Category Archives: Invoices

What is better, Heroku or DigitalOcean?

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Heroku or DigitalOcean?

In short, DigitalOcean is usually what you want or will eventually want but you may consider Heroku in certain circumstances.

Heroku is like cPanel PHP/MySQL hosting (e.g. GoDaddy hosting) but it provides a web UI that is a huge leap beyond cPanel and provides support for Node.js, Python, MongoDb, microservices and lots of other interesting, useful, cool and enterprise worthy software. The advantages over DigitalOcean (which are similar to cPanel advantages) are:

  1. No need to perform OS upgrades
  2. No need to manually install applications from command line
  3. Much easier to configure applications and usually no need to troubleshoot
  4. Configuration consistency
  5. Backups (well, sort of)
  6. Scaling “in the middle”

 Heroku advantages to DigitalOcean

  Let’s see how much of a disadvantage that these are on DigitalOcean.

1. DigitalOcean comes with an OS pre-installed so you are only responsible for OS updates and upgrades. OS updates usually only take a few minutes per month and the only impact might only be down for a 20 seconds if you decide to reboot. OS upgrades are more serious but maybe only occur 1 – 2 per year.

They can slow down the VM for an hour, force reboots and can break your application temporarily (e.g. after Apache was upgraded, I saw the PHP extension was disabled so I had to fix that quickly). It’s hard to remember to update the OS and annoying to have to quickly fix the occasional issue that breaks your app (which is why you don’t do automatic updates). Heroku can handle these upgrades seemlessly. It’s an advantage but it is worth choosing Heroku for that? No.

Benefits of Using Invoicing Software. Simplifying your company’s accounting

2. On DigitalOcean, you have to install your own servers. This is a one-time cost and can usually be done in a day . if you haven’t got absolutely crazy with your architecture. Installing Linux packages is pretty easy and error free these days. And, you only need to do it once. Heroku takes care of this for you. Is it worth it to pay month after month to save a day? No.

3. When you install your servers on DigitalOcean, you have to edit the configuration files and get everything working. The main stuff usually works but I had a sendmail application configuration issue the lingered for 4 months. On Heroku (and even cPanel!), I would not have to contend with this issue.

It was a lot of hair pulling but I figured it out and, once I figured it out, I’ll always have the answer. Maybe it’s worth it to use Heroku for a while if you want to focus on development instead of fixing these kind of issues. Maybe.

4. If you grow a lot, you will need to upgrade your VM. DigitalOcean currently requires you to move your app from the old VM and reinstall everything on the new VM. This is a hassle and, if you have been sloppy, you’ll have to recover and reapply all the tweaks that you made and forgot about on your original VM.

If you need multiple VMs, their configurations can diverge unless you are careful. Bu Heroku’s UI makes your configuration much more vanilla, consistent and upgradable. But, still, you have to grow A LOT. Many apps will never outgrow the original VM.

5. Heroku takes care of backups BUT you should not rely on it. You need to do your own backups, period. If Heroku loses your data, they will still be in business but you may not.

What is a droplet on Digital Ocean?

6. If your app runs on a single VM for a while, you don’t need scaling. You can casually upgrade your VM as you see the problem coming. If you are Google, Heroku won’t be able to handle you.

Heroku’s scaling only matters in the middle: you are growing fast enough that Heroku’s scaling helps you keep up but, if you grow too much, you’ll have to migrate to DigitalOcean or AWS after a huge amount of trauma. This is what happened to RapGenius: Heroku helped them grow in the middle but then broke when they outgrew it.

So, I see Heroku as having limited usefulness. It’s good for prototypes. It may help a growing app at a certain point in its growth. But, for the most part, it’s better to skip Heroku because either DigitalOcean is easy enough or, in a few cases, you’ll be forced to migrate away from Heroku in a traumatic fashion. The Heroku premium price rarely makes sense. Still, Heroku is popular and people still choose it, even if it isn’t the best choice.

 

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Benefits of Using Invoicing Software. Simplifying your company’s accounting

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The invoicing computerized solution is designed to generate bills by sellers for products or services sold to their customers. Creating invoices by hand is a cheap method that brings companies, including small businesses, many disadvantages. Not organized documents and kept in no single place makes it difficult to recall the invoices, perform queries, create reports, generate statistical data, and make other operations. Therefore, organizations, even small businesses, prefer to use invoicing or billing software instead of the manual writing invoices.

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The main benefits of using invoicing software are:

  • organizing and storing data, including billing data, in a single place;
  • availability of many different features such as auto-fill date, etc.;
  • easy creating and sending invoices to customers;
  • customizing the templates of invoices for each product and service;
  • creating customized invoices;
  • reduce the paperwork and less using of paper;
  • saving the employees working time and improving their efficiency;
  • ability to save the products and customers information for the later recall;
  • improving the accuracy of invoices;
  • ability to clearly show details of the product and price;
  • automating the process of creating invoices and reducing business costs;
  • ability to handle more clients and increasing the client base;
  • the ability of invoices to be easy recalled and retrieved;
  • ability to create invoices from anywhere via the online invoicing app;
  • sending out the multiple invoices simultaneously;
  • keeping records and easy finding not paid transactions;
  • keeping on the cash flow and tracking the business expenses;
  • identifying customers who need to make their payments;
  • controlling payments and receiving payments timely;
  • ability to send invoice reminders;
  • scheduling invoices for being sent automatically; 
  • ability to attach receipts to invoices and photos to receipts;
  • generating various types of report and financial statements;
  • saving money on paper, printing, and postage via using online invoicing or billing software;
  • integration with the company’s accounting system;
  • ability to generate multilingual and multi-currency invoices;
  • minimizing the invoice data entry errors; 
  • simplifying the company’s accounting.

