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Cash Basis Accounting vs. Accrual Accounting

by Sanjeev Archak Sanjeev Archak No Comments

In our previous post we have touched upon how to make your accounting effective. In this post we will explore ” Cash Basis Accounting vs Accrual Accounting” in detail.

The difference between cash and accrual accounting lies in the timing of when sales and purchases are recorded in your accounts.Cash accounting recognizes revenue and expenses only when money changes hands, but accrual accounting recognizes revenue when it’s earned, and expenses when they’re billed (but not paid).

Cash Basis of Accounting

Cash basis is simplest method of accounting.Revenues and expenses are accounted when they are paid.Consequently, this method does not recognize accounts receivable or payable.

This method is best suited for small businesses as it is easy to determine when the transaction has occurred.Moreover, there is no need to track receivables or payables. One has to look at the bank balances to understand the money available. 

Accrual basis accounting

Accrual accounting is a method of accounting where revenues and expenses are recorded when they are earned, regardless of when the money is actually received or paid. Revenue is recorded when the delivery of the product or service is complete, rather than waiting for payment.

Accrual method is an improvement over the cash method of accounting. This provides a realistic, long term view of the business finances. A possible downside is is that accrual accounting doesn’t provide any awareness of cash flow; a business can appear to be very profitable while in reality it has empty bank accounts.Accrual basis accounting without careful monitoring of cash flow can have potentially devastating consequences. 

The effect on cash flow

The method of accounting has an impact on the cash flow. Let’s look at an example of how cash and accrual accounting affect the bottom line differently.

Imagine you perform the following transactions in a month of business:

  1. Sent out an invoice  for Rs 5,000 for service completed this month
  2. Received a bill for Rs 1,000  in developer fees for work done this month
  3. Paid Rs 75 for a bill received last month
  4. Received Rs 1,000 from a client for a project that was invoiced last month

The effect on cash flow

  1. Using the cash basis method, the profit for this month would be Rs 925 (Rs 1,000 minus Rs 25)
  2. Using the accrual method, the profit for this month would be Rs 4,000 (Rs 5,000 minus Rs 1,000)

Which method to Choose?

The Income Tax Act in India allows non corporate entities to maintain books of accounts under cash basis. Non corporate entities in India may include an individual, a proprietary concern, a Hindu Undivided Family (HUF), a partnership firm, a LLP, a trust, etc.A corporate entity viz public & private limited companies, LLP’s are required to maintain the books of accounts only under accrual basis. 

A change in the method of accounting has to be stated in the income tax returns filed every year.

 

 

 

 

 

 

 

Income Tax Assessments

by Sanjeev Archak Sanjeev Archak No Comments

In our previous blog, we examined the new income tax assessment structure. In this post, we shall look at the various types of income tax assessments conducted by the department.The department selects cases for assessment based on certain parameters. The parameters for FY 18-19 has been published  by the department on 05.09.2019.

Under the Income-tax Law, there are four major  tax assessments:

1.Summary Assessment

A summary assessment is done by the department without human interface. The Central Board of Direct Taxes has set up a Centralized Processing Cell to do summary assessment. A return filed by the tax payer is verified with the information already available with the department.

For instance, the TDS credit claimed by the tax payer is checked with the credit in Form 26AS. Any mismatch is informed to the tax payer by an intimation. The tax payer is given time to respond to the intimation. A summary assessment can be made can be made within a period of one year from the end of the financial year in which the return of income is filed.  Any intimation issued beyond this time limit will be invalid.

2. Regular  Assessment

This is a detailed assessment and is also  called  as scrutiny assessment. At this stage a detailed scrutiny of the return of income is carried out  to confirm the correctness and genuineness of various claims, deductions, etc., made by the taxpayer in the return of income. The tax payer is required to produce books of accounts and any other record the income tax officer requires to be produced.

The objective of scrutiny assessment is to confirm that the taxpayer has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner. To conduct a regular assessment a notice has to be issued by the Officer to the tax payer. Such notice cannot be issued  after the expiry of 6 months from the end of the financial year, in which return is filed.

