How BMS systems aid MSMEs in meeting regulatory requirements

The keyword for MSME in compliance is peace of mind. They stay busy running their business operations and have little time to constantly fret about compliance. The business management systems need to solve for the MSMEs so that they have zero concern on remaining compliant. 

From sales tax to VAT to GST, compliance has shifted to a new era. Today, compliance means much more than just filing returns at a given frequency. With requirement of e-way bills and e-invoices, compliance is a daily task now. Take day to day activities or filing of returns at the end of a month, quarter, or year; the BMS system should facilitate ease in managing the same. 

The business may have decided to manage compliance in-house or may have outsourced it to a tax practitioner, the software should help do that. Also, compliance is manifold, some examples being eInvoice, GST returns, TDS, TCS, MSME reports and so on. A comprehensive business software will support the MSME to take care of all of them.

Some key aspects supported by an efficient business management system are as below.

Comprehensive coverage of tax acts: The rule engine of the BMS system needs to code in all relevant business tax clauses. This super critical. MSMEs and their tax practitioners need to manage diverse tax scenarios with ease. The business may be GST regular business or GST composite business, they may have one GSTIN or multiple, they may file a monthly or quarterly return, the current return may be a regular one or an amended one and so on – but in all such cases, they rely on the BMS to do it right for them. Further, tax computation needs to be completely reliable. Tax computation does not indicate only numeric calculation, computation needs to represent tax rules precisely so that every transaction is included in the correct category. It is important that the BMS computes it precisely, as otherwise it costs a lot of time and money for a business to get their return corrected after such a mistake. 

Capturing of transactions: the transaction should be fully compliant while being captured in the BMS system. At the time of entry, the software points out any error or lack of information and facilitate correction. Sometimes, the change may affect tens or even hundreds of transactions, since the data element may belong to the party with whom we had many transactions, or may need a correction in tax rate, or a correction in the attribute of a stock item. We need to be able to make entry or alteration at single place and seamlessly percolate the tax related changes across all affected transactions. This ensures compliance at the time of data entry. Then there is compliance at the time of return filing, which we will address below.

All pending tasks identified: the biggest peace of mind comes from knowing that I have identified and completed all tasks needed for full compliance. Software should help me identify all pending data entry completions, all error corrections, all pending filings and so on. It should also provide a simple experience to complete those tasks. Not only for the current period, but the BMS should be able to point out any pending action arising out of older periods as well. This may arise due to modification of an old entry by the CA or correction done in audit period. 

Speed of return preparation: for a medium sized business, a monthly return may result in running complex tax computations on thousands of transactions. It could take considerable amount of time. Since returns are typically prepared close to the due date, time taken by the software do these computations is crucial. A great BMS will ensure that the entire computation can happen in near-instant manner. Also, the system needs to be scalable to handle load gracefully, as the load on the backend systems are always very heavy in the last few days before filing due date.

Staying always reconciled: a key challenge for the businessman is reconciliation. The ideal state is for books to be always reconciled with government’s tax portals. API integration to tax portals is a necessity. But, really the magic that MSMEs are expecting, is for the business software to help them stay perpetually reconciled. For example, the biggest benefit of staying reconciled with GST is to be able to claim the Input Tax Credit in full, which is super critical for MSMEs.

Finally, it is important to understand that simplicity and flexibility of usage of the software is key. In order to comply with all tax rules, software should not become so complex that day-to-day operations become too difficult to do. BMS systems automate reporting and compliance for the MSME. They incorporate simplicity in the software design so that MSME can focus on running their business efficiently, while remaining compliant to the regulatory needs.

Author: Nabendu Das, Chief of Engineering, Tally Solutions