Using the billing software is a wise investment that allows any organization to save its time and money.

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Everything You Need to Know About GST E-invoice

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What is an e-invoice and an e-invoice under GST?

 

E-invoicing, often known as electronic invoicing, is a GST-compliant electronic authentication technique. All B2B and export invoices generated by a business must be registered with the government system, the Invoice Registration Portal (IRP), and each invoice must be assigned a unique identification number called an Invoice Reference Number (IRN). In addition to IRN, the IRP will create a digitally signed QR code with selected invoice details and digitally sign the invoice data that is provided.

As a result, an e-invoice is a document that contains an IRN and a digitally signed QR code printed on it.

 

After an IRN has been generated and an invoice has been authenticated, the details of the invoice must be made available on the GST and EWB portals.

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Who requires the creation of an E-Invoice?

 

  • Based on AATO (Aggregate Annual Turnover):

E-Invoice has been gradually introduced in the country, based on the companies’ aggregate annual turnover. On October 1, 2020, the first phase went live for companies with a turnover of more than Rs.500 crore. On January 1, 2021, the second phase went live for enterprises with a turnover of more than Rs.100CR.

 

  • On the basis of the fiscal year:

AATO in any preceding Financial Year from 2017-18 onwards must be evaluated to determine the applicability of the E-Invoicing obligation, according to Not. No. 13/2020, as amended by Not. No. 70/2020 and Not. No. 88/2020. The AATO is calculated based on GST returns. On the E-Invoice Portal, the GST System has also made it possible to examine the applicability.

 

  • Based on the Entity Type:

Suppliers are the only ones who can generate an e-invoice. E-Invoices cannot be generated by recipients or transporters. On behalf of the sellers on their platforms, e-commerce operators can generate e-invoices. E-Invoicing is something that E-commerce operators should be aware of.

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Who doesn’t need to create an E-Invoice?

According to GST notification No. 13/2020-Central Tax dated March 21, 2020, the following individuals are exempt from issuing e-invoices:

  • Company that provides insurance.
  • A financial institution.
  • Financial establishment.
  • NBFCs.
  • GTA.
  • Passenger transportation service provider.
  • Admission to the screening of cinematograph films in multiplex screens is provided by a service provider.

 

What kind of documents must be reported to the GST system as part of the E-Invoicing process?

The following papers must be reported to the e-invoice system by the taxpayers.

  • Supplier’s invoice.
  • Supplier’s Credit Note
  • Supplier’s Debit Note

 

As a result, E-Invoicing does not require the reporting of Bills of Supply and Delivery Challan/Job Work Challan.

 

How can I create an electronic invoice?

The taxpayer’s system generates an invoice, which is subsequently transmitted to the Invoice Registration Portal (IRP) for approval. The invoice data is updated with IRPs digital signature and a QR Code, as well as the Invoice Registration Number, once it has been authorised (IRN). An E-Invoice is what this is called.

 

What should an e-invoice receiver look for?

The extra-information relating to invoice reference number will now be included in the e-invoices received from suppliers (to whom the mandate applies) (IRN). As a result, recipients of e-invoices must be aware of the mandate’s applicability to their vendor list. Not only that, but the receivers must also know ahead of time the documents they will get.

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What influence will e-invoicing have on the procurement cycle?

As a recipient of standard e-invoices, the accounting systems can now automate the recording of purchase invoices, resulting in increased efficiency and accuracy of data in source systems. Furthermore, because IRN is unique to each invoice, it might be useful for identifying similar invoices and hence for reconciliation.

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Audit Procedures for Accounts Receivable

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Accounts receivable is the sum of money that your customers owe you for the goods and services you have sold to them on credit. This is considered to be a current asset, because you convert it into money later, usually within a year. Accounts receivable is important because it is the money you use to run your business. As an example, let’s suppose you sell office appliances worth $1,000 to a customer on credit. Your customer will need to pay you $1,000 for the appliances, so your accounts receivable increases by $1,000. This amount will be listed under the current assets on your balance sheet.

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What is auditing accounts receivable?

Auditing means a thorough and formal inspection of your documents. Auditors pay special attention to a business’ assets, including accounts receivable, to make sure there is no fraud involved. They also verify your financial statements, such as balance sheets and income statements, to check whether your business is being portrayed accurately. Auditing is a mandatory requirement in all countries, but the rules for when you need to audit differ from country to country. Usually the government requires you to audit as soon as you cross a revenue threshold.

