Accounting and Tax Reporting: Here is What You Need to Know

When you open a company in Hong Kong, China, or other jurisdiction, one of the crucial obligations is tax reporting. Efficient accounting facilitates correct tax reporting, which is critical for compliance with different authorities and group’s tax strategies.

Tax accounting and accurate reporting are also crucial in any company’s financial cycle for appropriate cash-flow management and planning for tax liabilities. 

However, it can be pretty complex because of the rapidly changing financial laws and policies. If your company works in different jurisdictions, say Hong Kong and Singapore, the process of accounting and tax reporting can turn into a nightmare. So, is there a way out? The answer is outsourcing.   

In this post, we delve deeper into it to help you understand how they work. Further, the post outlines the main reasons why you should consider accounting and tax reporting outsourcing.  

What is the Relationship between Accounting and Tax Reporting?

You may be conversant with accounting in your business, but how is it related to tax reporting? Accounting is the preparation of financial information for control and decision-making. It requires the gathering of factual financial information about the company and its interpretation in the management.

Although some consider accounting to be simply bookkeeping, it is a lot wider than that. For example, planning and financial analysis and accounts receivable/payable management are still part of accounting.

Tax reporting, on the other hand, is a process of compliance where a company files filled forms with the tax authorities. These forms capture crucial financial information, such as expenses, income and other crucial tax-related information for your company. The information provided to the tax authorities helps to demonstrate the position of the company, especially income and expenditure, and further ensure all taxes are paid on time. Therefore, tax reporting is entirely dependent on a company’s accounting. 

Common Challenges

One notable thing about it is that it can be pretty challenging for most companies. So, here are some of the main challenges faced by companies when dealing with accounting and tax reporting:

• Understanding the core drivers behind effective tax rates.
• Using non-tax personnel when responding to tax queries.
• A lot of work in the accounting department, especially when scaling up. For example, financial data on business income, expenses, and taxes, is likely to be a lot.
• Lack of expertise in accounting and tax reporting matters. Is factoring business returns in business statements or following the standards recommended for business accounting a challenge? What about filing tax returns? 
• Rapidly changing regulations about accounting and tax matters. This is perhaps the most challenging because the policies from the IRS can change anytime and your business needs to comply on every front, from taxes to recording different company expenses.
• High cost of maintaining a vibrant accounting and tax reporting department in a company. Whether your firm is  new or already in operation, maintaining a long list of accountants as permanent staff is never cheap. This is why most companies prefer to outsource accounting services, especially when there is a lot of work to be done. 

If your company has just started an offshore branch, compliance to the local and international standards is also likely to be challenging. This is the case because requirements for every taxpayer in different countries are different. For example, the tax reporting method in Hong Kong is different from the one used in Singapore. As we are going to highlight in the section below, the best way to address these challenges is outsourcing accounting and reporting services from an agency of experts.

It is true you might be able to do some part of accounting and tax reporting, such as to file tax returns or factor in expenses in the books, but that might not be ample to cover the entire array of activities that need to be done by the accountants in your companies. 

Accounting and Tax Reporting: Why You Should Outsource 

Planning for company growth at any time of the year requires a clear understanding of the organization’s clients and accounting information, which is used for strategic planning. To make the right decisions, it is also important to ensure that such accounting information, be it about cash flow or spending, is available in real-time. For example, the response of clients to new products can have huge impacts on the cash flow, especially if they like it.

Such information availability would make it easy for decision makers to recommend that more resources be directed to the marketing department.  

The good thing with outsourcing the business accounting and tax reporting services from top-rated firms is that they use cloud accounting that helps to provide all the information in real time. Cloud accounting programs can automatically pull out bank statements so that the balance sheet for your company is generated on the basis of the latest income reports, tax obligations, and expenses of the company. Other benefits of outsourcing it include:

• Helps to prepare and review interim annual tax provision calculations.
• Validating your company’s tax balance sheet accounts. 
• Advising your company on the impact of different tax standards based on the local requirements as well as the International Financial Reporting Standards (IFRS) and Generally accepted accounting principles (GAAP). You can use this information to prepare short-term, yearly, or long-term work projections, standards compliance, and cash flow targeting. 
• Reviewing the current tax accounting and reporting processes to identify areas that require improvement for higher efficiency. This is very important because it can help you to avoid unnecessary penalties, tax accrual, and danger of operating license getting withdrawn. 
• Managing tax processes and training your staff on accounting and tax reporting.

In addition to the above tasks, a good accounting and tax reporting firm can help with new ESG (environmental, social and governance) reporting requirements. The reporting is not just a demand from authorities such as the IRS, but clients and investors now want to be associated only with responsible businesses. For example, if your company is listed or plans to get listed with top exchanges, such as Hong Kong Stock Exchange (HKEX), the ESG reporting will be crucial for compliance. It will also come in handy to help investors appreciate your business potential on the basis of financial statements, returns, and operating standards to make the right decision to invest in it.

How to Pick the Best Firm for Outsourcing and Tax Reporting Services

Now that we have demonstrated the importance of working with a professional firm for accounting and tax reporting, there is one more thing; what is the right method for selecting the right firm? This can also be challenging because of the long list of firms that are offering accounting services. To ensure you only select and work with the best accountants on the basis of their services, here are some useful tips to consider:

•       Only work with the firm that has demonstrable knowledge in accounting and tax matters: This is perhaps the most important thing when selecting a firm for accounting and tax reporting work. You should review the selected firms to confirm that all the accountants in it are certified public accountants (CPAs) and hold other relevant qualifications. They should also have ample experience from working with previous companies. This will give you the assurance that their services are of high quality. 
•       Commitment to helping your organization achieve its objectives: Although the primary goal of seeking expert assistance is the accounting and tax reporting tasks, you should go beyond that. These professionals have a lot of information that can help your enterprise to grow rapidly into the multinational of your dreams. Having helped other firms that are now very successful, the experts can assist you in narrowing down to identify strategies that work. Therefore, only select the firm that is willing and capable of aiding you become more successful.
•       Competitive Rates: By hiring a professional firm to handle your accounting and tax reporting portfolios, one of the goals is to pull down the related costs. Therefore, you should check for the firm with competitive rates. Remember that the element of cost should be looked at together with the focus on quality as opposed to simply rushing to the cheapest and risking poor quality services.

Accounting and tax reporting in a company are two critical areas that you need to get right for your business to succeed. By working with professionals, it becomes easy to not only comply with various accounting and reporting standards, such as filing tax forms according to the IRS, but you also get useful information that can be used to enrich your strategy.

Remember that you can engage experts on accounting and tax reporting at any stage of your business, whether it is at startup or already established.