It is easy in todays fast paced business environment not to be give adequate attention to accounting and proper back office set-up. However, this is very dangerous for your business, as accounting & financial data can be key for your business. We have prepared below 6 quick reasons why its important to keep proper accounting records, primarily drafted around BVI Companies.
- Prepare for the financial return requirement
As mentioned in previous articles the BVI Business Companies Act is amended and from 1 January 2023 all BVI Companies will need to prepare and submit a financial return to their BVI Registered Agent. The first returns are expected to have to be submitted in 2024. Even though the requirement may seem a long way ahead its strongly advised to start keeping accounting records from now so that to make it easier for your company when the submission is required. Its better to have to prepare 1 year of accounting records instead of several.
More information on the change in the BVI Business Companies Act can be found here.
- To know how your business is performing
You have set up a business. You have transferred your assets and money to this business. Its of imperative importance to get to know how its performing. The bank/broker statement may show you profit/loss on investments, however accounting records and financial statements will give you a full picture taking into consideration other income and expenses.
- To know whether you can declare dividends
A company can declare dividends out of its profits. If you don’t know the profits/accumulated reserves of your entity then you will not be able to take informed decisions and declare the correct amount of dividends.
In addition, Directors will need to review accounting records to determine whether there are sufficient reserves for declaring dividends before signing such a resolution (especially if the Directors are service providers).
- Because banks usually need them
Many of our clients come to us requesting financial statements for companies which were incorporated years ago (some in the 90’s) and who never prepared accounting records because the bank requests them. Banks in recent years require accounting records and financial statements either to keep active a bank account or to open one. In that respect its better to be prepared than work on tight deadlines that the banks usually impose and urgently try to prepare accounting records.
- Tax Purposes
Tax requirements are becoming more and more stringent in many jurisdictions. Even if BVI is a tax neutral jurisdiction and there is no requirement to submit tax returns in the BVI, this may be required in your country of domicile, as we see some countries now require such returns.
- Know where your money are going
Data is priceless in our todays age. With proper accounting records you will be able to see categorized your income and expenses of your entity, so that to be able to take informed decisions.
As a conclusion, we do believe, that no entity should exist with no accounting records. Having a company holding millions of dollars and assets, without accounting records its not good management practice, and sooner than later you will need to prepare accounting records and financial statements (for reasons explained above and maybe others), therefore its better to start now rather than later.
Email us on contact@bviaccountants.com for more information on how we can assist you.