Auditing your receivables is important because it sheds light upon the status of a business’ incoming cash. In addition to validating your financial records, the outcomes presented on the auditing reports also let you check whether you have unsent invoices, and whether your customers pay their invoices on time.

The objectives of an AR audit

During an audit, the auditor will try to determine whether:

  • Your balance sheet reflects your accounts receivable accurately
  • Refund records for returned items are accurate
  • Proper measures are taken to prevent misappropriation of non-electronic payments in the form of cash and checks

Procedure for auditing accounts receivable (AR)

Once the objectives of the audit are set, the audit process can begin. These are some of the procedures involved in an accounts receivable audit.

Inspecting customer orders

Looking at your customer orders is an important part of AR auditing. During the audit, your auditor compares the invoices you’ve sent out with the orders made by customers to check if the amounts on both the documents are the same. This is important because if there is any discrepancy between the numbers, it could mean that you’ve recorded total receivables incorrectly.

Comparing receivable reports with the grand total

The auditor will compare the amount in the accounts receivable account in your general ledger with the grand total of your receivables in your period-end accounts receivable aging report, to check if the totals match. A mismatch indicates the presence of a wrong journal entry in the ledger account.

Matching invoices to shipping log

The auditor will match the date on each of your invoices with the shipment dates of the corresponding items in your shipping log. They will also examine invoices that were issued on dates after the auditing period. This is done because your sales must be recorded in the right accounting period, so it’s important to catch any invoices that should have been included in an earlier period.

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Confirming receivables

In this part of the audit, the auditor directly contacts your customers to confirm any unpaid accounts receivable as of the reporting period’s end. This is done to verify the accounts receivable that you have recorded. Auditors usually select customers that have large unpaid balances first, then customers with overdue invoices, and finally customers with smaller receivable balances.

Reviewing cash receipts

The auditor will look for proof of the payments made by customers. This is a backup plan that’s used if the auditor fails to confirm the accounts receivable with your customers directly. If customers pay you via checks, the auditor looks for check copies, and attempts to confirm them with the bank or by checking your bank transactions.

Reviewing credit notes

Credit notes are important transactions because they can affect future transactions. Customers can deduct the credit note amount the next time they pay you for goods or services. This makes their payment different from the original invoice amount, which affects your receivables. The auditor will review credit notes you have issued to your customers to make sure they were properly authorized and issued during the correct period. The auditor will also check if the circumstances under which you issued them were legitimate and match the records of issued credit notes.

Trend analysis

Auditors use trend lines to compare accounts receivable with the company’s sales or current assets. Trend lines, usually used in technical analysis of budgeting and forecasting, are graphed sets of data points that show how a particular financial figure is trending. They help auditors analyze patterns and conduct inquiries if they spot anomalies like an increase in accounts receivable or revenue without a proportionate increase in sales or assets.

Preparing for the audit

So how do you get your business ready for an AR audit?

  • Get an accounting system that helps create invoices and other sales transactions
  • Collect payments and update the corresponding invoices to paid status
  • Keep track of credit notes and refunds
  • Reconcile your bank accounts

Get audit-ready in no time

When an audit is around the corner, it is best to have clear and easy-to-track records of your accounts receivable. It is not impossible to get your records sorted for the audit by hand. However, a modern accounting system that uses automation to keep your accounts receivable audit-ready can cut down hours of manual work and eliminate undesirable errors. AR automation helps you schedule invoices and payment reminders, while also updating invoices with their corresponding payment status through workflows. The result is well-organized accounts receivable records and a smooth audit procedure.

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EU VAT e-commerce package FAQ: Everything you need to know

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Q. What is the EU VAT e-commerce package? 

The EU VAT e-commerce package is a reform to the existing VAT obligations for sellers that will come into effect on July 1, 2021. This package includes some key changes that will simplify VAT returns, and it will impact the way online sales happen across the EU.

Q. Where does the EU VAT e-commerce package apply? 

The EU VAT package applies to the online supply of goods and services throughout the EU. However, the protocol for Northern Ireland is slightly different and applies only to goods. The UK will implement this package with respect to goods being supplied back and forth from Northern Ireland, while services that are supplied back and forth from Northern Ireland won’t count towards the threshold that will be implemented.

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Q. What’s the purpose of the EU VAT e-commerce package? 

The new rules have been introduced to make administrative work and VAT collection a lot easier for businesses selling to customers across the EU and UK. Simply put, this package will allow sellers to make sales across the European Union on a single VAT return in their home country, instead of having to register for VAT in each country. With simpler VAT returns and reduced compliance obligations, cross-border online trade and trade across EU’s digital single market will grow faster.

Q. What’s new in the EU VAT e-commerce package? 

The two major components of the new EU VAT e-commerce measures are the OSS (One Stop Shop) and IOSS (Import One Stop Shop), which are portals that allow taxpayers to report and pay VAT on a quarterly and monthly basis respectively.