3.Best judgment assessment

A best judgement assessment is carried out in the following cases:

  1. If the taxpayer fails to comply with all the terms of a notice
  2. If the taxpayer fails to file the return required within the due date
  3. If the taxpayer fails to comply with the Special Audit requirements
  4. If the taxpayers fails to produce documents required by the tax office

As per the Income Tax Act, a best judge assessment has to be carried out within 12 months from the end of the assessment year in which the income was first assessable.

4. Income Escaping Assessment

This assessment is carried out if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any previous years. The objective of carrying out this assessment is to bring under the tax net any income which has escaped assessment in original assessment.

This assessment is carried out in the following scenarios:

  1. tax payer has taxable income and has not filed the returns
  2. tax payer is found to have understated his income or over stated his expenses
  3. tax payer has not filed a report for his international transactions
  4. tax payer has assets outside India

A notice has to be issued to the tax payer before commencing this assessment. Such a notice has to be issued within a period of  4 years years from the end of the relevant assessment year.

If you have received a notice from the Income Tax Department, please get in touch with experts at Integra Books.

Income Tax E-Assessment Scheme 2019

by Sanjeev Archak Sanjeev Archak No Comments

The Finance Minister in her Budget speech had announced the formation of  National E-Assessment Centre (NeAC) to handle all  Income Tax assessments. Consequently, the NeAC has been launched from 08th October 2019. In this post we shall examine the structure of E-Assessment Scheme 2019.

What is an Income Tax Assessment?

Every taxpayer has to furnish the details of his income to the Income-tax Department. The tax department examines the return of income for correctness.The process of examination is called as Assessment.

Income Tax assessment follows a chronology of:

1.Issue of notice by the Tax Department

2.Replies by the tax payer

3.Final orders by the tax officer.

This process requires the tax payer to appear before the Tax Officer and make submissions. This causes multiple challenges for the tax payer viz:

1.Keeping track of physical notices

2.Appearing before tax officer on the given date

3.Time taken for completing the assessment

Most importantly, there is a lot of scope for malpractice. 

Why is there a need for faceless E-Assessment? 

  1. NeAC  will eliminate human interface between Assessing Officer and Tax Payer
  2. There will be ease of compliance for taxpayers
  3. Quality of assessment, transparency will increase
  4. Cases of assessments will be disposed faster 

In other words,assessment’s will be  in electronic mode with no human interaction.All notice’s will now be issued electronically by a Central cell. The notices from the income tax department will now contain a Unique Identification Number.  This Central Cell will be the  point of contact between taxpayer and the tax department.

E-Assessment Structure

E-Assessment

 

Functions of National E-Assessment Centre (NeAC)

The NeAC will:

1.Send all notices/communication electronically

2.Assign cases to regional assessment centre through automated allocation system

3.Allocate cases to verification unit, technical unit through automated allocation system

4.Select draft assessment orders for review 

5.Providing opportunity to taxpayer before finalizing

6.Finalize assessment orders

7.Transfer all electronic records to jurisdictional AO for post assessment work

The National Centre will be located in New Delhi with 8 Regional Assessment Centre located at Delhi,Mumbai,Chennai, Kolkata, Ahmedabad,Pune,Bangalore and Hyderabad.

Consequently, assessments will not be done by jurisdictional tax officers. Hence, assessments will be allotted to tax officers by an automated system. For example,a tax return filed by a resident of Bengaluru will be assessed by a tax officer who may be located in any part of the country. 

Meanwhile tax payers will receive notices on their registered emails as well as on registered accounts on the web portal. Further,SMS’s will also be sent on their registered mobile number, specifying the issues for which their cases have been selected for scrutiny.

The replies to the notices can be prepared at ease by the tax payers sent by email to the National e-Assessment Centre or uploaded on the income tax portal. Above all,a tax payer  will not be required to appear before NeAC. The tax payers will be given an opportunity for a personal hearing via video conferencing.

Final Thoughts 

This is another significant reform initiated by Government after reduction in corporate tax rates . This reform is expected to bring relief to tax payers. 

In conclusion, hope this reform promotes the Ease of Doing Business in India. 

