5 accounting challenges faced by small businesses in India

Small businesses in India struggle with complex tax rules, GST filing challenges, transaction reconciliation, cash-flow pressures from delayed refunds, and limited accounting expertise. With thousands of evolving compliances, staying updated remains challenging without professional help.

Small businesses have had to deal with a burdensome list of accounting challenges in order to operate according to the government’s requirements. Unfortunately, the rules and compliances keep changing over time, with many changes remaining unknown until the tax notice comes along. Despite improvements in ease of doing business, many business owners have had to deal with at least one of these 5 challenges at some point with their filings and compliances.

1. Tax compliance complexity

Some business owners may not know the implications of the existing rules, and the ideal way to plan for lowering your taxes. Many don’t have access to professionals who can help them understand how to plan taxes, and that could mean paying more in taxes than you could for crucial business decisions. Sometimes, small remote firms or freelancers have paid almost 40% TDS, which can be lowered dramatically if it weren’t for specialized accounting services.

2. GST Filing chaos

GST was meant to make taxation easier for businesses. In essence, it still requires regular monitoring and compliance quarterly filing, reconciliations, and other related business accounting that can distract you from your work.  A GST registration can help you save costs, especially as a freelancer, but most business owners face challenges in keeping up with the GST refund rules and compliance requirements. Accounting platforms are ideal solution for GST filing services, as they can help you boost outcomes without worrying much about the services.

3. Transaction reconciliation nightmares

To ensure flawless, error-free accounting, small businesses need to record all transactions made. That is easier said than done, as multiple payment methods, international transfers and different fees are involved everywhere, not to mention the various GST rules that apply to each. Keeping a track of this is only possible through a dedicated tax and accounting service, which should keep a track of invoices TDS certifications and supporting documentations.

4. Working capital and cash flow pressures

For small businesses working on thin margins, a delay in a Input Tax Credit (ITC) refunds can affect your cash flow and working capital. In most cases, constant follow ups are needed, or the refunds may be held up for flimsy reasons or overlooked errors. Add technical errors on the government portal or delays from their end, and you could end up losing business if your refunds don’t come on time.

5. Resource Constraints

Given the complexity of tax rules, compliances and the risk of flouting rules, every business may not have an experienced bookkeeping and accounting executive who can help you manage your GST filing, TDS rules and advance tax. Also, rule changes may not be easily evident, and a small business owner cannot do all of this alone. For a peace of mind, and to avoid unnecessary challenges with the tax rules, a professional accounting service who knows how to save you money, time and effort in dealing with the authorities is your biggest bet.

The solution

Depending on where you are located and the nature of your business, you may have to adhere to almost 116 Acts, 990 filings and almost 3,284 compliances at all government levels. That’s not all. Throughout the year, the authorities issue unexpected regulatory updates, many of which are known only to professionals. In such cases, a professional accountant or online accounting service from Vakilsearch could help you outsource your worries to the professionals while you concentrate on your business.