During the course of our working with clients as professional accountants, we noted that some new companies mostly focus on sales and marketing instead of hiring professional accountants at the beginning stage of business, resulting in a number of problems. Here are some examples.
1. Foreign exchange issues. At the early stage of many Foreign Invested Enterprises (“FIEs”), the overseas headquarters may pay a lot of money for setting up the FIEs in China. However, these expenses may not be paid back by the FIEs if they are not properly planned in advance. Then these FIEs have to write off these payables to headquarters as non-operating income and pay 25% corporate income tax.
2. Tax issues. Some enterprises failed to do the tax registration or assessment on time and leave a bad record with tax bureau at the very beginning. Some enterprises didn’t set up a good accounting system at the very start, causing financial mess and unqualified invoices, and then resulting in unnecessary overpayment of taxes or tax penalties due to underpayment of taxes.
3. Fraud issues. The fraud issues in enterprises can’t be found timely without effective internal control procedures set up by professional accountants.
4. Budget and planning. Many foreign investors think the less the registered capital is, the better. However, in practice, quite often they may find they are lack of cash over time and have to increase the registered capital which takes almost 3 months and more service cost.
Before a business is set up, professional accountants will help the top management of the new business to take into account all above, but not limited to, issues and provide recommendations at the very beginning. They can help to work out a reasonable registered capital, lower tax risk, set up sound internal control procedure and monitor the cash flow of the operation, etc. The top management can then focus on business development without worrying the above issues. So, get your professional accountants involve to help you, either in-house or out-sourced, as early as possible.
