Category: Finance Consulting

Poor handling of finance is a root cause of failure for numerous businesses, and efficient financial handling helps a business move ahead during difficult times. This basic tenet of business holds the keys to the survival and growth of a startup venture.

But the irony is that finance is not a priority area for most startups at the initial stage. This may be due to a lack of awareness about how efficient finance handling can remove many roadblocks and create opportunities.

Another reason may be that the startup owners usually aren’t seasoned businessmen in professional life and therefore more inclined towards revenue generation without caring for the need to maintain a healthy bottom-line.

That is a fundamental mistake in cash management, the business owners often find out too late when suddenly they are faced with situations where they have utilized their available cash flow for operations without making budgetary allocation for tax incurred liabilities. This alone can cause a small business to liquidate.

Also, some compliance criteria may appear that the company might have breached due to ignorance, imposing heavy penalties payable within the stipulated time. Situations like this eats up the profit earned and also force the company to hire a CFO or a senior financial expertise manager (more financial burden) to survive the threat of winding up.

This is where a virtual finance department can come in as a viable, cost-effective, and trustworthy support service to address all your financial issues and also guide to accelerate the growth of your business performance. Wow, sounds great and just ideal for small startups that require nurturing by experts!

So, what is a Virtual Finance Department?

Whatever the size of a business, it needs to perform disciplined financial activities for growth. If you’re a startup or a small business and want to keep the upfront investment and risk minimum, this solution is practical and gives you more freedom to work when and where you want.

As the name implies, a virtual finance department acts like your own finance department, but yes, it’s outsourced and operates remotely using the Internet(remote employees). It’s a group of financial experts with long exposure and experiences in handling a full range of financial functions of various sizes and types of businesses. The responsibilities or functions it performs include:

• Bookkeeping and regular accounting services.
• Management of the company’s cash flow.
• Budgets and forecasting.
• Advising and sourcing longer-term financing.
• Management of Taxes.
• Management of Company’s Investments.
• Financial Reporting and analysis.
• Assist managers in making key strategic decisions.

The requirement may vary depending on the size and type of a business. Your requirement may be as basic as virtual bookkeeping, another company may require advanced level virtual accounting services, while a third company may be looking for full-fledged virtual finance management services or virtual CFO services.

Benefits of Virtual Bookkeeping

Bookkeeping is the most basic but essential financial practice of recording a company’s financial transactions daily. A properly updated ledger gives you many insights to make key decisions on operating, investing, and financing.

Virtual bookkeeping ensures daily recording of financial transactions entirely from remote. Virtual bookkeepers telecommute to post the transactions into your electronic ledger from remote using bookkeeping software.

Activity levels include: Accuracy, speed of work, the flexibility of working from remote, and cost effectiveness are some of the strong reasons that explain why you should hire a virtual bookkeeper.

What other services are included in advanced Virtual Accounting Services?

Besides virtual bookkeeping the other services covered in an advanced virtual accounting services are:

• Periodic GST Filing.
• Monthly TDS Payments, and Quarterly TDS Preparation and Filing.
• Bank Statement Reconciliation.
• Periodic P&L, Balance sheets, and other MIS reporting, where applicable.
• General guidance, where needed.

From a startup perspective, virtual accounting services present significant key advantages due to factors such as cost, accessibility from anywhere & anytime, no need to come to the office (in fact, small startups may not even have an office for that matter), and above all the combined experience and wisdom of a group of experts and their networks.

The concept of virtual CFO and virtual finance department are synonymous with the startup culture. They match each other’s unique requirements, as was proved during the startup revolution in the US. India is the 3rd largest contributor to startup ventures in the world needs a large number of competent virtual finance departments to achieve a greater success ratio.

Source- Fluidscapes
We are one of the best digital marketing companies in India that provides online reputation management services to all types of organizations. We assist businesses to stay on top of the game by leveraging the latest technologies and breakthroughs in marketing strategies and business processes. Want to grow your business, even more, get in touch with us and we’ll tell you how.

When we talk about the startup ecosystem of a country it epitomizes many things at a time about the country and its people, such as the use of technology to change lives, risk-taking mentality, level of education, lab-to-market transition, business incubation, and availability of funding.

India became the third-largest startup ecosystem in the world in 2019 based on the number of registered startups. But when it comes to transforming them into successful businesses, India lagged behind many other countries.

This is no surprise because it takes time for a startup business idea to get matured. Moreover, changing the attitude of the people, government policies, and the bureaucratic process in a large and democratic country like India is a tectonic shift.

