8 June 2020

Settings up the accounts department for Companies in India

For startups and newly incorporated companies, it is common to have questions like:

  • How should I set up my account department?
  • Does my company need a full-fledged accounting team?
  • Should we appoint a CA firm for monthly compliance?
  • When does one need to outsource accounts work?

In India, the business scenario, the compliances and the regulatory framework have all become very complex. There are multiple return filing, disclosures and document uploads required every month. It is important that businesses having operations in India have a dedicated accounts person or team right from the start.

The entire system of tax related filings in India is based on self-declaration. Hence periodic returns filed under various laws require disclosing the level of activity, turnover, expenses etc. based on which tax is calculated and paid. Be it GST, Profession tax, TDS, Income tax, all require self-assessment and declaration. In such a case the base data and its correctness assumes great importance. In fact, accounting data firms the basis for proper calculation and payment of taxes and filing of returns.

A lot of companies do well in their core business functions and are too aggressively involved in these operations. The accounts and finance function sometimes go to the back burner till the time a financial hurdle or block is faced.

More so with compliance and filings. It is common that companies miss due dates and act only when they start facing penalties or late fees.

Hence having a robust accounting, compliance and audit framework will go a long way in the company’s progress. Hence organizations need to have the right team to fulfill all these requirements.

The following are the key considerations based on which companies can decide the team size and composition of their accounts department.

  • The nature of operations of the company
  • Geographical locations in which the company operates
  • Whether centralized or decentralized operations and teams
  • Different departments and verticals of the business
  • The volume of accounting data, bills etc. to be handled
  • Management requirements and expectations for reporting, MIS etc.

Based on the above the following are the broad alternatives or methods.

Option 1 – Have an in-house team

  • In this method the entire team is recruited and trained in-house
  • They are responsible for maintaining the accounts and compliance records in the prescribed way
  • There must be a blend of junior and senior executives
  • At least one full-time chartered accountant must be appointed on company payroll for compliance and taxation work
  • The entire team needs training on a regular basis to be updated with taxation and related laws

This model is suited for larger companies having complex structure or where the management cannot give access to data and documents to an external agency.

Option 2 – Accounts Outsourcing

  • Accounts outsourcing involves outsourcing the entire bookkeeping and accounting function to an external agency
  • A proper framework and guidelines are need for effective implementation
  • A formal document defining roles, responsibilities and deliverables is a must
  • External agency must maintain the required professional standards for managing the required tasks and maintaining confidentiality
  • All aspects like sharing of documents and information, reporting aspects, due date and timelines etc should be agreed upon

This option can be considered for companies that generate large volumes of accounting and financial records. It can also work well for entities having repetitive tasks which can be automated and outsourced.

Option 3 – Partly Outsourced functions

  • Here, junior accountants and data entry persons are on the payroll of the company
  • Hence basic data, vendor and staff information is always readily available
  • A professional CA firm should be appointed to review the accounts on a monthly basis
  • The expert agency will obtain the base data from in-house teams, review the same and file the compliance related returns as per due dates
  • The in-house team is responsible for maintaining accuracy of base date and coordinate with the CA firm and also with auditors

This option is well suited for accounting for startups and smaller companies where it may not be feasible for a startup to appoint a full time CA and an in-house team. This would also allow the inhouse team to learn and gain knowledge from the CA firm and be updated with changes in regulations and laws.

Read more about how our Accounts outsourcing services can help your organization.

Conclusion

We have discussed in depth the factors to consider and the options available for setting up a company’s accounts department.

There is no one line answer or solution; and as companies grow, they need to adapt, and also consider other options over time.

Contact us for customized solutions for your accounts department.