Author: Tally Academy

What is Form GST ANX-1 Under New GST Return?

Posted on by Tally Academy

What is FORM GST ANX-1?

FORM GST ANX-1 is an annexure to the main return GST RET-1 introduced under the new filing system of simplified returns under GST. This annexure will contain details of all outward supplies, inward supplies liable to reverse charge and import of goods and services. Details in this annexure will have to be reported invoice-wise (except for B2C supplies) based on continuous uploading facility to be made available on GST portal. The reporting can be done on a real-time basis, and will be available for the recipient of supplies to take necessary action in their FORM GST ANX-2.

What are the contents of FORM GST ANX-1?

A taxpayer needs to input the GSTIN and the basic details such as trade name, legal name, etc. will be auto-populated on the basis of the GSTIN.

Details of outward supplies, inward supplies attracting reverse charge and import of goods and services: The details will be entered as follows-

Table No. Name of the Table Instructions Notes
3A Supplies made to consumers and unregistered persons (Net of debit/credit notes) All supplies that have been made to consumers and unregistered persons (i.e. B2C) need to be reported here. The supplies need to be reported in a summary form tax rate wise and net of debit/credit notes.

HSN Codes are not required to be reported here.
3B Supplies made to registered persons (other than those attracting reverse charge) All supplies (other than those which attract reverse charge) that have been made to registered persons (i.e. B2B) need to be reported here. Reporting of supplies made to entities (including Government departments) having a TDS or TCS registration need to be also reported here.

This would also include amendments, if any.

 Only the supply of services (NOT goods) made by an SEZ to a person located in a  domestic tariff area (DTA) needs to be reported here.

The supply of goods by an SEZ to a person located in the DTA shall be reported in table 3K.

The supply of goods or services made TO an SEZ unit shall not be reported here, but reported in table 3E or 3F, as the case may be.

The ‘invoice value’ needs to be reported in column 6 and the ‘taxable value’ in column 9.

For ex: If the taxable value is Rs 200, the tax at 18% will be Rs 36, hence the total invoice value will be Rs 236.
3C & 3D Exports with/without payment of tax All exports with payment of tax (i.e. Integrated tax or IGST) need to be reported in table 3C, while exports without payment of tax need to be reported in table 3D. The shipping bill number / bill of export number that is currently available as on the date of filing of return needs to be reported against the export invoices.

The details of the remaining shipping bills can be reported after filing of the return. A separate functionality for updating details in table 3C 3D will be made available on the portal.
3E & 3F Supplies to SEZ units/developers with/without payment of tax All supplies made to SEZ units / developers with payment of tax need to be reported in table 3E, and supplies made without payment of tax need to be reported in table 3F. This includes amendments, if any. For supplies made with the payment of tax, the supplier will have an option to select if either he will claim refund on such supplies or the SEZ unit. The SEZ unit is eligible to avail input tax credit and claim a refund on unutilised credit after export, ONLY if the supplier is not availing such refund.
3G Deemed exports All supplies treated as deemed exports need to be reported here. This would include amendments, if any. The supplier has the option to declare if the refund will be claimed by him, or the recipient of deemed export supplies. If the refund is claimed by the supplier, then the recipient will not be eligible to avail input tax credit on such supplies.
3H Inward supplies attracting reverse charge (to be reported by the recipient, GSTIN wise for every supplier, net of debit/credit notes and advances paid, if any) All inward supplies which attract reverse charge need to be reported here by the recipient. The details have to be reported GSTIN-wise and not invoice-wise. Advances paid on such supplies shall be declared in the month in which the advance was paid.

The value of supplies reported shall be net of the following:

debit/credit notes, and -advances on which tax has already been paid at the time of payment of advance, if any.

If only an advance has been paid to the supplier, and no invoice or supply received, then on reporting the same, this credit shall reflect in the main return (FORM GST RET-1), but needs to be reversed in table 4 of the said return. This credit can be availed only on receipt of the supply and issue of invoice by the supplier.
3I Import of services (net of debit/ credit notes and advances paid, if any) Services which have been imported need to be reported here. The value of supplies needs to reported net of debit / credit notes, and advances paid, on which tax has already been paid at the time of payment of advance.

The amount of advance paid needs to be declared in the month in which the same was paid.

Details are not required to be reported invoice-wise in this table.

Services received from SEZ units / developers shall not be reported in this table.

If only an advance has been paid to the supplier, and no invoice or supply received, then on reporting the same, this credit shall reflect in the main return (FORM GST RET-1), but needs to be reversed in table 4 of the said return. This credit can be availed only on receipt of the supply and issue of invoice by the supplier.
3J Import of goods The details of taxes paid on the import of goods need to be reported here.