The OSS is applicable only for online intra-community distance sales of goods across the EU. In simpler terms, intra-community distance sales are those in which VAT-applicable goods are sold from one EU country to another EU country. The IOSS, on the other hand, allows suppliers and online marketplaces selling imported goods to collect and pay VAT directly, instead of putting the VAT burden onto the buyer. This means that marketplaces become deemed suppliers and will be responsible for collecting VAT for sales made through their platforms. 

Q. What else is changing in the EU VAT e-commerce package?

The EU VAT e-commerce package includes the following changes to the existing VAT rules: 

A) Launching the OSS and IOSS

  • The OSS and IOSS extend the MOSS (Mini One Stop Shop) by removing the VAT exemption for low-value imports, and by including more services and goods, even those imported into the EU.

  • Using the OSS, taxpayers can register once and file one EU VAT return for ecommerce distance sales across the EU.

  • Using the IOSS, suppliers and online marketplaces selling imported goods can collect and pay VAT directly.

B) Replacing the distance selling thresholds with a pan-European threshold

  • While distance sales of B2C goods will continue between EU member states and Northern Ireland, the existing EU distance selling thresholds will be removed as of July 1, 2021, and will be replaced with a new threshold.

  • Previously, VAT only applied to intra-community distance sales, with a specific annual turnover threshold for certain countries (€35,000 for sales to most EU countries, and €100,000 for Germany, the Netherlands, and Luxembourg).

  • With the new measures, a single pan-European threshold of €10,000 (£8,600) is applicable for all businesses with a permanent address and VAT registration in the EU.

  • This threshold change is mandatory, and will apply to all cross-border sales by businesses across the EU.

C) Removal of Low Value Consignment Relief (LVCR)

  • The LVCR is a VAT relief option where imports of goods lesser than €22 (£20) could be exempted from import VAT. This has been abolished.

  • After July 1, 2021, VAT will be charged on all B2C consignments. Those that are worth €150 (£130) or less can be reported via the IOSS portal at the point of sale. For goods that exceed this amount, the existing rules will continue to apply.

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Q. What and who does the EU VAT e-commerce package impact?

These changes will impact the collection of VAT when it comes to:

a) Movement and sale of B2C goods between Northern Ireland and the EU, and

b) Import of low value goods (consignments with an intrinsic value of not more than €150 or £130) into the EU or Northern Ireland. 

It will also replace the existing thresholds for each country with a pan-European threshold of €10,000.

These measures will impact everyone in the ecommerce supply chain, including online marketplaces. Two changes (the One Stop Shop and the Import One Stop Shop) are optional, and can be used by businesses outside the EU, including the UK. The package will also impact non-EU businesses with goods located in Northern Ireland that are intended for sale. These new VAT measures only apply on online sales to customers in the EU.

Q. How are online marketplaces affected by these new measures?  

Online marketplaces facilitating the sale of goods in either of the following situations will become deemed suppliers:

1. Goods located in Northern Ireland or EU, sold by non-EU businesses to non-VAT registered customers in Northern Ireland and EU

2. Goods located in Northern Ireland, sold by businesses in Great Britain to EU customers.

When a marketplace becomes a deemed supplier, it should account for VAT for sales that are made through its portal as if they are its own sales. VAT will be charged at the point of sale. The marketplace will be accountable for VAT when it facilitates distance sales or any domestic transactions for non-EU sellers. Marketplaces have to use IOSS (if it’s opted) to collect and pay VAT for the sale of imports that don’t exceed €150.

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Bookkeeping – Definition, Importance, Types & Methods

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What is bookkeeping and why is it important?

Bookkeeping is the process of recording your company’s financial transactions into organized accounts on a daily basis. It can also refer to the different recording techniques businesses can use. Bookkeeping is an essential part of your accounting process for a few reasons. When you keep transaction records updated, you can generate accurate financial reports that help measure business performance. Detailed records will also be handy in the event of a tax audit.

This guide will walk you through the different methods of bookkeeping, how entries are recorded, and the major financial statements involved.

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Methods of bookkeeping

Before you begin bookkeeping, your business must decide what method you are going to follow. When choosing, consider the volume of daily transactions your business has and the amount of revenue you earn. If you are a small business, a complex bookkeeping method designed for enterprises may cause unnecessary complications. Conversely, less robust methods of bookkeeping will not suffice for large corporations.

With this in mind, let’s break these methods down so you can find the right one for your business.

Single-entry bookkeeping

Single-entry bookkeeping is a straightforward method where one entry is made for each transaction in your books. These transactions are usually maintained in a cash book to track incoming revenue and outgoing expenses. You do not need formal accounting training for the single-entry system. The single-entry method will suit small private companies and sole proprietorships that do not buy or sell on credit, own little to no physical assets, and hold small amounts of inventory.

Double-entry bookkeeping

Double-entry bookkeeping is more robust. It follows the principle that every transaction affects at least two accounts, and they are recorded as debits and credits. For example, if you make a sale for $10, your cash account will be debited for $10 and your sales account will be credited by the same amount. In the double-entry system, the total credits must always equal the total debits. When this happens, your books are “balanced.”

