How Can the Right Chartered Accountant Help Your Tech Export Business?
May 20, 2023
Cash flow problems. Poor investment decisions.
Unplanned levels of debt. Complex international tax laws.
Inefficient operations. And, inadequate financial planning.
Such risks in a tech export business are not isolated - they're interconnected and often causative. However, they have a common solution: having a good chartered accountant on your side.
With their finance, taxation, and regulatory expertise, chartered accountants can help you navigate the choppy waters of international business and ensure your enterprise stays afloat. They can help you optimise your finances, reduce your tax burden, and make strategic decisions that position your business for success.
However, it's not just about avoiding pitfalls- a chartered accountant can also help you seize opportunities and chart a course for growth.
9 ways a Chartered Accountant can help your tech export business
When managing finances, you may face several daunting challenges, especially if you are unfamiliar with the intricacies of international business. While not a miracle worker, a CA can help you with many aspects of financial management or, at the very least, give you sound advice upon which you can act.
CA Ravi Mamodiya, a seasoned chartered accountant professional, explains, "Understanding the numbers in your business is essential, but interpreting them is where the real value lies. From an economic perspective, pricing has a compounding effect on your margins, and distribution costs can impact your sales. Effective communication of these numbers is crucial, and your CA can help you identify areas where your business strategy may be falling short.”
Lean towards your CA when you need assistance in the following areas.
Budgeting and financial analysis
While operating internationally, your tech export business may have to deal with multiple currencies and their highly volatile exchange rates. These fluctuations can significantly impact your bottom line, making it difficult to plan and forecast finances accurately.
A CA can help you develop a realistic budget for your business, considering factors such as cash flow, revenue projections, and capital expenditures. They analyse your financial statements and identify areas to improve your profitability. This way, the right CA can help you develop a cash flow management plan, ensuring you have enough cash to meet your financial obligations and make strategic investments in your business.
International tax laws
Every country has its tax regulations which govern domestic transactions. These can be complex and dynamic. For example, if you provide consulting services in the US, you must comply with their tax regulations, file tax returns, and withhold taxes on payments made to the Indian business. However, keeping up with tax laws in different countries is time-consuming and costly.
A CA can help you understand these laws and ensure compliance. They can help you understand the difference between withholding taxes for domestic and import/export transactions. They can also help businesses with the necessary documentation, such as form 15CA and Form 15CB, which are required for making international payments.
Payment methods and invoicing
Exporting your services to countries with unique financial requirements, such as different payment methods and invoicing practices, is challenging.
For example, a US-based client may prefer a specific payment method that is not common in India. You need to ensure they are set up to receive payment through the client's preferred method, whether it is a wire transfer, credit card, or another method. You must be aware of any charges involved when accepting payments through these avenues.
A CA can help you navigate the invoicing and payments process and ensure they comply with all regulatory requirements.
Concerning payment methods, Rohit Khurana, a Chartered Accountant professional and finance lead at Skydo, explained, “A CA can help you to understand the costs involved across the different payment methods. There are some costs which are visible and apparent, but there are some costs which are not apparent, like FX markup, etc. In payment methods, a CA can guide you to analyse regulatory mechanisms and cost comparisons.”
After making international payments, businesses need to comply with the Foreign Exchange Management Act (FEMA) regulations. One of the key requirements under FEMA is filing the Foreign Inward Remittance Certificate (FIRC) with the bank. A CA can help you comply and avoid penalties.
Additionally, the Goods and Services Tax (GST) is a crucial part of business in India. All businesses, including tech export businesses, must comply with GST regulations. Although there is no GST payable on invoices denominated in foreign currency, a CA can help you understand the payments of reverse charges and how to claim refunds, among other regulations.
To avoid tax penalties, Rohit Khurana, a chartered accountant professional and finance lead at Skydo, suggests, “Any payment channel you are using needs to ensure that the channel provides you FIRC for all the foreign payments. If the Income Tax Department charges you for not paying the GST, you can provide FIRCs for all your foreign payments.”
Claiming Subsidies and Incentives Applicable
The Indian government offers various subsidies and incentives to promote exports. However, the challenge lies in the right way to claim them. A good CA can help you understand these and help you assert their benefits.
For example, the government offers various export promotion schemes, such as the Merchandise Exports from India Scheme (MEIS) and the Service Exports from India Scheme (SEIS).
Also known as the price that one company's subsidiary charges another subsidiary for goods or services, it can be complex, especially for tech export businesses operating in multiple countries. A CA can ensure that you follow the proper transfer pricing guidelines, which helps you avoid potential penalties and get a fair price for your goods or services.
Entity Structuring in India
This step is crucial in setting up a tech export business. A CA helps you choose among the various legal structures available, such as Limited Liability Partnership (LLP), Private Limited Company (PLC), Sole Proprietorship, and One Person Company (OPC).
CAs can help businesses develop Standard Operating Procedures (SOPs), which can help ensure that repetitive tasks are standardised, saving time and preventing human error.
Accounting and bookkeeping
CAs ensure that your financial records are accurate, up-to-date, and compliant with relevant laws and regulations. It helps eliminate the need for in-house high-cost resources until your business is large enough to support a full-time team.
“It's important to bring diverse perspectives and strategies to your business, including cross-border expertise and a global mindset. With this approach, you can navigate international tax laws and other challenges and stay competitive in a global marketplace,” states CA Ravi Mamodiya.
How Skydo Can Help
If you're running a business that deals with international transactions, we know how tough it can be to manage payments and currency exchange. That's where Skydo comes in.
We’re a payment partner that can help simplify things and save money.
One of the ways we can help you is by providing competitive FX rates for transactions. This means you won't have to worry about paying high conversion fees or dealing with unfavourable foreign exchange rates. We also eliminate the need for multiple bank accounts in different currencies, saving you time and hassle.
Skydo can help you streamline invoice payments and manage your cash flow, so you can focus on growing your business. With our user-friendly platform, you can track payments in real-time and stay on top of your finances.
The Final Word
International trade is a highly competitive arena where every opportunity counts. By working with a trusted chartered accountant, you can streamline your business’s financial operations, reduce costs, and improve profitability. Look for professionals with expertise in navigating complex financial regulations, optimising tax planning, and ensuring regulatory compliance.
Furthermore, with the right payment partner, you can automate your business’s payment processing, reduce errors and fraud, and improve cash flow. When choosing a payment partner, look for a provider offering flexible, scalable solutions tailored to your specific needs. The provider should have a proven track record of reliability and security, with robust fraud detection and prevention measures in place.
- Tech export businesses face several financial challenges, including cash flow problems, poor investment decisions, unplanned levels of debt, complex international tax laws, and inefficient operations. Inadequate financial planning can exacerbate these issues.
- Chartered accountants (CAs) can help tech export businesses navigate these challenges with their expertise in finance, taxation, and business strategy.
- Some of the ways CAs can assist include entity structuring, tax understanding and compliance, invoicing and payment processing, post-payment compliance, GST filing, and claiming subsidies and incentives.
- CAs offer a wide range of services beyond tax planning and compliance, such as drafting SOPs, budgeting, transfer pricing, financial analysis, and accounting and bookkeeping.
- Collaborating with a CA and a payment partner is crucial for the success of tech export businesses, as they can help optimise financial operations, reduce costs, and improve cash flow.