Audits go smoothly when the books are in good shape throughout the year, not when someone scrambles in March. For a small company in India, a handful of consistent habits makes the annual audit and tax filings far easier. This is general guidance, not a substitute for professional advice.
1. Record transactions promptly
Enter invoices, bills and bank entries within days, not months. The longer you wait, the harder it is to recall what a payment was for, and the more likely it is that a document is missing.
2. Keep every voucher and invoice
Auditors ask for the document behind each entry. Create a simple folder structure, by month and type, and store scanned copies of sales invoices, purchase bills, expense receipts and bank statements. Name files consistently so they can be found.
3. Reconcile the bank every month
Compare the bank statement with the cash book and clear any differences. Unexplained items are the first thing an auditor will question.
4. Separate personal and business money
Use the company's account only for company transactions. Founder loans, reimbursements and salary should be properly recorded rather than mixed in with business expenses.
5. Track receivables and payables
Maintain a list of who owes the company money and whom it owes. Review it monthly, chase overdue invoices, and write down balances that will not be recovered according to a consistent policy.
6. Reconcile your GST and TDS data
Match your books with GST returns and the tax portal's records. Check that tax deducted and deposited agrees with what appears in the statements, so mismatches are resolved before the audit and not during it.
7. Maintain a fixed asset register
List each asset with its purchase date, cost, location and depreciation method. Update it when assets are bought or sold, and do a physical check at least once a year.
8. Keep statutory records current
Minutes, registers of members and directors, and filings with the Registrar should be updated as events happen. Auditors may ask to see them along with the accounts.
9. Document decisions and policies
Write down how you value stock, recognise revenue and handle expenses. A short accounting policy note saves time when questions arise.
10. Close the books each month
Even a rough monthly close, with a simple profit and loss and balance sheet, shows errors early. At year end, you will be adjusting a few items, not rebuilding twelve months of data.
A simple monthly checklist
- Post all entries
- Reconcile bank and credit accounts
- Review receivables and payables
- Check tax deductions and GST data
- Back up the accounting file
- Note unusual items for explanation
Closing thought
Software helps, but habits matter more. Rules and thresholds change, so confirm current requirements for your situation.
Greenwolf Advisors helps founders with company registration, accounting and compliance in New Delhi.
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