Cloud Accounting Software

by Sanjeev Archak Sanjeev Archak No Comments

Internet has changed the word in indescribable ways. With the advent of cloud computing all products and services are now hosted on the cloud. Cloud computing enables access to data from any device or any place.Rapid penetration of internet has made access to data easy and quick. Most businesses are now on the cloud so why should accounting be an exception? A recent report estimated the accounting software market to reach US$ 20,408 Mn by  2026.There has been steady shift to cloud based accounting software from desk top software.As businesses become more mobile, they will move away from on premise accounting software.

 

In this post we shall read  how cloud accounting can transform your business. Here are some reasons to move your accounting to cloud:

1.Automation

Desktop accounting is a manual process. This requires sales invoices,expense entries, bank and cash entries to be entered manually. In a cloud based software one can:

  1. Set recurring invoices for sales
  2. Set recurring bills for expenses
  3. Integrate expense management software with books of accounts
  4. Sync bank accounts,credit cards,payment gateways for automated matching
  5. Create workflows to streamline processes

These features are absent in a desktop environment.

2. All teams on one Software

Cloud based application empowers services organizations to manage

  1. People
  2. Projects
  3. Financials
  4. Customer
  5. Vendors

in one integrated application. Desktop bases software is designed to do only accounting. This means that the finance function becomes a silo, distinct from the rest of the business.

3.Accessibility

All you need is internet connection. Internet penetration is increasing in India and data costs are cheapest in the world. Your accounting software can be accessed from a PC,tablet,mobile phone or any other device. This allows teams to work remotely.

Desktop based software is installed on a machine and remote access is not possible unless one brings the machine along. This rules out remote working.

4. Customization

Cloud based accounting software are very flexible. An user can customize:

  1. Sales invoices based on customer requests
  2. Emails to be sent to vendors/customers
  3. Financial reports
  4. Integrate with third party apps

Desktop bases systems rarely integrate with other applications.Hence customization options are limited.

5.Data Backup

All data rests on the cloud. Data is backed up off site and secured by high tech systems.  If your computer crashes,is broken, you can access your data from another device.

Desktop software requires manual back ups. If your dedicated accounting computer breaks down then data,if not backed up, is lost. This can cause huge damage and downtime.

6.Security

A recurring question when it comes to cloud is “How secure is my data”?. Relax. All the cloud based accounting software’s use state-of-the-art encryption to secure data. You do not need an IT department to host and administer these applications. User access can be regulated and can be changed on demand.

Desktop software requires that local machines be protected from viruses and unauthorized access. Login credentials have to be kept confidential.

7.Updates

In cloud based software you are always using the most current version.The software is automatically updated for changes in tax laws or any other upgrades. Installing updates in a desk top software is forced when there is a migration. Bug fixes or other upgrades require a new version to be purchased.

So there you have it, seven reasons why you should move your accounting to the cloud.  Integra Books uses Zoho Books, cloud based accounting software to provide accounting services. Integra Books can help you migrate from into Zoho Books. Get in touch with us today to put your accounting on the cloud and empower your business.

Quick Tips to Improve Cash Flow

by Sanjeev Archak Sanjeev Archak No Comments

Cash is King. There are no two ways about it. Effective cash flow management is one of the  the foundations of a business. How do you improve cash flow? In theory it is simple, increase your cash inflow and decrease the cash outflow. However, putting this formula into practice is easier said than done. Hence, managing your cash flows requires foresight.

We have explored the need for cash forecasting and budgeting in our previous post .In this post we will provide you with some pointers on how to improve cash flow :

1. Review of Costs

Review the costs being incurred in your business and formulate a budget for major expenses. Bench mark these expenses against a  previous period. Look for cost savings by looking for cheaper products and services.

2.Inventory Management

If you are a manufacturing business or a retail business then managing inventory must be a focus area. Categorise inventory into fast,slow and non moving items. Stocking fast moving items will lead to quick inventory to cash cycle and cut cash blocking in piled up stock. There are various inventory management tools available. We recommend Zoho Inventory.

3.Get paid faster by Customers

Make it easy for customers to pay you by using payment gateways. These integrate cloud based accounting apps and makes collections & reconciliation a breeze. Monitoring credit periods is a must to manage cash from customers. 

