Is cost cutting in accounting worth it?

CA Anurag Sharma | Last updated: 21 July 2021

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Quick Summary

Many businesses attempt to save money by hiring less experienced or cheaper staff for their accounting departments. However, this often leads to significant financial penalties due to errors in GST and income tax compliance. Treating accounting as a revenue-generating function, rather than a cost centre, is crucial for long-term financial health.

Is saving in hiring in the accounts department by businessmen actually a saving or a deferred liability?

Being in practice, how often I have heard and seen clients going for cost-cutting and then eventually paying hell lot in the fines and penalties.

100-500 pm less being paid to any x y z who is not well versed with accounting, GST and income tax etc. make some businessmen feel good for a short run, but eventually they end up paying much much more later on.

The problem is some businessmen and corporates think that accounting or finance department doesn't generate revenue to them. So they try to invest more into marketing or sales where they could generate more revenue. In the process, they end up compromising their finance department and end up paying a major chunk of their finances in late fees and penalties.

Cost Cutting in Accounting: True Savings or Hidden Costs

Accounting is an integral part of every business and it should be treated like that only.

As news about GST Scrutiny flashes on my Twitter feed, I wonder how many businessmen who tried to save few bucks by spending less in the finance department will rush to CAs now and will eventually end up paying more.

Even some professionals take a huge cut in the fees to stay relevant in the market and they then fail to provide quality to the clients.

The problem is our mindset. We think cost-cutting is our saving. But is it worth it?

A few days back a client came to me for GST work and I quoted him my fees, to which he replied that "sir, another person is charging 500 monthly for GST returns".

I said, "kindly go with that person and in case if any issue comes later on and you come to me for that, my fees will be double of what I have quoted right now".

He returned back after 2 days.

We have studied so hard, we keep ourselves updated about relevant amendments and suddenly some newbie watches random YOUTUBE videos and think himself as some GST or income tax expert and lures clients with fees cut and clients rush to him and when some notice comes, the client comes back to us cursing that person.

Businessmen need to understand that they are doing no good to their business by saving few bucks.

FAQ :

Some businessmen and corporates believe that the accounting or finance department doesn't generate revenue, so they prioritise investment in marketing or sales instead.

Hiring less experienced staff who are not well-versed in accounting, GST, and income tax can lead to errors, resulting in substantial fines and penalties later on.

The mindset that cost-cutting equals saving can be detrimental, as it often leads to businesses compromising on essential functions like accounting, ultimately costing them more.

Accounting is an integral part of every business and should be treated as such, not as an area where costs can be excessively cut.

Professionals who take a huge cut in their fees to stay relevant may struggle to provide the quality of service clients need, especially in complex areas like GST and income tax.