But then, the economic survey report 2020-21 forced us to change our view of the matter.

Despite the devastation of the business environment due to the pandemic for most of 2020, the country has produced 12 new unicorns (startups of $1b turnover), taking the total tally of Indian unicorns to 38.

This speaks of how well the startup culture has caught the desire of the nation and drives its youth towards innovation and technology-based entrepreneurship; finding ways through a lot of adversities to develop solutions and successful business models. Yes, startup culture is built through struggles, failures, and successes in the business market.

We all know how difficult the journey of a fledgling startup can be, numerous examples of promising startups nosedived after a perfect take off. Many times the failures are caused due to lack of financial planning and lack of management to handle critical situations such as business loans and debt financing. Also, the business model may not be foolproof.

This led to the emergence of venture capital (VC) farms that offer funding along with nurturing and guidance to the infant startup ventures for acquiring stability and growth. Let’s look at it more closely in the below description.

What is Venture Capital?

Venture capital or venture funding is a private investment, which gets invested in hand-picked startup firms that have long-term growth potential. The owners and the management of the venture capital companies in most cases are technocrats and management experts who evaluate the startup idea and scopes and get involved in it as a partner or financier, in exchange for the equity stake if the ideas are found viable.

Venture capitalists are generally well-off investors who have the insights to recognize jewels. Today, investment banks and other financial institutions are also coming forward with funding options to invest in prospective startups or in small companies that are on a fast growth trajectory with a solid business plan. This provides the investment companies the potential for above-average returns.

The difference between the venture capitalists and other investors is that while the investors are only interested in getting high returns from their investments, venture capitalists tend to become partners, share their business expertise in the ventures and help the owners navigate the difficulties on the path to achieve success.

Advantages of venture capitals

For new companies or ventures that have a limited operating history and exposures to nitty-gritty of bank financing, govt. regulations, compliance, etc. venture capital fundings are becoming increasingly popular sources for raising capital. The major advantages are:

1. Ready flow of funds at the crucial junctures throughout its journey
2. All the benefits of having an informed, matured, and trustworthy partner
3. Assistance in building networks and connections
4. No pressure or obligation for repayment
5. Easy accessibility

Different types of venture funding

Venture capitals can be pumped into a business at various stages, which define the types of venture capital. They are:

• Seed funding – Seed funding or seed capital is the funding that helps a company conduct business activities at the initial stage that include market research, product research, business plan creation, business decisions, and the like.
• Start-up capital – This includes capital that is required to set up an office, create prototypes, or recruit crucial personnel, etc in a startup phase.
• First stage or first round capital – This funding is required once a product is tested and ready for manufacturing, and also for the immediate marketing and sales activities.
• Expansion capital – This includes the funding required for the expansion of the ongoing business. The ideal applications are tapping new markets, developing new products, acquiring new equipment or technology, or even acquiring a new company.
• Late stage capital – Late or the last stage of venture funding may be required if the company decides to go public after creating a high reputation and strong customer base. The fund is used to meet the expenses for creating the initial public offering (IPO).

Bank Financing

Bank financing is another option left with the startup companies to arrange funding at various stages of their business lifecycle. There are provisions for many types of term loans, working capitals, or collateral loans depending upon requirements and the repayment terms. Banks can loan to a startup if it meets the following conditions

1. The business model is found to be satisfactory
2. Projected returns from the business are satisfactory
3. Ability to pay back the loan through business or otherwise is satisfactory

How to get bank financing for the startup engaged in novel areas?

Even if your startup is engaged in a novel area where it’s being difficult to establish a business model, banks will ask for higher collateral security coverage from one or more sources of income.

Different types of bank financing available for startups and small businesses.

There can be 10 different types of bank loans available to encourage entrepreneurship in India, each type is best suited for a unique situation.

• Term loan
• Startup loan
• Working capital loan
• Loan against property
• Invoice financing
• Equipment financing
• Business loan for women
• Overdraft
• Merchant cash advance
• Business credit card

Source- Fluidscapes
We are one of the best digital marketing companies in India that provides online reputation management services to all types of organizations. We assist businesses to stay on top of the game by leveraging the latest technologies and breakthroughs in marketing strategies and business processes. Want to grow your business, even more, get in touch with us and we’ll tell you how.

Your business is a replica of you. Whether you are complacent or you want to push the boundaries, whether you are a laid back type or aggressive, your traits reflect your business performance.

However, the current breed of young entrepreneurs are largely driven by 2 Gs – Growth and Global. Aided by technology, they want to tread on the unknown path to carve out new opportunities, and this creates great traction for the economy.