4.Price your products/services

It is important to price your products/services to maintain their perceived  value. Increase in sales prices will lead to positive cash flows whereas decrease in sales price may result in increase in sales volume thereby leading to increased cash flows. So these decisions should not lead to loosing customers or decreasing  sales. It is a fine line to tread.

5. Build a cash forecast

Cash forecast is a strategic decision making tool. Hence it is important to run forecasts at regular intervals, this could be monthly, quarterly or even annual. A forecast always gives you a heads up.

Get proactive with cash flows

Work closely with your accountant to do all this. A cloud based accounting software helps you to do this and much more for your business. 

Our experts at Integrabooks will advise you on your cash flow management and working capital which helps to streamline your finances and produce improved cashflow. Get in touch with us today!

 

 

How to prepare for a Due Diligence Audit

by Sanjeev Archak Sanjeev Archak No Comments

You’ve nailed the pitch, and now it’s time to focus on what investors will ask for once you’ve caught their initial interest. We have already covered the pre-funding and post-funding checklists. In this post we will try to guide you on how to prepare for a due diligence audit.

Once an investor has expressed interest in investing in a company, the deal will enter into a due diligence process. “Due diligence” is a term given to the investigation or audit of a potential investment. Throughout the due diligence process, investors look to confirm all material facts in regard to investment.

Investing in early stage companies is risky and conducting extensive due diligence can reveal problems with a company’s business early on allowing investors to identify the key risks associated with the investment.This will allow them to either develop a risk mitigation plan with the company or back out of the investment altogether.

Some investors conduct due diligence prior to issuing a term sheet, a nonbinding agreement used to propose the terms of an investment. However,most investors, especially when participating in more competitive deals, will issue a term sheet and then complete due diligence. For those deals, successful due diligence results in the legal paperwork being drafted and the investment round closing.

A due diligence (DD) check list is divided into:

  1. Financial DD
  2. Legal DD

Financial Due Diligence

Financial DD covers all aspects of business with a financial perspective covering books of accounts, taxation,  A typical Financial DD check list is reproduced below:

Particulars DD Requirements
Accounting Records, documents and MIS Access to  Accounting package
List of books, records, documents, registers maintained
Sample copies of cash and bank vouchers
Bank reconciliation statements
Monthly MIS
Borrowings Detail of all secured/unsecured loans/working capital debt/ loan from shareholders/ directors & relatives loans
Purpose of loan
 Sanctioned amount, disbursement date/ schedule
Balance confirmations from lenders
Financials / Returns / Assessment status Audited Financial statements
Internal audit report
Tax audit report
Transfer Pricing report
Copies of notices / inspection / orders from VAT / Service Tax / Income Tax authorities
Status of assessments
Key Contracts / Agreements Agreements/ contracts with customers and relevant amendments/addendums as application
Details of Patents/Trademarks Nature of intellectual property – codes generated, physical machinery invented, new formulation, etc.
Ownership of patents
Research and development strategies
Fixed Assets Fixed assets register
Details of intangible assets
Capitalization Policy – Tangible and Intangible Assets
Debtors Age-wise analysis of debtors
Breakdown of provisions and bad debts
Creditors Age-wise analysis of creditors
Payroll / Renumeration Consolidated payroll register
PF / ESI / PT payment Challans and returns

Legal Due Diligence

Legal DD  covers foreign exchange regulation, company law compliance’s,labor law compliance’s.A typical Legal DD check list is reproduced below:

Particulars DD Requirements
Shareholder Details List of all current shareholders including addresses and numbers of shares owned
Share Certificates
Details of the Directors Name of all the directors, appointment of directors, resignation of directors
Board and General Meeting Minutes Copies of Board Minutes
Copies of Annual General Meeting and Extra Ordinary General Meeting Minutes
Private Placement Offer Issue Letters
Record of Offer Letter
Filings with the ROC
Annual Return filed with the ROC Forms filed with the ROC
Charge created on Assets Filings with the ROC
Incorporation documents MoA(Memorandum of Association) and AoA (Articles of Association)
Certificate of Incorporation
Register of Members Register of members
Register of Debentures holders
Loans/Investments/ Guarantees and Securities Register of Contracts
Register of Loans
Register of Investments

A sample DD check list can be found here. Founders and the team have to devote time and energy to the DD audit. Typically, a VC team will be using the gathered diligence materials to write a note to enable investment decision.

