Small and medium-sized companies, usually hire an accounting firm to help them balance the books. This is a smart move. Hiring an experienced accountant full-time may not be necessary for every small company. However, “bookkeeping” is not as simple as some people might think. It’s not only a procedural job rather it necessitates a correct understanding of national tax laws and regulations and experience in the application of local tax policies. In other words, it’s a professional job for which, experience and care is very important.
That’s the most important reason to hire a good accounting firm.
According to applicable Chinese law, anyone who wants to take up this trade is supposed to incorporate a company and acquire an accounting agency license. In addition, the following requirements have to be met:
1. Not less than 3 full-time employees, who should master the basic knowledge and business skills of accounting, and who shall be able to deal with basic accounting tasks independently.
2. A reasonable staff configuration which comply with the regulations, make sure there is a team of field accountants, book-keeping accountants, audit accountants, tax accountants etc.
3. The staff in charge of the book-keeping should be qualified as an accountant or above and should have been engaged in accounting work for not less than three years.
4. There are fully established internal operational norms.
However, mediocre accounting firms barely meet the above-mentioned requirements. They usually hire lots of sales people to get business and charge lower prices as selling points. As a consequence, they can’t afford to hire qualified and experienced accountants to get the job done. They can only hire unexperienced graduates or unqualified staff to do the job after a brief training.
Such employees don’t know how to handle accounting related matters properly. To make things even worse, the high turnover rate in such companies will often lead to a very bad outcome for its clients: there are too many different employees engaged on the same accounting matter, and the ways in which they handle the same matter is often totally different due to knowledge gaps, bad management, lack of training or missing internal guidelines.
A fact about accounting — however, often overlooked by people is, that it is a profession of which ordinary people often can’t tell whether it’s done properly and in line with industry standards. It means that people usually don’t realize that their accountants have made grave mistakes until it’s too late! Often business owners have to make extra efforts in time and money to get matters fixed.
From time to time, we hear that some businesses complain about being blacklisted by their local AIC because their accounting agency forgot to go through the annual compliance check on their behalf; or, they hired a “cheap” accounting firm when they started their business, however, as their business grows and they are looking for investors or try to merge with other businesses, they are told that their books are a mess!
It’s understandable for start-ups to want to control their “burn rate”, however, a lack in professional service is most probably not a suitable way of cost control in the long run.
Related regulations:
<Accounting Law of the People’s Republic of China>
Article 36 An organization which is not equipped to set up an accounting organisation shall entrust an intermediary established with approval to provide bookkeeping agent services, to handle the organization’s bookkeeping matters.
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