Using the double-entry method for bookkeeping makes more sense if your business is large, public, or buys and sells on credit. Enterprises often choose the double-entry system because it leaves less room for error. In a way, it ‘double-checks’ your books because each transaction is recorded as two matching but offsetting accounts.

Cash-based or accrual-based

The next step is choosing between a cash or accrual basis for your bookkeeping. This decision will depend on when your business recognizes its revenue and expenses.

In cash-based, you recognize revenue when you receive cash into your business. Expenses are recognized when they are paid for. In other words, any time cash enters or exits your accounts, they are recognized in the books. This means that purchases or sales made on credit will not go into your books until the cash exchanges.

In the accrual method, revenue is recognized when it is earned. Similarly, expenses are recorded when they are incurred, usually along with corresponding revenues. The actual cash does not have to enter or exit for the transaction to be recorded. You can mark your sales and purchases made on credit right away.

Both a cash and accrual basis can work with single- or double-entry bookkeeping. In general however, the single-entry method is the foundation for cash-based bookkeeping. Transactions are recorded as single entries which are either cash coming in or going out. The accrual basis works better with the double-entry system.

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How to record entries in bookkeeping

Generating financial statements like balance sheets, income statements, and cash flow statements helps you understand where your business stands and gauge its performance. For these reports to portray your business accurately, you must have properly documented records of your transactions. Keeping these records as current as possible is also helpful when reconciling your accounts.

Recording transactions begins with source documents like purchase and sales orders, bills, invoices, and cash register tapes. Once you gather these documents, you can record the transactions using journals, ledgers, and the trial balance. If you are a very small company, you may only need a cash register. The information can then be consolidated and turned into financial statements.

Cash registers

A cash register is an electronic machine that is used to calculate and register transactions. Usually, cash registers are used to record cash flow in stores. The cashier collects the cash for a sale and returns a balance amount to the customer. Both the collected cash and balance returned are recorded in the register as single-entry cash accounts. Cash registers also store transaction receipts, so you can easily record them in your sales journal.

Cash registers are commonly found in businesses of all sizes. However, they aren’t usually the primary method of recording transactions because they use the single-entry, cash-based system of bookkeeping. This makes them convenient for very small businesses but too simplistic for enterprises.

The journal

The journal is called the book of original entry. It is the place where a business chronologically records its transactions for the first time. A journal can be either physical (in the form of a book or diary), or digital (stored as spreadsheets, or data in accounting software). It specifies the date of each transaction, the accounts credited or debited, and the amount involved. While the journal is not usually checked for balance at the end of the fiscal year, each journal entry affects the ledger. As we’ll learn, it is imperative that the ledger is balanced, so keeping an accurate journal is a good habit to keep. This form is useful for double-entry bookkeeping.

The ledger

A ledger is a book or a compilation of accounts. It is also called the book of second entry. After you enter transactions in a journal, they are classified into separate accounts and then transferred into the ledger. These records are transcribed by accounts in the order: assets, liabilities, equity, income, and expenses. Like the journal, the ledger can also be physical or electronic spreadsheets.

A ledger contains a chart of accounts, which is a list of all the names and number of accounts in the ledger. The chart usually occurs in the same order of accounts as the transcribed records.

Unlike the journal, ledgers are investigated by auditors, so they must always be balanced at the end of the fiscal year. If the total debits are more than the total credits, it’s called a debit balance. If the total credits outweigh the total debits, there is a credit balance. The ledger is important in double-entry bookkeeping where each transaction changes at least two sub-ledger accounts.

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Trial balance

The trial balance is produced from the compiled and summarized ledger entries. The trial balance is like a test to see if your books are balanced. It lists the accounts exactly in the following order: assets, liabilities, equity, income, and expenses with the ending account balance.

An accountant usually generates the trial balance to see where your business stands and how well your books are balanced. This can then be cross-checked against ledgers and journals. Imbalances between debits and credits are easy to spot on the trial balance. It is not always error-free, though. Any miscalculated or wrongly-transcribed journal entry in the ledger can cause an incorrect trial balance. It is best to look out for errors early, and correct them on the ledger instead of waiting for the trial balance at the end of the fiscal year.

Financial statements

The next, and probably the most important, step in bookkeeping is to generate financial statements. These statements are prepared by consolidating information from the entries you have recorded on a day-to-day basis. They provide insight into your company’s performance over time, revealing the areas you need to improve on. The three major financial reports that every business must know and understand are the cash flow statement, balance sheet, and income statement.

The cash flow statement

The cash flow statement is exactly what its name suggests. It is a financial report that tracks incoming and outgoing cash in your business. It allows you (and investors) to understand how well your company handles debt and expenses. By summarizing this data, you can see if you are making enough cash to run a sustainable, profitable business.

The balance sheet

The balance sheet reports a business’ assets, liabilities, and shareholder’s equity at a given point in time. In simple words, it tells you what your business owns, owes, and the amount invested by shareholders. However, the balance sheet is only a snapshot of a business’ financial position for a particular date. It must be compared with balance sheets of other periods as well. The balance sheet allows you to understand the liquidity and financial structure of your business through analytics like current ratio, asset turnover ratio, inventory turnover ratio, and debt-to-equity ratio.