So if you are raising money and want help with due diligence audits get in touch with our experts at Integra Books.

SaaS metrics

by Sanjeev Archak Sanjeev Archak No Comments

Keeping track of key metrics is very important and can give you a great overview of how the business is doing. Traditional financial metrics like EBITA,Net Profit, Cash to Turnover does not cut it for a SaaS business. What metric should a SaaS company use to measure performance?  It doesn’t need to be all-consuming so let’s keep it simple. 

Here are the top metrics a SaaS business should track to keep growing and stay on the right path.

1.  Cost Per Acquisition (CPA)

Acquiring customers costs money. There is a cost involved in running Facebook ads, Email campaigns, Google ads. The formula for measuring CPA is simple.Your total marketing costs divided by a number of new clients you attract is your CPA. If you have a high CPA then you will have to re-look at your marketing processes and adjust accordingly. 

2. Customer Lifetime Value (CLV)

It is apparent that CLV has to be higher than CPV to generate a profit. This means that you consider the net profit over the entire course of your business’s relationship with a customer rather than just an initial sale. Depending on your business model this might be weeks, months or even years. SaaS companies have a recurring billing model which result in a loss in the initial transaction due to trial period discounts.

3. Gross Margin

A positive gross margin is required for a business prosper. So what is gross margin it is the difference between sales revenue and cost of goods sold. Increase in sales volume should allow increase in gross margin due to efficiencies.

4. Customer Churn

Customer loyalty is critical for a business. Customer retention costs nearly five times more than acquiring a customer. It is important to measure the time that the customer stays with your business. Something as simple as adding some user-friendly training videos your customers can access may improve churn.

Some simple ways to examine the drop-off points are to survey existing customers and test some changes, ultimately implementing the most effective changes.

5. Cashflow

Cash is King. Without cash, a business dies, it’s that simple. A profitable business need not be a cash rich business and would be struggling to pay day to day expenses.

Its important to build a cashflow forecast for a range of scenarios. A dynamic forecast will enable to make strategic business decisions. 

There are endless financial metrics you could track in your business but getting a handle on just these five will give you a great starting point and help you keep your business on track, improve your bottom line and manage growth in a profitable way.

If you are a SaaS company, we recommend Zoho Subscriptions to handle all your subscriptions. Let our experts Integra Books help you with setting up Zoho Subscriptions.

Happy Tracking.

 

 

Key fundamentals to Effective Accounting

by Sanjeev Archak Sanjeev Archak No Comments

Accounting can be tedious work,however it helps you get more organized,brings more clarity and allows you to work more efficiently. In a day and age where business is cut throat competition,financial insights could be the game changer for your business. In many instances it could even be your competitive advantage.Without accounting, you’re driving blind like a car without knowing how much fuel is left in the tank. Proper book keeping gives you sight of what’s happening both internally and externally.

In this guide, we’ll break down the basics of accounting, we’ll show you why it is critical and the seven key steps to setting up and optimizing your own accounting process to help you get on the fast lane past your competition.

What is accounting?

In simple words, accounting is the process of tracking of all your company’s financial transactions, so you can see clearly where your business is spending money,where your revenue is coming from and which tax deductions you’ll be able to claim.

Why does accounting matter?

Accounting provides answers to critical questions viz

1.Is my business profitable?

Profit matters.Profit is the most critical measure of a business.It keeps your business ticking.Well kept books of accounts will always provide the correct answer to this critical question.

2.Are my operations cost effective?

You may be able to see your bottom line by glancing at your bank balance, but ups and downs in your account are also telling a story.Are sales up? Are my operations costs too high? Who knows? Paying attention to your financial statements is a great way to get to know the story of your business

3.Are my operations cost effective?

Taxes. There is no escaping from taxes. Well kept books of accounts will help you legitimately claim deductions. The more information & supporting documents your CA has, the better tax return will be.

4.Will I get loans?

If you need financing of any kind, having well-kept books gives lenders or investors a clear idea of your business’s current financial state and allows them to make financial projections about your company’s ability to pay off loan in the future.

Where to Start?

