It seems like another one of those “Tryst with Destiny” moments when India witnessed something historic and life-changing. And once again as with our Independence, we seemed to be under-prepared for it. Only this time, prior to the demonetisation, there seemed to be no heads-up, no grace period, no warnings apart from what we had dismissed as pure rhetoric – Prime Minister, Narendra Modi’s speeches made at different points in time.
Are we moving towards a ‘cash-less economy’ – probably not, at least not in the short to medium term. What we are definitely moving towards is a more ‘accountable economy’. All transactions are to be recorded accurately and properly.
With GST on the anvil, in any case, businesses would have had to start maintaining their books more diligently – it would become a regular affair, rather than a once-in-a-quarter or once-in-a-year activity.
Accounting, in the past, has been ignored by businesses – they felt that it was only required to fulfil some statutory compliance. The reality is that, going through the books, analysing the reports, seeing the stock statements, etc. can be such an eye-opener. It contains such a wealth of information, that people will be able to manage their businesses better, plan their future growth and take higher quality business decisions. This move will force people to maintain proper books of accounts.
Secondly, a lot of the businesses, had this concept of ‘kachcha’ books and ‘pakka’ books which were maintained separately. It was a clumsy affair, with no real accounting happening – it was more of managing the books. I foresee that with this move and going by the speeches he has made since the demonetization announcement, generating black money shall become more and more difficult – automatically, businesses will keep one set of books which will be maintained properly.
People will also be surprised to know that doing regular book-keeping is actually cheaper than the year-end book-keeping. First –you can extract informative reports which you can analyse and assess, secondly – you know the exact position of your receivables and payables and hence know who to follow up with. Thirdly, all your compliance is up to date – no heavy penalties, scrutiny notices, etc. to deal with. You won’t even have to manage government departments or worry about visits from the tax officer!
The excuse that the tax structure in India forces people to evade taxes is actually a myth. With more people evading taxes, the tax rate has to be kept on the higher side to ensure a certain threshold of taxes is collected. If tax collection is higher, then definitely taxes on items would reduce and lower the tax burden on the consumer basket.
Hence, I actually feel that this move will actually help businesses being managed more efficiently, make everyone more accountable and reduce costs.
Assuming that this cash shortage problem is resolved soon, people’s spending habits would return back to normal. It’s a matter of time before people get used to mobile wallets, plastic money and make the Prime Minister’s vision of Digital India a reality.
I hope RealBooks which is already championing this cause with its excellent accounting features and document digitizing capabilities is at the forefront of taking this to the next level.
By Anurag Mohta, Co-Founder- RealBooks.