Keeping the books

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Every company needs to keep its books for the revenue authority and for what is more important itself. When running a company that deals mostly with businesses it is very useful to become a value added tax payer. Simply because are your suppliers and customers are also VAT payers. By the law you are forced to become a VAT payer when your yearly revenue exceeds certain amount (1M CZK at this date). We have chosen to become a VAT payer voluntarily. One disadvantage of becoming a VAT payer is the need to keep a double entry accounting. You are able to choose from becoming a quarterly or monthly VAT payer. Monthly payments are more expensive but inevitable when your yearly revenue is high (10M at this date).

You have three choices at hand to keep the books – tax consultant, bookkeeper and in-house solution. Bookkeeper is a standalone company or individual which processes the incoming, outgoing invoices. He provides you with the prefilled forms to sign, prepares closing of book etc. The monthly fee is based on the number of documents and work he’s doing (1000 – 1500 CZK).  You are still responsible for your accounting and if the bookkeeper makes a mistake, you’re on your own.

In order to protect yourself you can hire a tax consultant. He provides all the services as the bookkeeper, but takes full responsibility for his actions. You give him full authority and you don’t have to worry about anything. The monthly fee is quite higher (5000-10000 CZK). Some companies combine the services of bookkeepers and tax advisors in order to keep their costs down. The bookkeeper does the work and the tax consultant checks the reports once in a year (VAT every quarter/month), signs them and takes the responsibility.

The in-house accounting is more difficult because it requires an employee with bookkeeping skills. Therefore it’s mostly recommended for large companies with more than 50 employees. If a small company provides a person (executive) with basic accounting knowledge, it’s the way to go. It sure takes some time to process the data and prepare the forms, but the market provides software which can help significantly. The advantage is the executive has all the data in real-time, filters it according to his needs and lowers costs. We would recommend this approach only during start-up phase though – the accounting is not complicated at that time.

Both service providers bookkeeper and tax consultant process the data and give you results. You can be sure they are fine from the revenue authority point of view, but what about the company’s point of view. In own opinion this point of view is more important just because it let’s you decide about the company in numbers.  In our view the need of an accounting software in the company is unavoidable. Simply because you need some system to fill invoices unless you have two per month. In this case you’ll get along with a text processor.

We choose the Stormware Pohoda software from a Czech company. They provide many different packages of the system according to the needs of the company – from simple invoice processor to double entry accounting. We also tested Money S3 – Czech software, which offers the same services, but the operating was a slightly unintuitive. There are also web based accounting tools like startup FreeAgent Central, but not yet localized for the Czech market/laws. All mentioned provide free full trials. Pohoda trial comes with limits on record counts – nice for the first months of company start. You are able to upgrade later and spend the money after you earned it.