You probably are thinking that these tasks are easy and doable.However, from our experience working with multiple business, unpreparedness is precisely the problem that gets them drowned when everything seems to be fine and running smoothly. It then suddenly hits you like a Tsunami out of
nowhere.Here’s a few steps you can follow to help ensure you have the basics sealed tight and functioning for your advantage.

Step 1: Separate your business and personal expenses

It is critical to separate business finances effectively. In fact, we would suggest to permanently separate them from your personal finances.

If you are running a limited company (Pvt Ltd or LLP or Public Ltd) there must be distance between your personal and business finance.A corporate company is distinct legal entity different from the promoters.The law requires that finances of company be tracked separately. 

Plus, you’ll want to pull your hair out when it’s time to reconcile bank statements, you have to hunt down the receipt for lunch to remember if it was a personal expense or a client meeting.

Step 2: Choose a bookkeeping system

There are two main accounting methods: single entry and double entry.It is a matter of picking the system that’s right for your business and applying it consistently.

Single-entry is a simple system that might work for you if your accounting is straightforward. Entries are recorded one time, as either an input or output If you are doing your own accounting, this is the approach you are likely to take.

Double entry is much more complex, but also more detailed and effective. At first, all transactions are entered into a journal and then each of them entered into the ledger twice, as a debit and credit. If you are a corporate entity in India, you will be required to maintain your books under the double entry system mandatorily.

Step 3:Choose an accounting method: cash or accrual

If you are using cash accounting, you only record transactions when money has exchanged hands. So if you billed a customer you will not enter it till your customer has paid you.

Under the accrual method, you will record the income when you bill the customer,rather than waiting for them to pay you.

If you are a corporate entity in India, you will be required to maintain your books under the accrual system of accounting.

Step 4: Organise and store your documents

At tax assessment time, the burden on you to show validity of all of your expenses, so keeping supporting documents like receipts and records is crucial. Income tax law in India requires you to maintain the documents for a minimum of 8 years. It is smart to use cloud based software like Zoho Books or other such software to store receipts so you don’t have to deal with smudged receipts.

Step 5:Make it a habit

It’s easy to fall behind on your accounting when you’ve got other things happening. To stay on track, try setting a finance date with yourself once a month to get it done. If you do happen to fall behind, Integra Books can help you get caught up in no time.

There you have it, basic steps to make the foundation of your accounting processes strong and effective for your business’s advantage. Accounting is complex but with a strong foundation, you’ll be equipped to race past competition and ensure you are always on track to profitability.

In this new age of technology why should accounting be cumbersome and boring? Let the experts at Integrabooks help you.

 

 

 

 

 

 

GST Refund-Online Processing

by Sanjeev Archak Sanjeev Archak No Comments

The Government of India has been introducing changes to the GST law to make it more user friendly. As a part of this measure we have seen a simplified return scheme (you can read about  changes here https://integrabooks.co/changes-in-gst-law-return-filing-including-annual-returns/) being introduced from April 2020.

Another significant measure is the introduction of online processing of GST refunds. GST refunds have been a major contention for exporters ever since the introduction of GST. There were problems of jurisdiction of tax payers and huge paperwork to be filed for refunds. (You read about manual refunds here https://integrabooks.co/manually-file-gst-refund/)

In a significant process  improvement, a new online refund processing system has been announced to be begin from 26th September 2019. The changes introduced are as follows:

  1. . Refund applications filed by the taxpayers in RFD-01 form shall be processed electronically/ online by the tax-officer and all communications between the tax officers and the taxpayers shall take place electronically. 
  2. Refund amount shall be disbursed by accredited bank of Central Board of Indirect Taxes and Customs (CBIC) through the Public Financial Management System (PFMS) after bank account validation.

The details of changes in various forms are illustrated below in the tables:

Form RFD-01
Description  Refund Application
Action by Taxpayer
Previous Processing Workflow The taxpayers were filling refund application in form RFD-01A online. 
Electronic/ Online Processing  1.The RFD-01A form has been disabled on the portal.
2.The taxpayer shall be able to file his refund application in form RFD-01 now.
3.However, the taxpayer shall be able to view the status of RFD-01A applications also along with the new ones.
4.The bank account details mentioned in the refund application shall be validated by PFMS after filing of RFD-01. The taxpayers must ensure that the bank account details selected in the refund application are valid and correct.
5.The taxpayer shall be able to view the status of bank account validation
on his dashboard. It will also be communicated through e-mail/ SMS. 