 

These goods were subjected to IGST at the time of import, and are hence not subjected to tax once again while filing this return. The amount of IGST and cess paid at the port of import needs to be reported here, in order to avail input tax credit.

 Any reversal done due to ineligibility of credit or otherwise is to be carried out in table 4B of the main return (FORM GST RET-1).
3K Import of goods from SEZ units / developers on a Bill of Entry Goods received from SEZ units / developers on a Bill of Entry need to be reported here by the recipient.

 

These goods were subjected to IGST at the time of clearance into the DTA, and are hence not subjected to tax once again while filing this return.

 The SEZ unit making such supplies should not include such outward supplies in table 3B.

The reporting in table 3J and 3K shall be required till such time the data from ICEGATE and SEZ to GSTN system starts flowing online.
3L Missing documents on which credit has been claimed in T-2 /T-1 (for quarter) tax period and supplier has not reported the same till the filing of return for the current tax period The recipient needs to provide document-wise details of the supplies for which credit has been claimed but the details of supplies are yet to be uploaded by the supplier(s) concerned as detailed below:

 

(i) Where the supplier has not reported supplies even after a lapse of two tax periods in the case of monthly return filers and after a lapse of one tax period in the case of quarterly return filers.

 

(ii) Where the supplier uploads the invoice after the recipient reports the same in this table, then such credit needs to be reversed by the recipient in table 4B(3) of the main return (FORM GST RET-1) as this credit cannot be availed twice.
4 Details of the supplies made through e-commerce operators liable to collect tax under section 52 (out of any outward supplies declared in table 3) All supplies made through e-commerce operators liable to collect tax under section 52 shall be reported here at a consolidated-level in this table even though these supplies have already been reported in table 3.

What is the format of FORM GST ANX-1?

Form GST ANX-1 Format

Important pointers taxpayers should know while filing FORM GST ANX-1?

  • The supplier can upload documents continuously and on a real time basis
  • The documents issued during a particular tax period or for any other prior period, which have been uploaded by him in the current return filing period, shall be accounted towards the tax liability of the supplier in whichever return these details have been uploaded
  • The recipient will get input tax credit during a tax period based on documents uploaded by the supplier till the 10th of the month following the month for which the return is being filed for, or the10th of the month following the quarter in case of quarterly filers
  • The details of the documents uploaded by the supplier shall be available for the recipient in FORM GST ANX-2 to take action such as to accept, reject or to keep the document pending
  • Supplies which attract reverse charge need to be reported only by the recipient and not by the supplier in this annexure
  • The place of supply (POS) has to be reported for all supplies, and this requirement is mandatory. In the case of intra-State supplies, the POS will be the State in which the supplier is registered
  • The tax rate applicable on IGST supplies can be selected from a drop-down menu. For intra-State supplies, the tax rate will be half the tax rate of Integrated tax, to be split equally between Central tax and State / UT tax. Cess should be reported under the cess column if it is applicable
  • Wherever supplies are reported net of debit/credit notes, even if the values become negative in any particular cases, the same can be reported as it is
  • All suppliers with an annual aggregate turnover over Rs 5 crores, and in relation to imports, exports, and SEZ supplies have to upload HSN-level data., whereas other taxpayers (with annual aggregate turnover up to Rs 5 crores) can report HSN codes on an optional basis in the relevant table, or leave the same blank
  • The tax amount shall be computed by the system based on the taxable value and tax rate. The tax amount so computed cannot be edited, except by issuing debit/credit notes. However, the amount under Cess will be reported by the taxpayer himself
  • Any documents rejected by the recipient shall be conveyed to the supplier only after filing of the return by the recipient
  • The new return system provides for editing or amendment of details only from the supplier’s side. The recipient can reset, unlock or reject a document, however, the option to edit or amend a document shall be made available to the supplier only
  • The rejected documents can be edited before filing any subsequent return for any month or quarter by the supplier, and the credit of the same will be available to the recipient in the next open FORM GST ANX-2. The liability for such edited documents, however, will be accounted for in the tax period in which the supplier has uploaded the documents.
  • In situations where the particulars of the document may be correct but the document has been reported in the wrong table. A facility of shifting these documents to the appropriate table will be provided in such cases so that these rejected documents can be shifted instead of needing to amend them
  • A supplier can, at any time, amend documents relating to supplies made to persons such as composition taxpayers, ISD, UIN holders etc., and the same shall not be dependent upon the action taken (accept/reject/pending) by the recipient
  • Documents belonging to the previous period prior to the current return filing system can be uploaded in the relevant tables of this annexure. Only those details can be uploaded which have not been included in the erstwhile FORM GSTR-1

Inventory Management: Importance and Benefits

Posted on by Tally Academy

Inventory is one of the most crucial aspects of any business model. A close tab on the movement of inventory can make or break your business and that’s why entrepreneurs always emphasise on effective inventory management. While a few business owners do understand the significance and cruciality of tracking inventory on a regular basis, some fail to realise its importance making their business fall through the unseen cracks.

