You finally made decision to get your venture registered. Now what is next? In this article, we have outlined 5 things that you MUST do to manage your business’ accounts and finances immediately after the completion of business registration process.
All the ventures, regardless of their size, nature of business, geographical area etc., should compulsorily take Permanent Account Number (PAN) to start and continue their operations. PAN can be obtained from Internal Revenue Office (IRO) after submitting an application form with supporting documents like registration certificate, minute of BOD for obtaining PAN, two photograph of at least one promoter/shareholder, map containing location of registered office etc. It is also mandatory to display a copy of PAN certificate at your office for public view.
Additionally, company with annual transaction (sales or purchase whichever is higher) exceeding NPR 20 lakh and service provider with annual transaction exceeding NPR 10 lakh must also get registered under Value Added Tax (VAT) under same Permanent Account Number.
You must open a bank account and channelize all your transactions through the account itself. For example, collecting your capital, pay your suppliers or salary to your staff through cheque. Limit the use of cash, except for petty expenses. This would help not only in tracking and reconciling the transactions but also in creating transparency in the business operations. Various documents such as Registration documents (MOA, MOA, OCR Registration Certificate), minutes of board for opening bank account, photo and any other specific documents etc are required for opening a bank account.
You must send various details about your company to OCR after registration of the company. This includes
You need different materials such as invoices, receipts, vouchers and ledgers to record your transactions. Sales and Purchase Book are required for transaction relating to Value Added Tax. There is specific format of these materials to ensure that all the required information are captured and some are even to be approved from regulators prior to use. So you need to design and print those materials to ensure that your first transection is recorded correctly.
From the day you start your transaction, you must record your transactions in line with minimum requirement of government authorities (Inland Revenue Department, Office of Company Registrar and other Industry Specific Regulators) and Nepal Accounting Standards. Value Added Tax (VAT) Income Tax, Excise Duty and any other tax are calculated based on data captured in your accounting system. If you will not be able to comply with requirement of those authorities and submit sufficient evidence of the transactions you recorded, you may have to pay additional tax, fines and penalties. Only robust accounting and internal control system will help you to scale your business in case of need.
The above mentioned actions might seem tedious for the beginners. However, they are utmost necessary to a) keep your business insulated from future legal and regulatory hassles (b) create a robust internal control mechanism (c) sustain the business in long-term by being able to regularly review financial position of the business. If you find the process too complicated, we advise you to take experts’ service rather than to ignore it.