 

Form RFD-02
Description  Acknowledgement
Action by Tax Officer
Previous Processing Workflow The tax officer issued RFD-02 manually.
Electronic/ Online Processing  1.The tax officer shall issue RFD-02 electronically to the taxpayer.
2.The taxpayer shall be able to view the acknowledgement in RFD-02 on his dashboard.
3.The taxpayer will also receive communication through email and SMS. 

 

Form RFD-03
Description  Deficiency Memo
Action by Tax Officer
Previous Processing Workflow The tax officer issued RFD-03 manually and there was no auto recredit
of ITC/cash.
Electronic/ Online Processing 

1.The tax officer shall issue RFD-03 electronically to the taxpayer.
2.With the issuance of RFD-03, the ITC/ cash will get re credited to the electronic credit/ cash ledger of the taxpayer.
3.The taxpayer shall be able to view the deficiency memo in RFD-03 on his dashboard.
4.Once RFD-03 has been issued against an ARN, the taxpayer is required to file a fresh refund application.
5.The taxpayer will receive communication through email and SMS. 

 

Form RFD-04
Description  Provisional Refund Order
Action by Tax Officer
Previous Processing Workflow The tax officer issued RFD-04 manually.
Electronic/ Online Processing  1.The tax officer shall issue RFD-04 electronically to the taxpayer.
2.The taxpayer shall be able to view the provisional sanction order in RFD-04 on his dashboard.
3.The taxpayer will receive communication through email and SMS. 

 

Form RFD-05
Description  Payment Order
Action by Tax Officer
Previous Processing Workflow The tax officer issued RFD-05 manually and sent a copy to the central  nodal authority and state AAs respectively for disbursement.
Electronic/ Online Processing  1.The tax officer shall issue RFD-05 electronically to the taxpayer.
2.The tax officer is not required to send the copy of RFD-05 to the central nodal authority and state AAs.
3.The taxpayer shall be able to view the payment order in RFD-05 on his dashboard.
4.The bank account details mentioned in the refund application shall be validated by PFMS after issuance of RFD-05 by the tax-officer.
5.The taxpayer will receive communication through email and SMS.

 

Form RFD-06
Description  Final Refund Sanction/Rejection Order
Action by Tax Officer
Previous Processing Workflow The tax officer issued RFD-06 manually.
Electronic/ Online Processing  1.The tax officer shall issue RFD-06 electronically to the taxpayer.
2.The taxpayer shall be able to view the final sanction/ rejection order in  RFD-06 on his dashboard.

 

Form RFD-07B
Description  Withholding Order
Action by Tax Officer
Previous Processing Workflow The tax officer issued RFD-07B manually.
Electronic/ Online Processing  1.The tax officer shall issue RFD-07B electronically to the taxpayer.
2.The taxpayer shall be able to view the withhold order in RFD-07B on his dashboard.
3.The taxpayer will receive communication through email and SMS.

 

Form RFD-08
Description  Show Cause Notice
Action by Tax Officer
Previous Processing Workflow The tax officer issued RFD-08 manually.
Electronic/ Online Processing  1.The tax officer shall issue RFD-08 electronically to the taxpayer.
2.The taxpayer shall be able to view the show cause notice in RFD-08 on his dashboard.
3.The taxpayer is expected to give reply to the SCN within 15 days of
receipt of the SCN.
4. If the taxpayer doesn’t respond within 15 days of the issuance of SCN, the tax officer can take action on the refund application.
5.The taxpayer will receive communication through email and SMS.

 

Form RFD-09
Description  Reply to Show Cause Notice by the Taxpayer
Action by Taxpayer
Previous Processing Workflow The taxpayers were submitting reply to the show cause notice manually  to the tax officer.
Electronic/ Online Processing  1.The taxpayer is required to reply the SCN electronically/online in RFD-09 form which would be available on his dashboard.
2.The taxpayer shall be able to reply to the SCN and upload supporting documents electronically through RFD-09.
3.The tax officer may not process the reply to the SCN if not given electronically in RFD-09 by the taxpayer. 

