Article extracted from The Star.com.my
Date : Monday December 19, 2005
By PAK FOOK MENG
Having the right accounting software package complete with goods and services tax (GST) capabilities can help your business manage accounts more efficiently.
It will also help make the process quicker and more straightforward when complying with the soon-to-be implemented GST on Jan 1, 2007.
GST and Value Added Tax (VAT) are not new and have been adopted by many developed and developing countries.
GST and VAT generally operate on the same tax mechanism and much has been said about GST and its most probable features since the Finance Ministry made the announcement in Budget 2005.
The key question is?what is the level of readiness among our companies in facing this change? Do we have the right accounting software in place for GST implementation?
Accounting Software
Maintaining accounts can be truly challenging for any business. Whilst many businesses entrust this task to an accountant, others aim to save time and money by using specialist accounting software.
You will rely on your accounting package for all the important financial transactions in your business, as well as giving you critical information about the health of your business. Therefore, it is crucial to choose the right package for your business needs.
Your package must not only be able to meet all the statutory or legal requirements applicable to your business now but it must also continue to do so in the future.
It must be able to meet the Financial Reporting Standards (FRS) and revisions to the many existing standards based on the globally converged International FRS that will take place in 2006 and the GST requirements in 2007.
Some requirements are equally applicable to all businesses, but others are more specific to particular businesses and the way in which they operate. A business that deals mostly in cash will keep accounts in a different way from a business that does not.
Understanding and defining your support requirements is an important element to consider in choosing the right accounting package. Consideration must be given to the setting up, installation and maintenance of the package.
Problems might occur in the handling of GST when you need to generate returns to the relevant authority. Penalties will be imposed if problems remain. Therefore, you will need a person or a support organisation that you can rely on to sort out this type of problem.
Accounting Software & GST
The administration and enforcement of the GST system would require efficient and effective computerisation of the relevant department administering the tax.
In the GST environment, the accounting software should be able to accommodate the changes affecting the invoicing and billing system of the business process.
The purchase and sales of goods and services will give rise to input and output tax. This information will have impacts on the inventory, purchase orders, sales orders, debit notes and credit notes.
Payments and refunds of GST will arise on supply of taxable goods or services and this information will most likely be addressed in the account receivables (AR) and account payables (AP) module of the accounting software.
Therefore, it is important for the accounting software to be able to integrate all the relevant data from the modules of sales, procurement, inventory, AR and AP to generate accurate and complete reports and forms required for filing and reporting to Kastam Diraja Malaysia (KDM) on a timely manner.
The relevant reports and forms can also be used to facilitate payments and refunds, audits and timely submissions to KDM. Having an e-filing feature will be ideal in expediting the filing process.
In order to ensure compliance with the GST requirements, the accounting software must be able to carry out internal checking and auditing of GST returns.
In addition, it must be able to facilitate the checking and monitoring of the information?s completeness and accuracy.
The most challenging task is whether the accounting software has a master data maintenance function which will enable it to cater to any changes in the GST rates, taxpayer status, procedures and any other issues (such as businesses transitional issues, exempted or zero-rated goods/services and discount vouchers) that may affect the businesses.
Of course, one also has to consider implementing a fairly accurate cost estimates for budgeting purposes and cash flow position.
Alternatively, companies employing legacy systems may want to opt for a small plug-in system capable of handling and administering the GST requirements.
This may save the company from engaging in extensive modification work to its existing system, which involves much hassle that may lead to extensive downtime, thus affecting the operations and its bottom line eventually.
However, a detailed analysis has to be carried out to determine the current systems' capability or flexibility for modification to address the GST requirements.
To ensure efficient and effective implementation, a committee needs to be set up and headed by a senior person, ensuring all departments in the company understand what is required of them in order to comply with the GST.
Effective administration and enforcement also require well-trained staff, both on the usage of the accounting software and GST requirements.
Training is vital as it can also be used as an ongoing process to garner feedback from the staff and management as varying expectations from them may arise.
Early preparation by the companies in the implementation of GST will surely benefit both the taxpayers and Government. This will allow early detection of problems and the workaround of a solution.
Furthermore, you will encounter less problems making changes to your business now than when the GST system is in place. Therefore, it is worth planning ahead on what you need to do and when to do it in the early stages.
In conclusion, it is vital that companies get themselves prepared with the right accounting cum GST software in conjunction with the implementation of GST in Malaysia.
Having the right accounting software is indispensable in the areas where it supports your core business processes, enables sophisticated decision making, and utilises business-critical specialist knowledge.
Pak Fook Meng is the senior manager of information systems at Shamsir Jasani Grant Thornton.
thestar 2005-12-19