This is that beautiful time of the year wherein we sit with clients over long hours and try to structure their finances in such a way that all the books reflect the company’s vision and takes into account all the advantages provided by law, at the same time, understanding that this year end milestone is a super important one and needs to be handled with smartly.
Sorry to write this when we are just a week from closing our books but better late than never.
Tip 1: Bring cash received on to your books immediately
So many businesses except partial or full payment in cash. Much of which, sometimes never reaches the bank account and consequently the books! This might look okay in the short run but in the long run, your numbers would not reflect a true story. Especially important if you want to raise funds via. Equity or Debt route. No one likes a business which does not bring a part of its revenue on record. Big credibility issue!
Tip 2: Maintain strong and accurate GST returns
GST returns are now your holy grail of a trusted business metric. Many financers disburse loans based on your GST returns. Your clients/vendors are eagerly waiting to see that input tax credit. In all, as aforementioned, if you are looking at your business from a long term scaling perspective, closing your books on an accurate and higher GST paid note always helps. The total turnover up to 31st March is to be calculated for the purpose of determining the important aspects like applicability of GST Registration, Eligibility of opting Composition Scheme, and Applicability of Filing of specific returns.
Tip 3: Purchase Fixed Assets for the business
Purchase asset to claim depreciation (half of specified rate of depreciation). If any tangible or intangible fixed asset has been purchased for the purpose of business during the previous year and is put to use for the purpose of business or profession for the period of 180 days or more, depreciation will be allowed at the percentage prescribed for that kind of asset.
If the asset has been put to use for the purpose of business or profession for the period less than 180 days in that previous year, the depreciation shall be restricted to 50% of the amount calculated at the prescribed percentage.
Hence, if you are planning to purchase any fixed asset for the purpose of use in the business, purchase it and put it to use for business purposes on or before 31st March 2021 so as to avail deduction of depreciation at least at the rate of 50% of the normal rate of depreciation.
Tip 4: Loan accounts re-look
Verify loan accounts and cleanup them up if necessary. If an assesse has given or taken any temporary loans, hand loans and are outstanding, try to repay / recover the same on or before 31st March 2021.
This will help in improving the balance sheet position of the ratio of assets and liabilities, Debt Equity Ratio etc. Temporary loans, hand loans can be again given or taken on or after 1st April 2021.Since the balance sheet will be prepared as on 31st March 2021, try to square off the assets and liabilities which would show unfavorable position if not squared off on or before 31st March 2021.
The author is the Founder & Managing Partner at White Collar Legal LLP and can be reached at firstname.lastname@example.org.
Tags income tax gst