Tag: Automated reconciliation

Mastering 26AS Reconciliation

Mastering 26AS Reconciliation: Proven Ways to make it a Breeze

Understanding the Need for Mastering 26AS Reconciliation

In recent years, tax laws has experienced significant changes. The authorities take many actions to guarantee that taxpayers properly report all transactions to the Income Tax Department. Mastering 26AS Reconciliation is crucial amid these changes. Department (IT Department). With the help of this information, the IT Department will be able to analyze and catch hold of tax evaders.

Decoding Section 194Q: Mastering 26AS Reconciliation Amidst TDS On Goods

One such change is the introduction of Tax Deducted at Source (TDS) on the purchase of goods vide Section 194Q of the Income Tax Act (IT Act). The introduction of the same has resulted in flooding of the TDS entries in Form 26AS. It is a form that captures details of the TDS deducted and reported for a particular Taxpayer.

Further, the IT Department relies on this form before allowing the TDS refund or adjustment of TDS against Income Tax liabilities. Therefore, it has indirectly become mandatory on the part of the Taxpayer to ensure that the Deductor has reported all the TDS in its Form 26AS. However, to identify the same one needs to first identify the Deductor who has not reported the same. Therefore, it has become necessary to reconcile Form 26AS.

However, Reconcile with what other data source?? There are two options 1) TDS ledger and 2) Sales Register. Let’s try to understand how each of these ways works and which one to select for your organization.

1) 26AS v/s TDS Ledger (Approach 1)

In this way, Form 26AS of Taxpayer is reconciled with the TDS receivable ledger maintained by the Taxpayer. This is a direct approach where we are comparing two different data sets capturing the same information.

Mastering 26AS Reconciliation

2) 26AS v/s Sales Register (Approach 2)

In this way, Form 26AS is compared with what TDS should have been deducted for each and every sales line item. Assuming that the Tax Deductor has diligently deducted the TDS, this is an indirect way.

Both approaches have their benefits and drawbacks, so organizations should choose the one that best suits their needs. Below are the areas which one should consider before choosing the approach:

A) Timing of booking of TDS receivable

Most organizations record TDS Receivable at the moment of payment receipt. So, while completing reconciliation, there will be a date discrepancy, and in the scenario where there are ‘000s of line items, which can be difficult to resolve when using Approach 1. However, if payment and invoice connection is available, Approach 1 becomes much easier to execute.

If the organization books TDS Receivable on an ad hoc basis, it shall opt for Approach 2, provided all the other details are available.

B) Reporting pattern of Tax Deductor

Are the Tax Deductor reporting based on the actual date or are they either putting the date of the end of the month or the end of the quarter? Accordingly, one shall select the approach of reconciliation. If the Tax Deductor is clubbing the amount for the quarter or month and just reporting a single line item then in that case just a TAN level month-wise or quarter-wise reconciliation will suffice.

C) Availability of TDS rate for each sales line item

Approach 2 is possible only when one has proper records of the TDS rate applicable on each sales invoice or each line item of the sales invoice. In many cases, when billing services and goods in a single invoice, each line item of the invoice will have a different TDS rate.

Hence, it is crucial to exercise precision when choosing an approach. Selecting the wrong method can elongate the activity and potentially result in repetition.

Future-Proofing Your Finances: Mastering 26AS Reconciliation for Long-Term Compliance

Organizations can also evaluate various software which are available to automate 26AS reconciliation. One such solution is provided by Firmway. Firmway’s 26AS reconciliation software provides both the approach as mentioned above. Moreover, it also provides the option of line level as well as TAN level reconciliation. To know more about Firmway’s 26AS Reconciliation Click here.

Data Digging

Data Digging in Accounting: Insights for Improved Cash Flow

Transforming Accounting: From Data Digging to Enhancing Cash Flow

Accounting has traditionally played the role of the data keeper. However, recent developments have expanded the roles of account teams, changing this perception from mere data recording to actively enhancing cash flow. Businesses have regarded the accounting team as both a booster of cash flow and a cost center, with their main function being the maintenance of records of company activities. The 21st Century has realized the importance of data and its analysis. Moreover, data analysis is not just limited to operational activities; it has also made its presence felt in the accounting function. One such Data Digging exercise we will be focusing on today is boosting cash flow through ledger reconciliation.

The Impact of Ledger Reconciliation on Cash Flow

Our experience with clients has led to the following observations from ledger reconciliation activities:

  • We identified Rs 998 crore in vendor-unadjusted advances.
  • The company raised a Rs 3,761 crore debit note that vendors or customers did not book.
  • Vendors reversed a Rs 2,942 crore invoice, even though the company had claimed GST credit.
  • Vendors issued Rs 314 crore in credit notes that the company did not account for.
  • Customers deducted Rs 53 crore in TDS, which the company failed to record.