But a dream start may end up in a great disillusionment. Business is like a snake and ladder game. One has to be prepared to circumvent the obstacles and take advantage of the situations.

There are many challenges to a startup or a growing business – managing finances, financial planning, financial reports, compliances, corporate governance, addressing strategic requirements, and so on. These aren’t the tasks responsible for direct revenue earning for the company yet they are immensely important as they shield the business from unexpected blows.

A Virtual CFO firm takes up the responsibility to provide comprehensive financial management services to the businesses of varying sizes. It’s especially ideal for MSMEs and Startups as they are often faced with burning questions like –

• How to manage the cash flow within a lean budget,
• What are the various ROC and legal compliances to be fulfilled,
• How to manage GST and TDS compliances,
• How to handle the IT return formalities,
• How to be eligible for a bank loan,
• How to get a good investor on board,
• How best the profits can be invested,
• How to extend the business to other regions, and so on.

Virtual CFO services provide all that is needed by an organization to ensure monthly financial discipline, financial analysis, financial statements, protection from various legal pitfalls, creating funds, healthy relations with banks and investors, and navigating for growth. Learn more at inquiries@fluidscapes.in.

How to go about selecting the right Virtual CFO firm?

Selecting the right Virtual CFO services agency for your business should be the foremost decision after you decide to start your business – many startup owners have learnt this lesson after having setbacks due to mistakes committed out of ignorance.

So it’s a vital task and definitely requires some major considerations, such as

1) Ability to assume full control of your accounting and finance needs

First thing first – it’s the proficiency and expertise. Handling finance in order to steer the company to a profitable future is a specialist’s job that requires knowledge, experience, and wisdom. A good Virtual CFO service agency should be able to

• Analyze the financial health of the company
• Play an active role in setting the company’s strategic direction and planning
• Make forecasts of the financial insights and market status 
• Develop effective financial and tax strategies
• Maintain good relationships with banks and investors
• Evaluate and monitor the liabilities and investments for effective risk management
• Take part in the executive discussions, business administration and decision-making process
• Study and research the industry of the company to provide specialized advice. 
• Organize the bookkeeping and accounting processes

If you already have accounting or finance staff then it requires employee management skills from the Virtual CFO as the existing staff need to be motivated to adapt to the new system. Learn more at inquiries@fluidscapes.in.

2) Good Man Management skill

Outsourcing a crucial function like finance can be a failure if your Virtual CFO services consultancy is not able to get full cooperation from the staff and important stakeholders in the organization. This requires a little extra effort initially, by the Virtual CFO to forge a friendship through mutual trust.

In other words, Your Virtual CFO should be able to completely align with your system and ethos and should be absolutely committed to securing growth of your business.

3) Other qualities

The way your Virtual CFO operates defines the forward journey of your company. Apart from competence, you should look for certain other qualities in your chosen virtual CFO service agency, as listed below, that put the odds in your favour

• Strategic thinking
• Creative or out-of-box approach
• Proactive stance
• High level of commitment
• Culturally fit and forward-looking
• High level of expertise and experience

The concept of Virtual CFO has been extremely popular in the USA, which is home to the highest number of startups in the world, due to flexibility and cost-effectiveness associated with it. Another major advantage is that the virtual CFO services can be performed almost entirely over the Internet, which eliminates physical meetings and increases speed of work.

India too is seeing a rapid growth of Virtual CFO services due to a thriving startup and MSME culture. Small companies may opt for specific services on a weekly or fortnightly basis. Even one-time help with streamlining accounting, financial processes, business planning, cash flow management, bookkeeping services budgeting, and other strategic transactions are possible. Kindly mail us to learn more at inquiries@fluidscapes.in.

Startups are essentially businesses but startup founders aren’t the type of cautious businessmen, at least during the initial years.

They are more like techies, dreamers, typically obsessed with new ideas, enhancing their innovative solutions, or even engaging in a team-building process, but when it comes to checking the balance sheet or the ledger, their condition resembles that of fishes when taken out of water.

Of course, there are exceptions, especially if the startup happens to be in the field of finance, but in general, the startup owners think financial management is complicated, not appealing and can be postponed to a later date. But that’s a mistake.

A startup is like a young kid who can flourish in life if proper guidance is provided and the essential needs are fulfilled. Guidance is in your hand but the essential needs and nourishment that helps a toddling startup to grow and develop through various stages of becoming strong and independent is done by the Financial management.

