 and did the necessary to fend off TDS complications for the financial year 2017–18.
Payroll– Wondering if anything was kept untouched? Yes, they sought our services in processing payroll as well. Earlier, no such payroll functions were put into effect. We actualized the entire payroll process that included elements like investment declaration, employee payslip and tax calculation sheet etc. As humongous as it may seem, the payroll customization was a big help to Wishfie.
Monthly Profit and Loss Account– From the time of initiation of operation, Wishfie had maintained their profit and loss records on excel sheets. Quite understandably so, as it’s an early stage company with very few resources and tools at their disposal! Be their daily expenses, bank dealings, revenue generations or liabilities & assets, we streamlined the process and recorded every single transaction in QuickBooks. Did we not pay a heed to profit & loss accounts? Call it an affirmation. Till date, we share every detail with the management on a monthly basis. This helps them in realizing their financial position as a startup. Accordingly, they decide their monetary plan of actions. Today, the Wishfie management has a clear understanding on where from the money is draining in and out and likewise where should they invest more or less.
Who Are We?
We are “Growth Secret” — India’s one of the finest platform for all your start-up financial and taxation frets. Our motive is to make financial & taxation affairs easy for start-ups. We constantly strive to make financial decisions easy, convenient, and transparent for our customers. We have a team of experts with several years of experience in the industry and have in — depth knowledge of direct & indirect taxes, Indian accounting standards (Ind AS), accounting principles, GAAP, due diligence & transfer pricing etc. We are the platform which is dedicated to helping people easily start and grow their businesses, at an affordable cost.
