Follow these tips to stay compliant with the Inland Revenue Department (IRD) and prepare end-of-year financial statements quickly and easily.
After you’ve registered your company in Hong Kong, you’ll be able to start operating your business. But as you focus on daily growth and fighting fires within your operations, you start to neglect your accounting duties. It’s easy to lose track of receipts, invoices, and other important paperwork. With a hectic work schedule, it’s tough to find the time to organize everything and focus on long-term financial planning.
Maintaining accurate accounting records throughout the year will enable you to:
- Ensure that your business practices comply with the IRD
- Get the most value out of your deductible expenses
- Reduce tax obligations legally
- Save time by preparing your end-of-year financial statements ahead of time
- Construct a mindful plan for your business’s future prosperity
- Run your business with more confidence
In this article, we will explore five tips that Hong Kong businesses need to know in order to improve their accounting accuracy.
What you’ll learn:
1. Identify sources of revenue
2. Organized invoices and receipts
3. Prepare financial statements
1. Identify your sources of revenue
Usually, a revenue stream refers to one of the ways your business generates money. You might have several revenue streams, for example:
- Transaction-based revenue
- Project revenue
- Service revenue
- Recurring revenue
The revenue stream is vital to business success and accounting responsibilities. Before sending the IRD your company’s financial statements, you need to identify all sources of revenue.
If you want to avoid penalties and fines, cross-check your reports for any mistakes before turning them in. To plan for the future and identify opportunities for growth, you need to understand your current value streams. To summarize, it is essential to identify and manage your various revenue streams effectively.
2. Organized your invoices and receipts
Unpaid or late invoices will take a toll on your company’s cash flow. To avoid this, make it a rule that you cannot accept new orders from clients until they have paid for previous ones. Tracking your invoices and receipts is essential to know how much you owe, what is owed, when projects were completed, what was spent on them, etc. This information is critical for business planning and key to maintaining accurate accounting records.
Maintaining the organization of your invoices and receipts guarantees that you can claim all potential deductions, so you don’t overpay on taxes. This way, you’ll stay compliant with the IRD, avoid overlooking income for your financial statement, and get a clear summary of your revenue and spending–this identifies core clients, expenses, etc.
3. Prepare financial statements
Your business’s financial statements for the past year provide insight into your company’s progress, including completed projects, revenue, employee compensation, and profit margins. The three key elements of your financial statement are:
- Balance sheet
A comprehensive view of your organization’s finances, including all assets, liabilities and stockholders’ equity if applicable.
- Income statement
Tracks your company’s revenue and expenses throughout the year Although it contains some of the same information as a balance sheet, they are not the same.
A financial document that provides insights into your company’s inflows and outflows of cash during the year.
After you create all the above items, you can start the audit.
4. Ask for professional help
Depending on the size and nature of your industry, you may be able to use accounting software that’s already available out there or customize your software. Xero is our software partner, and we’re always here to help you with using it.
5. Automate your process
Accountant software is making it much easier to enter data into spreadsheets and reconcile figures. Cloud-based accounting software like Xero can save you even more time by complementing your digital business. And if you already do all your banking online, using cloud accounting software will allow you to sync your business bank account with the cloud software quickly and securely.
In addition, Xero updates its invoicing feature in November this year. Starting from 16th November, new customers will access the new invoicing experience by default when they first try Invoices in Xero hk. Customers will still be able to switch between new and classic invoicing if they choose. For more details, stay tuned to our upcoming blog!
How can FastLane help?
Following our 5 top tips will help you stay compliant, develop a good relationship with IRD, pay the appropriate amount of tax, and always have accurate accounting. This way, you can avoid any financial surprises and make next year your most profitable yet.
Need help getting your Hong Kong business accounting in order? FastLane offers assistance with tax filing, auditing, and cloud-based accounting for businesses of all sizes.
|As a Xero Certified Advisor and Platinum Partner, FastLane can offer a range of services that will let you get the most out of Xero and adapt to any new features that Xero will offer.|
Don’t hesitate to contact us or visit Xero’s website (www.xero.com) to explore how FastLane and Xero can benefit your business!