Importance and Benefits of Inventory Management

The importance of inventory management cannot be stressed enough especially for eCommerce and online retail brands. Accurate inventory tracking allows brands to fulfil orders timely and accurately. Inventory management in businesses must grow as the company expands. With a strategic plan in place that optimizes the process of overseeing and managing inventory, including real-time data of inventory conditions and levels, companies can achieve inventory management benefits that include:

Accurate Order Fulfilment

With an effective inventory management system, you can easily track the stock in the warehouse. Bid goodbye to overstocking, stocking of obsolete items, understocking and start focusing on making your brand become one of the key players in the market space. Develop a robust plan with the help of an efficient accounting software and avoid inaccurately filled orders, high return volumes and a loss of customer base.

Better Inventory Planning and Ordering

Striking a balance between the demand and supply is extremely crucial for businesses, thus, inventory management provides aid in better planning and ordering of stock items. Imagine having a huge demand for a particular product but not having enough material to supply the same. Sounds like your worst nightmare, right? A detailed inventory management mitigates these issues, allowing warehouse managers to refresh inventory only when needed. It’s both space and cost-effective.

Increased Customer Satisfaction

Since a systematic and robust inventory tracking system will give you a comprehensive view of your stock at-hand, it yields in an increased customer satisfaction. In retail sector, customers resent late deliveries or “out of stock” notifications and eventually never return to the website to fulfil their shopping needs. However, good inventory management leads to orders being fulfilled more quickly and shipped out to customers faster. The enhanced processes can help eCommerce and online retail brands build a strong repertoire with consumers – and keep them coming back for more.

Organised Warehouse

A good inventory management strategy leads to an organized fulfilment centre. An organized warehouse results in more efficient present and future fulfilment plans. This also includes cost-savings and improved product fulfilment for businesses utilizing the warehouse for managing inventory.

Minimise the Blockage of Financial Resources

The importance of inventory control is to minimise the blockage of financial resources. It reduces the unnecessary tying up of capital in excess inventories and also improves the liquidity position of the firm. With proper inventory tracking module, business owners can take quicker decisions about the stock lying in the warehouse more wisely.

Income Statement – Definition, Format and Example

Posted on by Tally Academy

Definition of income statement

The income statement presents information on the financial results of a company’s business activities over a period of time.

It communicates to users how much revenue the company has generated during the period and the cost incurred by it in connection to generating such revenues. Income Statement is also called by different names as “statement of operations” or “statement of earnings” or “profit and loss statement”.

Business engaged in services usually prepare income statement instead of profit & loss a/c. While the objective remains the same, owing to the difference in the nature of business, few components are different in the income statement.

Components of income statement

Revenue

Revenues are the amounts from the sale of goods and services in the normal course of business. And net Revenue means all proceeds from the sale of goods and services excluding the returns.

 For example, Zen Phones, an electronic store selling phones and computers. This implies that Company A is in the sales business and its revenue is from the sale of computers and mobile phones.

Let’ take another example.

Max associates is a law firm rendering consultancy services to their clients. Here, they are engaged in the business of rendering services for which it charges a fee. So here fee is the revenue forming part of Income Statement.

However, there are also other forms of revenue such as interest income, royalty income, rental income etc. that will be part of the statement.

Expenses

Expenses are the amounts incurred to generate revenue and includes the cost of rendering services such as operating expenses, interest payments, rent, salaries and wages, taxes etc.

For example, Max associates is a law firm providing legal consultancy services to its clients.

In the process of rendering services, the company will incur various expenses such as promotional expense (advertisement expenses), sales managers’ salaries, depreciation on usage of fixed assets and other administrative expenses to earn revenue by rendering services. All these expenses form part of the income statement as they are incurred in relation to such revenues.

Net Income

Here, the net income is nothing but an excess of revenue over the expenses. In other words, after deducting all the expenses and taxes from the revenue earned during the period, remaining is the net income from the business operation.

Format of income statement

A format of an income statement is very important as it is the means of communication of operating results to outsiders. The income statement format includes details such as the company’s name, the title stating, “Income Statement”, the period covered, and other key components as discussed above.

Company Name

    Income Statement

          For the period ______
Particulars  Amount (Rs.) Amount (Rs.)
Revenues

Service revenue/revenue from sale of goods/royalty/rental/interest income/commission income etc.

   xxx
Expenses

Salary expense

Rent expense

Depreciation expenses

Office expenses

Bank charges

Interest expense

 

Total Expenses

  

xxx

xxx

xxx

xxx

xxx

xxx

  

 

 

 

 

 

 

 

xxx
Profit before taxes (Revenues – Expenses)   xxx
Tax Expense   xxx
Net Profit or Net Income (Profit before taxes – taxes)   Xxx

Single-step income statement format

 

Income statement example

Below is the income statement example of Max Associates, who are into legal consultancy service.