All the above can have a direct and/or indirect impact on the cash flow of the Company. If the account team is able to identify such a mismatch on a timely basis and deep dive into it, then it can convert itself from a cost center to a profit center.

Data Digging for Cash Flow Enhancement

Manual reconciliations, even with Excel – MATCH, HIGHLIGHT, or LOOKUP formulas, bear the risk of human errors. Any inefficiency or deficiency in reconciliation plagues the entire enterprise; it affects the credibility of financials, causes inefficient decision-making, and affects the goodwill of a company. Automated reconciliation is the solution to all the above issues.

Data Digging

The Power of Automated Reconciliation

Automation can simplify and streamline the tedious reconciliations process. With minimal human involvement, the entire process of vendor communication, follow-ups, tracking, gathering, and summarizing voluminous information works automatically in the background. The added leverage of real-time analytics makes companies proactive and efficient. 

Enhancing Data Digging with Technology

Using technology for reconciliation has led to the observations shared above. Thus, CFOs and account teams should continue to adopt technologies that allow them to analyze and interpret the vast amount of data at their disposal.

The Role of Technology in Accounting

A team of chartered accountants started Firmway, a cloud-based automation software, to simplify time-consuming reconciliations. Using the latest technology, such as AI, it performs reconciliations on par with industry standards and practices.

Technology makes reconciliations, be it vendor, bank, GST, or TDS, simple and efficient. It also simplifies the communication of reconciliation differences through a world-class online action tracker. Thus, adopting technology in accounting and reconciliations should be a priority for CFOs and account teams.

GSTR-2B Reconciliation: Protecting Your Bottom Line with ITC

GSTR-2B Reconciliation: Protecting Your Bottom Line with ITC

Background

In recent years, fraudulent practices have been prevalent in availing Input Tax Credit (ITC). In FY2021, more than Rs 35,000 crores of ITC was wrongly claimed. This misuse primarily stemmed from Rule 36 of the CGST Rules, 2017. This underscores the critical importance of GSTR-2B reconciliation.

Rule 36 amendment and its impact

The amendment introduces GSTR-2B as a benchmark for determining the amount of eligible ITC. From January 2022, businesses can avail of ITC only to the extent reflected in GSTR-2B. Earlier, Rule 36 allowed buyers to avail of provisional ITC (over and above the amount prevailing in GSTR-2B) up to 5% of the eligible ITC reflected in GSTR-2B, but not anymore. Restricting ITC to GSTR-2B impacts businesses negatively, especially large-scale companies with crores of ITC in the funnel. Thus, it has become increasingly vital to reconcile GSTR-2B and the purchase register.

GSTR-2B Reconciliation

The Importance of GSTR-2B Reconciliation

Imagine losing crores of ITC due to inefficient reconciliation of GSTR-2B and purchase register. It will impact working capital and may even lead to a financial crisis. According to Ernst & Young, industry trends depicting mismanagement of ITC may increase working capital requirements by 5–7% and negatively impact profit before tax by 1–2%.

The following illustrations explain how inefficient GSTR-2B Reconciliation and purchase register may lead to the loss of ITC:

  1. Say out of Rs 1,00,000/- of total purchases, the supplier furnishes details of Rs 70,000/- in GSTR-1. Therefore, GSTR-2B will depict eligible ITC as Rs 70,000/-, and ITC worth Rs 30,000/- will be lost until the supplier updates it.
  2. A failure to update purchase-related credit notes in GSTR-2B can also result in overclaiming ITC, which is subject to penalties. CGST law prohibits ITC claims for credit notes, even if they are not yet updated in GSTR-2B.

Thus, the onus of reconciling GSTR-2B and the purchase register to reduce the risk of ITC disallowance and penalties is more prevalent than ever.

Why automate GSTR-2B Reconciliation? 

Reconciliation of innumerable transactions in GSTR-2B and the purchase register is a tedious task, especially when done manually. Reconciliation is possible with Excel formulas like Lookup, Match, etc., but to some extent only. There is always a risk of corrupting Excel files with heavy GSTR reports and purchase registers. Moreover, manual intervention in applying formulas also exposes you to errors, thus marking the need for automation in reconciliation.
According to Deloitte’s GST@5 survey 2022, reconciling ITC with auto-generated reports (GSTR-2B) is the highest-ranked issue with GST, and automation is an ideal solution. Adopting technology and automation for GST is prevailing in all large, medium, and small-scale enterprises, as they are losing crores of funds in ITC mismanagement.