The income statement

The income statement, also called the profit and loss statement, focuses on the revenue gained and expenses incurred by a business over time. There are two parts in a typical income statement. The upper half lists operating income while the lower half lists expenditures. The statement tracks these over a period, such as the last quarter of the fiscal year. It shows how the net revenue of your business is converted into net earnings which result in either profit or loss. The income statement does not focus on receipts or cash details.

Bank reconciliation

Bank reconciliation is the process of finding congruence between the transactions in your bank account and the transactions in your bookkeeping records. Reconciling your bank accounts is an imperative step in bookkeeping because, after everything else is logged, it is the last step to finding discrepancies in your books. Bank reconciliation helps you ensure that there is nothing amiss when it comes to your money.

Why is it mandatory?

Bank reconciliation is a must because it:

  • Provides the exact financial situation of your company
  • Tracks cash flow accurately
  • Helps detect fraud or bank errors

Stay on top of your bookkeeping

Proper bookkeeping drives your company to success. It is a foundational accounting process, and developing strategies to improve core areas of your business would be nearly impossible without it. Yet as important as bookkeeping is, implementing the wrong system for your company can cause challenges. Some companies can still use manual methods with physical diaries and paper journals. However, as technology gets more and more advanced, even smaller companies could get benefits from going digital. This is where a cloud bookkeeping solution like Zoho Books comes in.

Zoho Books helps you keep accurate records of your business finances. It provides quicker and easier solutions for cash management, accounts payable/receivable, bank reconciliation, and generating financial statements. Further, its built-in automation takes care of mundane accounting tasks and helps you focus more on your business. Try our bookkeeping software for free and see how it can help your business maintain perfect bookkeeping records.

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OSS FAQ: All about the One Stop Shop

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Q. What is the One Stop Shop?

The One Stop Shop (OSS) is an optional quarterly VAT reporting and payment system that’ll be live from July 1, 2021, as part of the EU VAT e-commerce package. This means that you can use the OSS to report and pay VAT on non-domestic B2C sales of the following types across the EU:

a) cross-border supplies of services

b) online intra-community distance sales of goods (selling VAT-applicable goods located in one EU country to a customer in another EU country)

Using the OSS, you can account and pay for VAT across EU with just one return. This is an extension of the Mini One Stop Shop (MOSS) that previously allowed you to file a single EU return for B2C sales of TBE (telecommunication, broadcast, and electronic) services. 

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Q. What’s the purpose of the OSS?

The OSS has been introduced to ease the seller’s burden of having to register for VAT returns in each EU member state where there are customers. With the OSS, there’ll be a single EU VAT return for ecommerce distance selling which the seller can file from their home country.

Q. Who can use the OSS?

The OSS applies to any business making B2C sales in the EU (including charities and NGOs).

Q. What are the different kinds of OSS?

There are 2 kinds of OSS:

a) Union OSS

If your business is established in the EU, you can use the Union OSS to report VAT on intra-community distance sales and non-domestic sales of services to EU customers.

If you’re established outside the EU, you can use the Union OSS, but only to report intra-community distance sales of goods.

b) Non-Union OSS

If your business is not established in the EU, you can use the non-Union OSS to report VAT only on sales of services to EU customers. To do this, you’ll have to register with the tax authority in an EU country of your choice.

Note: The pan-European threshold of €10,000 (£8,600) will apply only if you have a fixed establishment (a permanent address from which to make supplies) in an EU state. If you only have a VAT number in an EU country, that won’t be considered a fixed establishment.

Q. Is it mandatory to use the OSS or IOSS? 

Neither is mandatory. However, once you register, you should use the OSS or IOSS (Import One Stop Shop) for all applicable sales to EU customers. If you don’t want to use it, you’ll have to register for, account for, and pay VAT in each EU country you sell to. UK sellers who don’t use the OSS or IOSS will have to zero-rate their exports for domestic VAT (the goods will still be taxable under VAT, but the rate charged will be 0%) and apply VAT for imports.

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Q. How is OSS going to affect me as a seller? 

Starting July 1, 2021, if you’re shipping goods from your home country to customers across the EU, you can use the OSS to report your sales across the EU. When you move from MOSS to the OSS, you can now use it to report any B2C service sale that’s subject to destination VAT, not just telecommunications, broadcasting, and electronic services.

If you’re an ecommerce seller, you can close your foreign VAT registrations and, instead, file a quarterly OSS return for your home country’s tax authority. 

The existing country-specific EU distance selling thresholds will be removed and replaced with a single pan-European threshold of €10,000 (£8,600).

Q. What should online marketplaces do about the OSS?

Under the VAT e-commerce package, online marketplaces become deemed suppliers. This means that a marketplace can opt to use the OSS to report VAT for intra-community supplies between EU countries. If the marketplace facilitates a domestic supply of goods by a non-EU seller, it can use the Union OSS to report and pay VAT. 

