All You Need To Know About Bookkeeping In China
Vicky Zhang – Finance Manager
For every company in China, bookkeeping is a matter of utmost consideration.
The difference between Chinese and international standards can lead to misunderstandings with the law and, potentially, to economic losses for companies.
This situation becomes complicated especially for small and medium companies that many times focus primarily on business growth, forgetting the importance of correct bookkeeping in China.
In this article, we want to introduce you the importance of proper bookkeeping for small and medium companies in China and how often outsourcing this function can bring important benefits to companies.
Bookkeeping For SMEs In China
In China, for a lot of small and medium companies is common to outsource bookkeeping.
The main reason for this is that most small and medium-sized companies, in order to reduce the cost of accounting, will not hire full-time accounting personnel for the company accounting information processing, otherwise, the company will also have to spend a lot of costs and time to cultivate professional talents.
After the company starts to use the services of a bookkeeping agency, it does not have to worry about training, and can get more accurate accounting information, at a lower cost, and with more professional results.
Therefore, the agency bookkeeping industry fundamentally solves the accounting problems of small and medium-sized companies.
In addition, the bookkeeping agency generally has more professional accounting knowledge and has more experience.
It can be said that a good accounting company brings the client not only the solution of accounting problems but also can make certain help for the development of the client company, such as reasonable control of tax costs, establish a sound financial system for the company, give professional advice and so on.
Bookkeeping VS Financial Outsourcing: What Are The Differences?
As outsourcing services continue to flourish, “financial outsourcing” is increasingly appearing in front of the public.
You may wonder about the differences between bookkeeping and financial outsourcing.
Below we show you what are the main differences between the two.
The target of a bookkeeping agency is mainly small and medium-sized companies that have not set up accounting institutions and have not employed accountants.
The target of financial outsourcing services are companies that, even if they have ability to deal with financial problems, will choose alternative outsourcing services to obtain more efficient results.
The service provided by a bookkeeping agency is a comprehensive accounting treatment for customers, including industry and commerce, tax, banking, etc. To a large extent, bookkeeping service is equivalent to the financial department of the company.
For the financial outsourcing, the service provided is not only about the overall finance, but also the outsourcing of one or several financial modules (such as general ledger accounting, current account management, payroll management, tax declaration, etc.), as well as related functions (such as cashier, bookkeeping, financial analysis, etc.).
The purpose of the bookkeeping service is to save labor expenses.
Financial outsourcing not only saves such costs but also reduces potential risks and achieves high performance. For example, professional financial outsourcing services can provide companies with all kinds of tax planning advice, and reduce the company tax burden.
Financial outsourcing can also introduce some tools of accounting management to provide reliable data analysis for company decision-making.
General bookkeeping company’s standard is to have a clear accounting, deduct all the tax in time and with high accuracy.
The main purpose of financial outsourcing is to complete the outsourced business, improve the project, optimize, and develop company finance and tax.
Bookkeeping Methods In China
Generally speaking, bookkeeping in China is handled in three ways: special agency, acting company account, perennial agency.
The special agency handles matters such as:
- Registration, alteration, and cancellation procedures of industry and commerce and tax affairs;
- Audit of the final settlement of company income tax and application for approval;
- Confirmation of general taxpayers on behalf of the agency;
- Deal with export tax rebate business;
- To act as agent for tax reduction and exemption, administrative reconsideration, and coordination with tax authorities.
The acting company account handles matters such as:
- Confirmation and finalization of the Engagement Letter for Bookkeeping, and define the rights and obligations of both parties;
- Assign someone to give door-to-door guidance, set up account books of the company, and initiate the establishment of accounts;
- Instruct the cashier to complete the cash journal and bank deposit journal. Lending, receiving, sending, and depositing detailed accounts;
- Audit vouchers, register account books, prepare statements, and fill in tax returns.
The perennial agency handles matters such as:
- Acting for tax returns of various types. Acting for tax payment to check and liquidate various tax business;
- Acting as an agent for overall tax arrangements of companies, tax assessment of investment projects, and making tax-related documents;
- Establish the tax accounting system for companies, and design the financial system for them;
- Assist companies in joint-stock system reform, mergers and acquisitions, and design operation and management system;
- Provide statement analysis and other management suggestions for companies;
- Other perennial agency businesses required by the company.
How To Choose A Bookkeeping Agency
Choose bookkeeping agency can avoid a lot of financial and tax issues, and will not bring unnecessary impact to the operation of the company.
In choosing a bookkeeping agency, there are few aspects to consider:
- Company qualifications: besides the business license, the bookkeeping company should have a bookkeeping qualification certificate and other relevant certificates. Without these basic certificates, the bookkeeping company is not trusted;
- Company size: many companies attract users with low prices. Therefore, our suggestion is to have a look at the company, make a field investigation, and check the strength of the company, including the office space, the company size, the working history of financial personnel, and so on;
- Reviews: check if there are any online reviews that recommend the company. In this way, you can have a better understanding of the agency situation.
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Our clients are assisted from initial stages with company formation and employment solutions, to further support-requiring stages with our business solutions such as tax, accounting & bookkeeping, and payroll & tax. Get a consultation and a free quote for our services!