Good accounting is one of the most important aspects in making your business successful. You don’t have to be an accountant to find out how the basic procedures work, and from that point you can make sure the advice you are given is correct for your company.

Technically, a business must by law have an accounting system that manages procedures for accurately entering, tracking and maintaining information related to an organisation’s financial operations. Companies are required to prepare a balance sheet and income statement for each accounting period which must be certified by an authorised auditor.

In everyday terms this means producing sales invoices, tracking who has paid you, entering purchases, knowing whom you have paid, establishing what taxes are due, paying them on time, and producing the appropriate financial reports.

The preparation of financial statements in Thailand correlates closely to international standards with a leaning towards US accounting terminology – is it inventory or stock? As with all countries there are some small differences, such as the treatment of Withholding tax and Non-deductibles, which can seem like ways to trip the unwary.

Many Thai companies issue invoices (called Non-deductibles) in a format that is not acceptable to the Revenue for tax purposes. An invoice with an incorrectly completed company name and address can produce the same result.

Withholding Tax is applied to various categories of income paid to a company. The amount of tax to be withheld by the payer depends on the type of income and the tax status of the recipient.

In everyday terms, this means that the Thai Revenue requires a business to deduct a percentage from certain types of purchases and pay that money directly to them rather than the supplier. A Withholding Tax form – verification of payment to the Revenue – must be issued to the supplier who can then offset that money from future payments of Corporation or Income tax, depending on the supplier’s business status.

For example, if you pay for advertising then 2% of the payment must be withheld. For rent, 5% should be deducted. If you pay an individual for work and they are not employed by you, you must withhold 3% of the payment. In addition, the Revenue will expect payment whether you have deducted from the supplier or not.

Most countries nowadays have some form of VAT. In Thailand any business entity providing goods or services which has an annual turnover of 1.8 million baht is subject to VAT. This is currently 7%. Certain businesses and activities are exempted.

Although business in Thailand can be full of pitfalls for the unwary and uninformed, most accounting rules are reasonably clear. It is merely deciding how to interpret them that becomes a problem.

Even if you speak Thai, it is important to have a Thai employee who can deal with all your accounting details; preferably someone with accounting knowledge and experience, but common sense can go a long way. A qualified accountant in your employ is only required if you have 10 employees or more.

All businesses need to look to the future. Accounting is not just for tax purposes. You must be able to react quickly to economic changes. Decisions should be based on accurate projections. ‘How is the increase in fuel costs affecting your company?‘ ‘Are you really making profit on that project?’ ‘Where can you make cuts?’ Can you afford to open that new branch?’

Accounting can be done manually, or with the help of Excel, but both can be time consuming, subject to user error and usually with little in the way of management reports.

You could use an accounting service. They will take your paperwork and pay Withholding Tax and VAT for you, but reports, feedback and advice are rare. Can you really survive without knowing the answer to questions such as, ‘What stock are you holding for too long?’ ‘How much is your sales force costing you?’ ‘How can you control the credit you give your customers?’

Small new companies often think they do not need accounting programs; ’too expensive and unnecessary’, they say. This can be a big mistake. In the first instance, learning to use an accounting program is best done when other demands on your time are still small. With reliable and expert software support you will soon be able to work confidently.

Most good accounting software providers will offer training for you and your staff to speed the learning curve and make the process easy for you. Above all make sure the accounting program operates in both Thai and English, allowing both you and your staff access in the clearest way.

Secondly, management reports, at your fingertips with up-to-date accurate information, are essential to decision-making if you want to move forward. It is important that the figures and reports you receive are easy to understand, accurate and above all, there when you need them.

There is no shortcut to setting up a reliable accounting system for your business, but the benefits are clear. You will have the management information to stay in control. Out of control businesses do not succeed.

This article was written by Carol Fryer (CEO)
A++ Software, www.aplusplussoftware.com.