Q. Which state should I register in?

If you want to register for the OSS, you can do so in any EU member state or in the UK, as long as:

  • You’ve registered for VAT in that EU member state, or

  • You’re trading with the EU under the Northern Ireland protocol

If you cross the new pan-European threshold of €10,000 (£8,600) and want to use the UK’s OSS, you’ll have to register for VAT in the UK if you haven’t already. Note that if you’re using the OSS, you’ll have to register for VAT even if your overall turnover falls below the the usual UK VAT registration threshold of £85,000. If you don’t want to use the OSS, you don’t need to register for UK VAT, as long as you register and account for VAT in each EU member state to which you’re dispatching goods.

Q. When can I register for the OSS?

To register for the Union or non-Union OSS, you’ll have to apply and wait until the following quarter for your registration to become effective. So, for instance, if you register after July 1, 2021, your registration will become effective in October 2021 when the next quarter begins.  

After you’ve applied, you may make supplies before your registration has become effective. If you do so, you’ll have to inform this to the tax authority in the relevant EU member state where you’ve registered. This should be done by the 10th of the month that follows the first supply you made after applying. This supply and the rest that follow will be counted together. For example, if you applied on July 15 for your registration to become effective in October, and you make a supply on July 30, you should inform the tax authority about it by August 10.

Note: If you had previously signed up for the non-Union MOSS, the EU member state that you registered in may reach out to you for more information related to the non-Union OSS. The only change in your process would be reporting more services via the non-Union OSS. 

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Q. What should I do once I’ve registered for the OSS?

Once you’ve registered for the OSS, you should use it to account for VAT on all distance sales. You should also continue to file VAT returns in your own country. The OSS is a simplified return for non-domestic VAT, so you should continue to report your domestic supplies via the domestic VAT return.

The process for using OSS is similar to MOSS, where the VAT rate of the destination country (wherever you’re selling to) is charged at the point of sale, and then reported and paid on a quarterly basis via the online portal.  

If your distance sales takes place through an online marketplace that’s in charge of supplies within the EU, the marketplace will have to account for VAT using OSS. Besides this, if you’re a B2C service provider or an event organiser, you can use the OSS VAT return to report your pan-EU sales, and you don’t have to register for VAT in each country.

If you have stock in warehouses (even if you use the Fulfilment by Amazon program) in other EU states, you have to remain foreign VAT registered in those states after July 2021.   

Q. Can I use the OSS to reclaim input VAT or offset VAT returns?

No. The OSS only allows payment of output VAT and can’t be used to reclaim input VAT. 

Q. I have a business in Northern Ireland. How will the OSS affect me?

Under the Northern Ireland protocol, the EU VAT rules apply only to goods, and not services. So if you run a business in Northern Ireland and opt to use the OSS, you’ll have to report all distance sales of goods through the Union OSS, but use the non-Union OSS for services. 

Q. I have a business in the UK, and sell to EU customers. How do I use the OSS, and what happens if I don’t use it?

If you have a fixed establishment in an EU country, you can register for the Union OSS in that country and use it for sales of goods. If you don’t have a fixed establishment but want to use the Union OSS for intra-community distance sales, register in the country that your goods are being sent from. 

If you carry out intra-community distance sales, then you can register for the Union OSS and use it to account for VAT.

If you’re selling to EU customers through an online marketplace, then you won’t need to account for VAT on intra-community distance sales or B2C domestic sales within the EU. Your marketplace will take care of it. 

If you don’t have a fixed establishment and you sell services to EU customers, choose any EU country to register and use the non-Union OSS.

If you don’t opt to use the OSS, you must register for VAT in each country that you’ll be selling your supplies to.

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What exactly do cloud services like Digital Ocean and AWS do?

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What Cloud Services Do 

Companies don’t use cloud services based on the levels of traffic but based on the ease of using cloud services. The amount of traffic doesn’t matter, it is you who decides whether or not to use cloud services. Do you really want to go through the struggle of building a server room for your application with regular maintenance or just use a cloud service. But the advantage of using cloud services is elastic scaling which means you can add and remove servers based on your needs, in you case based on traffic.

The major benefits of using cloud services are elastic scaling, no restrictions on backend technology stack ( I’ve noticed some web hosting companies have restrictions) and you can see what’s going on in your server as you’ll have access to it and you can debug in case if there is a problem.

Basically using cloud services is like building a server farm without worrying about the hardware maintenance.

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Invoice payment through the portal?

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How can customers pay an invoice via the portal?

In order to pay an invoice, your customer needs to login to the portal. You can find out how your customers can login to the portal here.

After logging in to the client portal, your customer can choose a transaction and click on the corresponding Pay Now button.

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A method of payment can also be chosen

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Can we have our customer pay an invoice directly without going through the portal?

Yes! Your customer can simply click on the link received in the email and he would be directed to the portal page. He can pay for the invoice without logging into the portal.

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Can a customer download his “Customer Statement” from within the client portal?

The Statements tab on the navigation panel inside the client portal contains a Statement of Accounts which is nothing but the customer statement. It can be printed or exported as PDF using the respective options provided right inside the portal.

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IOSS FAQ: Your guide to the Import One Stop Shop

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Q. What is the Import One Stop Shop? 