Max Associates

    Income Statement

          For the period 1-4-2019 to 31-3-2020
 Particulars Amount (Rs.) Amount (Rs.)
Revenues

Revenue from legal consultancy fee

    

25,00,000
Expenses

Salary expense

Rent expense

Depreciation expenses

Office expenses

Bank charges

Interest expense

 

Total Expenses

  

2,00,000

1,80,000

30,000

20,000

12,000

8000

  

 

 

 

 

 

 

 

4,50,000
Profit before taxes (Revenues – Expenses)   20,50,000
Tax Expense   3,00,000
Net Profit or Net Income (Profit before taxes – taxes)   17,50,000

Why do businesses prepare income statements?

We must mainly remember one thing that a company does not operate wholly on owned funds, it borrows money from outsiders to run its operational activities.

So, the external users of income statement i.e. investors, creditors and other lenders must make decisions about resource allocation as where to put their money. They use the income statement to find out answers for the questions they may have about the future profitability of the business.

  • For investors – This statement will help them to decide whether to keep or sell the shares they own in the company. The investors also use the income statement to determine the ability of a company to pay dividends.
  • For lenders – Lenders use the income statement to find out whether the company will be able to repay the loan with interest in the future.
  • Creditors – They use the income statement to determine whether the company will be profitable enough to repay their debts as they come due.

How do businesses prepare income statement?

With the help of ERP software, preparing an income statement is made a lot easier. Gone are those days where you need to wait for the closure of books to determine the net income. Today, most businesses have automated the preparation of various financial statement including income statement using ERP software or accounting software.

Usage accounting software has helped the business owners to frequently check the income statement and accordingly take the corrective actions as when required.

Shifting to New GST Return: How to Prepare for the Change

Posted on by Tally Academy

The introduction of the new GST return system aimed at simplifying the tax filing regime for business owners across India. The current GST return filing will shift from GSTR-1 and GSTR-3B to a new single return RET-1/2/3 with an auto-filled ANX-1 (for tax liability) and ANX-2 (for Input Tax Credit). The new GST return filing mechanism will be focussed on allowing input tax credit based on the actual invoices uploaded by the supplier.

How to Prepare for the transition to the New GST Returns

If turnover is more than Rs 5 crore, a taxpayer will need to file the return (Normal Monthly) and make the tax payment on a monthly basis. If turnover is less than or equal to Rs 5 crore, a taxpayer will have the following three options to choose from:

·       Normal Quarterly

Return filing frequency will be on a quarterly basis. Tax payment needs to be done on a monthly basis. Applicable to any type of sales.

  • Sahaj: Return filing frequency will be on a quarterly basis. Tax payment needs to be done on a monthly basis. Applicable only to B2C suppliers.
  • Sugam: Return filing frequency will be on a quarterly basis. Tax payment needs to be done on a monthly basis. Applicable to B2B or B2C suppliers

·       Switching between return types

A taxpayer can switch only once in a financial year from Quarterly (Normal) to Sahaj or Sugam. The switch has to be initiated at the beginning of any quarter.

A taxpayer can switch only once in a financial year from Sugam to Sahaj. The switch has to be initiated at the beginning of any quarter. A taxpayer can switch more than once in a financial year from Sahaj to Quarterly (Normal) or Sugam.

The change has to be initiated at the beginning of any quarter. A taxpayer can switch more than once in a financial year from Sugam to Quarterly (Normal). The change has to be initiated at the beginning of any quarter.

·       Claim provisional ITC

A taxpayer who opts to file returns on a monthly or a quarterly (GST RET-1) basis would qualify to claim provisional Input Tax Credit (ITC) on missing invoices. However, the credit of missing invoices will not be applicable to a taxpayer who opts to file Sahaj (GST RET-2) or Sugam (GST RET-3).

·       Necessary actions on invoices

A taxpayer will need to accept, reject, or keep the supplier invoices as pending as necessary. A taxpayer has to take appropriate actions on the invoices uploaded to claim ITC between 11th and 20th of the month.

·       Modify ERP systems

The existing Enterprise Resource Planning (ERP) Systems will need to be modified in order to comply with the new GST returns. A few modifications include (not limited to): Bifurcation of capital goods and input services, Details related to Bill of Entry has to be included, Bifurcation of eligible and ineligible purchases and a single debit/credit note has to be linked with multiple invoices of a vendor.