One such software that can help you save crores is Firmway. It is a SaaS-based software company specializing in multi-GSTIN and multi-month reconciliation of GSTR-2B and purchase registers. This innovative platform automatically carries unmatched items from the previous month and matches them with the data from the following months. Achieving up to 95% accuracy, it relies on a unique blend of technology and algorithms. Not only reconciliation, but technology also smooths the next steps: vendor communication and summarizing reports. Thus, opt for technology to simplify the voluminous task of ITC reconciliations and save yourself from litigation.

Customer & Vendor Reconciliation

Vendor Reconciliation Made Easy With Firmway

Mastering Customer & Vendor Reconciliation: How Firmway Increases Reconciliation Efficiency?

Mastering customer and vendor reconciliation is a crucial account closure process that ensures the composition of an account balance matches with customer/ vendor reports. It substantiates that balances in financial statements are free from errors or misstatements. As a part of internal controls, it ensures the accuracy and completeness of certain ledger balances, such as banks, fixed assets, payables, receivables, etc.

The world is rapidly moving towards digitization, and this transformation is equally impacting the field of accounting. Automation, while a powerful tool, will not replace accountants but rather complement their roles. In fact, according to the 2021 EY Smart Closing & Reporting survey, where over 40% of company representatives were interviewed, there is a growing demand for higher levels of automation in various accounting processes, including accounts payable, receivable, and general accounting. Enter Firmway, a cutting-edge software solution that not only automates but also simplifies a wide range of reconciliation tasks, aligning perfectly with leading technology standards.

Out of all the ledger balances, reconciling customer and vendor accounts is the most tedious task due to countless transactions. Let’s understand customer and vendor reconciliation and how Firmway can increase and automate the reconciliation exercise.

Understanding Customer and Vendor Reconciliations

Customer Reconciliation 

Customer reconciliation is a critical activity for every business. It involves analyzing the receivables statements to identify any errors or irregularities. Customer reconciliation is a useful tool to get a clear idea of the actual position of receivables. In certain exceptional cases, it can be effective in identifying fraudulent activities pertaining to accounts receivable.

Advantages of Mastering Customer Reconciliation

  • Transactions with customers directly affect the revenue. Reconciling their accounts provides evidence supporting reported revenue. 
  • With regular reconciliations, you can keep track of aging accounts to ensure timely follow-ups. 
  • Helps facilitate internal and external audit and identify prospective bad-debts at an early stage.
  • Significantly reduce the likelihood of errors in receivable account management.

Vendor Reconciliation

Vendor Reconciliation 

It involves comparing general ledger balances of vendors (suppliers) with statements from concerned vendors to identify and resolve differences.

Vendor reconciliation means reconciliation of a vendor’s account with the statement provided by the vendor.

Benefits of Mastering Vendor Reconciliation

  • Vendor balances are a result of credit purchases. Therefore, vendor reconciliation statements provide supporting evidence of purchases. 
  • Regular reconciliations help you resolve disputes and ensure the timely settlement of vendor accounts. 
  • Process checks the entity’s payables to vendor and vendors’ outstanding balances. This enables the company to identify duplicate invoice bookings.

Reconciling vendor and customer balances involve the study and analysis of countless transactions. KPMG’s Automation of financial reporting and technical accounting, September 2019 report, shows that more than 50% of businesses prepare financial records using MS Word and Excel. Furthermore, it is not a sustainable solution to accommodate the growing number of e-commerce transactions. Additionally, customer and vendor reconciliations provide corroborating evidence for two major account heads – revenue and purchases, of an Income statement. Moreover, the quality of these accounts is afflicted by manual intervention. As a result, inefficiency in the reconciliation process enhances the susceptibility of financial records to errors and misstatements.

Streamlining Reconciliation with Firmway’s Automation Software

To address these deficiencies effectively, it is essential to standardize and streamline the reconciliation process using automation software. With Firmway’s Reconciliation software, data retrieval from customers and vendors is automated, ensuring a seamless experience. Moreover, using the embedded algorithm and smart AI tool, it can swiftly convert it to Excel format, organize it, and meticulously compare it with accounting records of respective companies to identify discrepancies. As a result, it saves accounting staff a considerable amount of time, allowing them to efficiently analyze the above-found differences.

Firmway: Your Solution for Seamless Customer and Vendor Reconciliation

Firmway is a web-based SaaS software providing automation in the space of confirmations & reconciliation. It offers multiple tools and services to automate all-round reconciliation and confirmation exercise whether it’s Customer & Vendor Reconciliations, 26AS Reconciliation, MSME Confirmations. It helps accountants and auditors utilize time and resources on analytical work rather than gathering and reconciling information. How are you dealing with reconciliations and confirmations? Time to do it with Firm-way!