The Import One Stop Shop (IOSS) is an online portal that businesses can use from 1 July, 2021 to file VAT returns for imports. This has been introduced as part of the EU VAT e-commerce package, where the import of low value goods that don’t exceed €150 (£135) will be subject to VAT.

Low value goods are those that are in consignments with an intrinsic value (the price of the supplies, excluding discrete packaging and postal charges) of €150 (£135), imported into the EU or Northern Ireland.

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Q. What is the purpose of IOSS and how does it help? 

The IOSS was introduced to allow suppliers and marketplaces selling imported goods to EU buyers to collect and pay VAT in a simpler way. With this option, you don’t need to register in each EU member state to keep up with your VAT obligations, and you can simply use the portal to file your monthly VAT. The buyer is charged VAT at the point of sale, and doesn’t have to face any unexpected fees when the goods are delivered.

Previously, VAT would be applied at the very end, and the customer would have to pay an unexpected amount. With the IOSS, the process of customs clearance is much faster, because by then, VAT would have already been calculated and applied. This gives the customer complete knowledge of the exact amount they’d have to pay.

Q. What changes does IOSS bring?

a) No more low-value consignment relief (LVCR)

The previous VAT exemption, where imports valuing less than €22 (£20), is removed with the introduction of the IOSS. From July 2021, VAT will apply to all goods. You can file your VAT for imports falling under the threshold of €150 using the IOSS. This portal can be used by businesses outside the EU, including the UK. Goods that cross €150 will continue to be charged with VAT, as per the existing rules. 

b) Marketplaces will become deemed suppliers

From July 1, 2021, online sellers and marketplaces will become deemed suppliers. In other words, they will be in charge of collecting and paying VAT on behalf of the seller. Marketplaces that facilitate the sale of imported goods can opt to use the IOSS to file monthly VAT returns. Note that the IOSS won’t be applied to goods that are subject to excise duties (like alcohol or tobacco products).  

c) Customs clearance becomes easier

If you’ve registered for the IOSS, you don’t need to pay import VAT at the customs clearance. However, if the value of your items crosses the threshold amount, you’ll have to pay import VAT to customs.

Q. Who can use the IOSS? 

Any business (including charities and non-profit organisations) that imports goods falling under the threshold amount of €150, even if the order contains more than one item, into the EU or Northern Ireland, can use the IOSS. These goods, when sold, must be transported from outside the EU and must not be subject to excise duty.

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Q. Is IOSS mandatory? 

IOSS is optional. However, once you register, you should use the portal for all applicable sales. If you don’t want to opt for this, you’ll have to register and pay VAT in each of the EU countries in which you sell to customers, and will have to apply VAT upon imports.

Q. How does IOSS affect me as a seller?

If you’re a non-EU seller, you’ll have to charge VAT on imported goods and can register for the IOSS in just one EU state to declare and pay the amount. The VAT rate that you’ll have to apply will be the rate in the destination state (the EU member state where your goods will be delivered). If these goods cross the threshold amount, they will be taxed at importation in the respective EU Member State.

In the case of marketplaces, since they facilitate sales on behalf of other sellers, they’ll become a deemed supplier, and can register for the IOSS as well. If so, they’ll be in charge of collecting and paying VAT that’s due on sale, instead of the seller having to take care of it.

Q. How can I register for IOSS? 

From April 1, 2021, you can register on the IOSS portal of any EU Member State of your choice. If you’re a non-EU business, you should appoint an EU-based intermediary to act on your behalf and fulfil your VAT obligations under the IOSS. In case you already have an agreement with the EU, related to mutual aid in VAT recovery, then you don’t have to appoint an intermediary.

When you register for the IOSS, remember to continue following your regular VAT requirements in your own country. If you don’t opt for IOSS and don’t select an intermediary, you can continue your business as it is, and import VAT will be applied at customs.   

If you haven’t registered with the IOSS, your buyer will have to pay VAT. The transporter will also charge a customs clearance fee.

Q. What should I do once I’ve registered for IOSS?

Once you ensure that the value of the consignment doesn’t exceed the threshold, you (as the supplier or the deemed supplier) have to display the VAT amount to be paid to the buyer. After this, you’ll have to submit a monthly VAT return via the IOSS portal of the EU member state you’ve registered in, and keep records of these sales.

Marketplaces that facilitate sales will have to be in contact with the sellers, and have to pass on details like the IOSS VAT identification number to the EU customs for customs clearance. 

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Q. Can I use IOSS to reclaim input VAT or offset VAT returns?

No. You can use IOSS to pay output VAT, but you cannot use it to reclaim input VAT.

Q. I have a business in Great Britain. How do I use IOSS?

If you have a business in Great Britain and you’re selling to the EU or Northern Ireland, you should follow the usual steps of paying VAT via IOSS for sales falling below the €150 threshold. You can also report your IOSS number to HMRC before transporting your goods to Northern Ireland. If you’ve registered for the IOSS but haven’t registered for VAT (you may fall below the threshold), you can submit your IOSS number to HMRC, but you need not charge VAT on your sale.

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