·       Know other key changes

A taxpayer will need an HSN code for submitting details at a document level versus an individual HSN summary. B2B supplies which are accountable for reverse charge mechanism (RCM) need not be shown in the GST ANX-1 by the supplier. Nevertheless, the aggregate figure has to be shown in GST RET-1. The recipient of supplies has to declare the inward supplies which are liable for RCM in GST ANX-1.

·       File a NIL return

If a taxpayer is liable for a monthly return filing but hasn’t made any purchases or has no output tax liability and ITC to avail in any quarter, he or she will have to file one Nil return for the entire quarter versus monthly returns. The taxpayer needs to report Nil transactions through an SMS in the first and second month of the quarter.

Cost Behaviour: Definition, Formula and Example

Posted on by Tally Academy

Cost Behaviour – Definition

In any business setup, processes change overtime and the best way to overcome any unprecedented changes in the most appropriate way is to be well prepared in advance about the future outcomes. One such aspect which gets impacted with changes is cost behaviour.

Cost behaviour is an indicator of how a cost will change in total when there is a change in some activity. In cost accounting and managerial accounting, three types of cost behaviour are usually discussed:

  • Variable costs. The total amount of a variable cost increases in proportion to the increase in an activity. The total amount of a variable cost will also decrease in proportion to the decrease in an activity
  • Fixed costs. The total amount of a fixed cost will not change when an activity increases or decreases
  • Mixed or semi variable costs. These costs are partially fixed and partially variable

Understanding how costs behave is important for management’s planning and controlling of its organization’s costs, and for cost-volume-profit analyses (including the calculation of a company’s break-even point).

Formula

Variable Cost = Total variable cost/Units Produced

Fixed Cost = Total fixed cost/Units Produced

Examples of cost behaviour

  • Variable cost

An example of a variable cost is the cost of flour for a bakery that produces artisan breads. The greater the number of loaves produced, the greater the total cost of the flour used by the bakery.

  • Fixed cost

An example of a fixed cost is the depreciation and insurance on the bakery facility and equipment. Regardless of the quantity of artisan breads produced in a month, the total amount of depreciation and insurance cost for the month will remain the same.

  • Mixed cost

An example of a mixed cost or semi variable cost is the bakery’s cost of natural gas. Some of the monthly gas bill is a flat fee charged by the utility and some of the gas bill is the cost of heating the building. These two components of the gas bill are fixed since they will not change when the bakery produces more or less loaves of its bread. However, a third component of the gas bill is the cost of operating the ovens. This component is a variable cost since it will increase when the ovens must operate for a longer time in order to produce additional loaves of bread.

MIS Report: Definition, Types and Example

Posted on by Tally Academy

What is MIS?

MIS Reports are reports required by the management to assess the performance of the organization and allow for faster decision-making. A Management Information System, often simply referred to as MIS, can be understood by looking at each of the words that make up the name. There is the management, the information, and the system. At the heart of it, such a system is one that will provide important information to the management of the company.

The complexities of running businesses, have made us more reliant on advanced technologies which will remove any room for errors. On one hand, it accurately states what a management information system does for the management of the company. On the other hand, it cannot be overemphasized that management information systems are very important to the smooth running of a business. It is crucial that businesses opt for an automated management information system is set up for better decision-making.

What is the need for MIS?

The following are some of the justifications for having an MIS system

  • Decision makers need information to make effective decisions. Management Information Systems (MIS) make this possible.
  • MIS systems facilitate communication within and outside the organization – employees within the organization are able to easily access the required information for the day to day operations. Facilitates such as Short Message Service (SMS) & Email make it possible to communicate with customers and suppliers from within the MIS system that an organization is using.
  • Record keeping – management information systems record all business transactions of an organization and provide a reference point for the transactions.

Components of MIS

The major components of a typical management information system are;

  • People – people who use the information system
  • Data – the data that the information system records
  • Business Procedures – procedures put in place on how to record, store and analyze data
  • Hardware – these include servers, workstations, networking equipment, printers, etc.
  • Software – these are programs used to handle the data. These include programs such as spreadsheet programs, database software, etc.

Types of information system

 

types of management information system

Management information systems find their way into just about every aspect of a company. They work with the people in the company, the technology in the company, its products, and the inter-relationships between all of these on a day-to-day basis. If you implement an MIS in your company, then the levels of efficiency you could potentially achieve with it are mind boggling.

Types of MIS reports in Tally.ERP 9

·       Accounting reports

To obtain information on the financial position, operational performance and economic activities of the business.

·       Financial reports

To determine the financial condition of an organisation as required by shareholders, creditors and government units.

·       Inventory reports

To manage the Inventory effectively since the actual status of stock items is obtained.

·       Management control reports

To utilise budgets, cost centre reports, scenario reports etc. for controlling activities.