 

Form RFD-09
Description  Order for Re credit of Rejected Amount
Action by Tax Officer
Previous Processing Workflow The tax officer uploaded the refund order details in RFD-01B and then the ITC got re credited to the taxpayer’s ITC ledger.
Electronic/ Online Processing  1.The tax officer shall issue PMT-03 electronically.
2.With the issuance of PMT-03, the inadmissible ITC shall get re credited to the electronic credit ledger of the taxpayer automatically.
3.The taxpayer is required to give an undertaking that he will not file an appeal against the refund order if he/she desires to get a recredit of the rejected amount. This undertaking has to be submitted to the tax officer manually.
4.The taxpayer shall be able to view the recredit order in PMT-03 on his  dashboard.

Now the tax payers will be able to view the various stages of processing of their refund claims. Communication between the GST department and tax payers are now through email/SMS which is welcome move.

The disbursement of refund will now be done by a single authority.Earlier the state and the central government used to disburse the refunds separately. 

Final Thoughts

Online GST refund processing is a major relief for tax payers. The earlier process relied on too much paper work and manual processing  of claims. Hope this new workflow proves beneficial to tax payers.

 

Budgeting and Cashflow Forecasting

by Sanjeev Archak Sanjeev Archak No Comments

A business to be successful has to not only focus on day to day elements of finances but has to create a financial plan for the future.A financial plan will enable the management team to know where they are going and how they’re going to get there.

Budgeting and forecasting is an essential part of any business. Often these terms are used interchangeably.In this post we guide you through the differences between budgeting and forecasting and how combining them together  will give you an insight into your financial future

Budgeting

Budgeting is used to control your spend. This is a periodic exercise which is can be done either on a quarterly or annual basis. Normally, businesses set targets for revenues or expenditure across the entire organisation.Actual versus budgeted numbers provide a clear picture to internal and external stakeholders of the money that is available.

Forecasting

Forecasting is about attempting to predict, as closely as possible, the real financial outcomes you’ll see over a given period. A forecast uses current data to build “What if Scenario’s”. 

So for a robust financial forecast it is necessary to have solid financial data.It is apparent that a dynamic forecast is the result of current business knowledge and reliable data. A forecast, unlike a budget, can be run at anytime viz, monthly, quarterly or yearly. A forecast is an essential part of business intelligence aiding decision making.

Scenario planning is a process of trial and error which is played out in theory. Some examples of scenario’s could be:

  • what if rentals go up by 5%?
  • what if selling prices go up by 5%?
  • what if payroll costs go up by 10%?

The answers to all these have a significant impact on the business. Scenario-planning is there to help you understand the impact of your business decisions, and to reduce the potential risk by showing you the most financially astute pathway to take when it comes to planning for the future.

A better view of the future with cloud accounting

Spreadsheets are not up to the task, being time-consuming to update, tricky to share and generally outmoded by the latest in online accounting software. Having a cloud accounting platform as your main accounting system adds real value, by helping the business to record every single transaction – and giving you a pool of real-time data to dip into.

Having this huge pool of financial information at your disposal allows you to create three-way financial reporting and provides a data source you can integrate with your choice from the latest in financial technology reporting and forecasting apps.

With a forecasting solution incorporated into your forecasting you can turn your numbers into a practical reality that you can then execute on. There’s an ever-growing marketplace of cloud-based apps you can integrate into your core system – and that means you can use budgeting tools, budget managers, KPI dashboards and business intelligence solutions to measure business performance and check out those ‘What if…?’ scenarios across the period.

Look to the future and succeed

If you’re serious about making a success of your business, you need to plan ahead, get your budget in place and run regular forecasts to check that you’re on track.

At Integra Books we believe that cloud based services are the future and to achieve this we have partnered with Zoho. We use Zoho Books as accounting software integrated with Zoho Reports. The sync between Zoho Books and Zoho Reports will enable to track your budgets and build forecasts for the future. 

Integra Books combines the best domain expertise with best in class technology. Get in touch with us to set ball rolling.