Inventory Planning: Basic Concept and Benefits

Posted on by Tally Academy

Inventory is one of the most crucial aspects of any business model. A close tab on the movement of inventory can make or break your business and that’s why entrepreneurs always emphasise on effective inventory management. While a few business owners do understand the significance and cruciality of tracking inventory on a regular basis, some fail to realise its importance making their business fall through the unseen cracks. While production and manufacturing organizations hold raw material inventories, finished goods and spare parts inventories, trading companies might hold only finished goods inventories depending upon the business model.

When in case of raw material inventory management function is essentially dealing with two major functions. First function deals with inventory planning and the second being inventory tracking. As inventory planners, their main job consists in analysing demand and deciding when to order and how much to order new inventories.

What is inventory planning?

Inventory planning refers to the process that any organization adopts to determine the optimal quantity as well as timing, with the sole aim of aligning such plans with the organization’s capacity to produce and make sales. Inventory planning usually affects the company in numerous ways. For example, it directly determines the cash flow of any organization and its profits margins with reference to those that have an over reliance on fast turnovers of materials and goods. Evidently, inventory planning is an important aspect of any business’s success.

Good inventory planning supports several vital business objectives including:

  • Customer service and satisfaction
  • Supply chain efficiency
  • Control of costs
  • Accurate sales and demand forecasting

Benefits of inventory control and planning

  • Cash Flow

Inventory control and planning allows small businesses to manage their cash flow opportunities. SMEs aren’t always able to purchase large amounts of inventory, due to limited capital. By having better control of their inventory, they can know exactly how much inventory they will need and when they need it. This can free up other capital to re-invest in other areas of the business.

  • Business intelligence

An inventory control and planning solution allows small businesses to gain insights into the fast-selling products. This allows them to adjust their product line and to make quick and smart business decisions.

  • Maximize profits

By being able to make better business decisions the inevitable outcome for a small business will be an increase in profits. This is because the stock in their inventory will only be stock that’s actually selling. Other stock that doesn’t grab customer’s attention can be deemed obsolete and can be abandoned. This makes the general business practice more efficient.

  • Limits employee mishandling

Inventory planning and control limits the ability of employees to steal from the inventory. Often employees use items from a business’ inventory for personal use. Without inventory control, the business owner would be none-the-wiser. This practice ultimately reduces the profitability of the business. By limiting the ability of the employee to steal, the employer is reducing potential ‘hidden’ costs.

  • Reduce labour costs

Improved inventory planning and control techniques allow small businesses to reduce labour costs associated with inventory. These include the time spent counting stock and the transportation of stock. Employing an intelligent inventory planning and control solution can significantly reduce all these labour-intensive activities.

Conclusion

Earlier, the conventional way to track inventory was to use pen and paper. Over a period of time, businesses switched to spreadsheets, and most small businesses still manage their inventory in the same manner. However, as the business grows, it becomes next to impossible to continue using manual methods or spreadsheets, since a business owner will end up spending more time managing inventory rather than focus on the overall business. Also, inherently entering data by hand, is time consuming and error prone, and tends to be a repetitive task, which can easily be automated. Most importantly, an efficient inventory management in today’s day and age demands a centralized database that is accessible to multiple resources in your business, across multiple locations and updates on a real-time basis.

It needs to be noted here that inventory management software isn’t the only technology that can help a business manage its inventory and stock efficiently. It also includes mobile scanners, POS machines, barcode machines and a host of other equipment which can automate your inventory processes.

Business Report: Definition, Format and Example

Posted on by Tally Academy

Any business, irrespective of the size needs to be organised to achieve its goal, whatever it maybe. A well-structured firm has more chances to achieve success and sustain for a prolonged period in the market as compared to a disorganised business. Each department needs to be tracked and analysed on a timely basis so that various business decisions can be taken appropriately.

Since most businesses are a part of an ever-changing environment, it is crucial to roll and embrace the changes. And if you want to be a part of such rapidly changing scenario, it is imperative to manage all business activities rigorously. As a part of staying afloat in a competitive space, the need of managing business reports arises. Businesses may gather financial, marketing and sales-related information, or more technical data; a business report sample will be your all-time assistance to adjust purchasing plans, staffing schedules, and more generally, communicating your ideas in the business environment. These business reports would vary from business to business and there is no stringent rule to be followed while creating them as every business model is different and unique.

What are business reports?

A business report is a set of data which can provide historical information related to a company’s operations, production, specific department’s insights, and create a base for future decision-making processes or factual insights needed to organize business functions. According to Lesikar and Pettit, “A business report is an orderly, objective communication of factual information that serves some business purpose”. Like we said before that each business report would be different depending on the business model, but they all have one common trait: gathering data and tracking the business activities related to something specific.

General business report format

A good general format for a formal business report includes the following:

  • A cover sheet that lists the name of the report, your company name and address and the date
  • A table of contents, if the report is longer than 10 pages
  • An executive summary; an introduction section explaining the background of the report and any special methodology used
  • The main body of the report, with appropriate subheadings
  • A section with conclusions and recommendations
  • An appendix for non-essential attachments such as charts and graphs that don’t need to be in the body of the report.

Several businesses might not require such a structured format as a business report depending on the audience. For example, a balance sheet is a type of business report. It has a common structure that’s easy to replicate, and typically, every spreadsheet and accounting program has a template available that generates the report from basic inputs. Likewise, a marketing plan has a general format that includes a cover sheet, an executive summary, a budget and sections that detail market research, target market, positioning, competitive analysis and market strategy.

Example

There are 12 types of business reports that virtually every business and consultant needs:

  • Weekly activity reports
  • Project status reports
  • Sales reports
  • Digital marketing reports
  • Competitor analysis reports
  • Case studies
  • Growth strategy reports
  • Market research reports
  • Budget reports
  • Annual reports
  • White papers
  • Project plans
  • Business proposals

Each of these business reports serve different purposes and cater to different audiences. While creating business reports, it’s crucial to segregate your audience, so that you do not present an irrelevant report to your target group. One of the best ways to strike the right chord with your audience is to make your report visually appealing with data presented in the form of pie charts, diagrams, graphs, et al. No one likes to read documents which are text-heavy, so make your report interesting and pleasing to the eye.

Doing the right reporting and information delivery can have a significant impact on your organization and orientate its strategy better.

Data Synchronisation: Definition and Importance Benefits

Posted on by Tally Academy

What is Data Synchronisation?

Data synchronisation is the effort to ensure that, once data leaves a system or storage entity, it does not fall out of harmony with its source, thereby creating inconsistency in the data record. Often, we might modify and update the data after it has been entered into the system. It is important that when we make such changes, all the alterations reflect in all the systems in the same way and there are no discrepancies, in order to avoid any errors. Data synchronisation provides a means of creating harmony and consistency among all the systems that have access to data.

Data conflicts can result in errors and low data quality, which consequently leads to a lack of trusted data down the line. With data synchronisation properly implemented throughout a system, a business will see performance improvement in many areas, including:

  • Logistics and transportation
  • Sales team productivity
  • Order management
  • Invoice accuracy
  • Business systems
  • Cost efficiency
  • Reputation management

Data accessibility and error resolution afford time savings, allowing emphasis to be put on important business development processes like marketing, new product development, and strategic decision-making. Virtually everyone benefits from clean, synced data.

  • Customers receive product information and service that meets their specific needs
  • Business users can interact with all department members using up-to-date information, in real-time, even globally
  • Executives receive the latest data when making important strategy decisions
  • Stockholders can easily stay on top of their business interests
  • Manufacturers access the most recent updates or changes for accurate design and production
  • Distributors have access to the most recent product and marketing information

Benefits of Data Synchronisation

·       Data availability

One of the key benefits of a data synchronization system is that data is made available locally, rather than through potentially expensive, less reliable, and slow connections to a single central database. Data is accessible locally even in the absence of any connection to a central database, so you are not cut off from data in the event of a failure of a network connection.

·       Response time

Synchronization improves response times for data requests for two reasons. Retrieval rates are faster because requests are processed on a local server, without accessing a wide area network. Also, local processing offloads work from a central database server so that competition for processor time is decreased.

Tally.ERP 9 has a robust mechanism to synchronise Master data, removing the need for convoluted approaches, giving both higher reliability, as well as allowing new forms of control architectures (example, allowing for a central system to ‘create and modify masters’, while the local systems are only allowed to enter transactions). You can share data between two or more instances of Tally.ERP 9 using a client–server environment using data synchronisation. Data synchronisation can be initiated from the client to the server or vice versa, depending on your user-defined configurations.

The concept of ‘On Demand Synchronisation’ – where systems actually align to a Tally.NET Synchronization Service, allowing each system to independently complete their work without needing to be ‘connected to each other live’.  It has immediate benefits of removing the ‘manual’ coordination between two end-points before data is exchanged – which is a current typical behaviour. It immediately increases the scale of ‘simultaneous uploads’ from ‘multiple points’ – as each system is now independently operating without clashing with another.

Fund Flow Statement: Definition, Format with Example

Posted on by Tally Academy

Definition of fund flow statement

A fund flow statement is a statement prepared to analyse the reasons for changes in the financial position of a company between two balance sheets. It portrays the inflow and outflow of funds i.e. sources of funds and applications of funds for a particular period.

It is also righteous to say that a fund flow statement is prepared to explain the changes in the working capital position of a company.

Objectives of fund flow statement

A question arises as to why prepare fund flow Statement when we already prepare profit and loss and balance sheet. The need here arises because the profit and loss and balance sheet will not explain the reasons for a change in the financial position.

Profit and loss a/c and balance sheet will give two years figures i.e., current years and previous years. But it will not explain as to why the movement has happened, let’s say, the extent of use of long-term funds for a long-term needs and the use of short-term funds for a long term and short term. Here is why fund flow statement is prepared.

Broadly, a fund flow statement will give us the following two information:

  • Sources of funds – From where the funds have come in
  • Application of funds – Where these funds have been used

Components of a fund flow statement

A fund flow statement comprises of :

  • Sources of funds: It talks about the extent of funds availed from
    • Owners
    • Outsiders
  • Application of funds: It talks about how the funds have been utilized
    • Funds deployed in Fixed assets
    • Funds deployed in Current assets

Fund flow statement explained with examples

National Enterprises raised its funds from the following equation listed below:

  • Long term funds for its noncurrent assets.

Explanation: Noncurrent assets are a company’s long-term investments for which the full value will not be realized within the accounting year. Examples of noncurrent assets include investments in other companies, intellectual property (e.g. patents), and property, plant and equipment.

So, going by the accounting parlance, long term funds are generally raised by a company to meet its long-term requirements. So National Enterprises using its long-term funds for its non-current assets are the right utilization of funds and these details are explained by fund flow statement.

  • What if National Enterprises uses its short-term funds to finance its long-term assets?

Here the fund flow statement when prepared conveys the users of financial information that the usage of the fund has not been made properly by the company as it is living dangerously by utilizing its short-term funds for financing long term assets.

It means that when the company is in need for funds for repaying it to the short-term obligation, it will be in cash crunch situation since once an investment is made into long term assets by the company it, it will not be in a position to convert it into liquid cash at a later stage due to the nature of the investment.

This is how the fund flow statement explains the source of funds and its utilization or application, allowing the users of financial information interpret and know the impact on the business.

Benefits of preparing a fund flow Statement

  • It helps to explain the managers of funds as to why the company is sitting in liquidity strain despite making profits as reflected in profit and loss statement.
  • On the contrary, it helps the managers to understand as to how a company is financially strong despite losses made by it in its operation front.
  • A fund flow statement helps us to analyze whether any short-term funds are being used for long term purposes. The grey area which can only be highlighted by preparation of fund flow Statement.

Users of funds flow Statement

The most interested users of fund flow statements are the lenders of capital. They pay more attention to the fund Flow Statements than the Profit and Loss and Balance sheet.

For Example, Bankers who lend money to the company as Overdraft or Cash Credit in return for interest. The bankers use the information provided by the company in its profit and loss statement and balance sheet in preparing fund flow statements, which then enables them to take decisions as whether to provide its overdraft or cash credit facilities to its clients or not.

Fund flow statement format

Sources of Funds   Application of Funds  
 Capital

Debts

Funds generated from operations

Sale of assets (if any)

 

 

 

 

 

·       (Bal.fig) Excess usage of funds over sources.

[Decrease in working capital]

 xxx

xxx

xxx

 

 Funds utilised in creation of Fixed assets

Funds utilised in creation of other Non- current assets.

Funds utilised in repaying existing loans.

Funds utilised for paying dividends, taxes

 

*(Bal.fig) Excess of Funds over application of funds –

 

 

[ Increase in working capital]

 

 xxx

 

xxx

 

xxx

 

xxx

 

 

xxx
Total xxx   xxx
  • Increase in working capital

Possibilities may arise when long term sources are in abundance of uses or application resulting in a gap. Which we call in fund flow statement as ‘Increase in working capital’. As it is a free flexible source which can now be used by the company for funding its working capital requirements. Say short term loans outstanding (if any) can be paid from the long-term sources slot or dividends be paid etc.,

  • Decrease in working capital

Possibilities that the company has more uses of funds, but it has very limited long-term source available. At that time, the company will go for funds which are available in the nature of working capital.

As a result, the company will reduce the funds available for working capital and divert it for long term uses. So, by decreasing the working capital, we get the funds which are available for long term uses which form part of the source of funds.

The increase or decrease in working capital can be known by preparing a statement of changes in working capital. This statement compares the values of two years of the difference between Current asset and Current Liabilities and tells as to whether there is an increase or decrease in working capital.

How do modern businesses prepare a fund flow statement?

Given the importance of fund flow statements brings to the table, most of the businesses prepare and analyze this statement more frequently. Today, most businesses use ERP software or accounting software which automatically prepares the fund flow statement along with various other financial statements. This allows business owners and other users of financial information to analyze and make on-time smart business decisions.