India is currently in the second position, after the US, in terms of early stage startup numbers, which was expected to touch 55 thousand according to a study conducted before the affliction of Covid. But starting a startup and steering it to sustainable growth are two different matters.

The disturbing fact that has been observed globally in this context is that

• 9 out of 10 startups fail
• 7.5 out of 10 venture-backed startups fail
• 2 out of 10 new businesses fail in the 1st year of operation.
• And what are the key elements responsible that lead to such heart-wrenching statistics?

A revealing insight from a business leader in South Africa tells us that a lack of adequate financial planning and company administration is the root cause of most of the startup failures in South Africa, though lack of funding and support also plays a huge part.

It goes on to say, “Compliance requirements are onerous, such as those for our tax system; few entrepreneurs have the know-how to meet them all with ease.”

And that, “Often business owners find out too late about the required registrations or thresholds after having utilised their available cash flow for operations, only to later find out that they have tax incurred liabilities for which they did not budgeted for. This issue alone is causing many small businesses to liquidate.”

The scenario is no different in India. Startup owners often neglect financial management in the shape of documentation, taxation, registration, etc. as it has no direct role in revenue-generating operations, and end up paying a heavy price for this imprudence.

Lack of proper financial planning, financial model and discipline, penalties for non-compliance, etc. overshadows the profit earned and forces the company to hire a good financial professional (more financial burden to the company) to survive the threat of closure.

This is where the role of a financial consultant comes in.

You may have a good product or service but if the business model is not good no sustainable business venture can be made out of that. Startups also struggle when it comes to convincing banks, NBFCs or other sources of funding due to lack of managerial skills or credentials to prove their liquidity. Banks generally want to see the financial history.

With a competent financial consultant by your side, all these problems can be mitigated and financial discipline placed from the beginning to facilitate cost savings, fruitful investments, financial projections and forecast, creating a strategic roadmap for financial success et al.

Following are the services that a startup can expect to receive from a financial consultancy farm.

• Accounting and book-keeping
• Cash flow forecasting and budgeting
• Financial statement preparation and records management
• Banking services
• Tax services
• Compliance,
• Corporate governance
• Miscellaneous services

That’s an exhaustive list of financial services that can secure a business from tumbling down. As someone famously said, “Discipline is the bridge between goals and accomplishments.” Financial planning plays a double role – that of creating a strong foundation and then building a solid structure on top of that – in the transition from a startup to a successful business.

India is a big family of Resident Indians and the Non-Resident Indians; both are citizens of India and enjoy the same rights. Non-Resident Indians or simply NRIs are part of the Indian diaspora (over 21 million), the most widely spread and diverse diaspora in the world that maintain strong cultural and social linkages with India, besides engaging economically.

So the huge and increasing number of NRIs through their various types of financial transactions have become an integral part of the Indian economy and therefore, liable to pay income tax, just like Resident Indians.

However, while a Resident Indian is required to pay taxes on incomes from within or outside the country, an NRI is only required to pay taxes on incomes generated within the country. This difference in tax implications has necessitated clarity on their definitions to avoid their wrong uses.

This article talks about NRI taxation in India. We’ll first highlight the various conditions that help to identify an NRI in the eyes of the Income Tax authority and then look at the income tax criteria for them.

Let’s break down the whole matter into questions and answers. This’ll make it easier for you to relate to and understand the salient points.

Q1. How are a Resident Indian and a Non-Resident Indian defined?

Your residential status is a key factor in determining your income tax liability in India. From Income Tax point of view, an Indian citizen can be either Resident Indian or Non-resident Indian. Resident Indian is further divided into two types – Ordinary resident(ROR) and Not Ordinary Resident(RNOR). The residential status can change each year.

You’ll be considered a Resident Indian if:

• You are an Indian citizen who has stayed in India for more than 182 days during the financial year in question, or
• You are an Indian citizen who has spent 60 days in India in the previous financial year and 365 days in the last four years cumulatively.
  However, an amendment has been introduced through the FA 2020(Finance Act 2020), which is applicable in the FY 20-21, that reduces the upper limit of stay in India from 182 days to 120 days, for an individual to be treated as an NRI in case his/her total income in India exceeds Rs.15 Lakh in a financial year.
  In other words, if your income in India during a given FY exceeds Rs.15 Lakh and your stay in India exceeds 120 days in that FY, your status will change from an NRI to Resident Indian. This has been done to curb tax evasion.
• Also, if you are on the payroll of an Indian company but have been sent to a foreign country on an assignment, or as a crew member of an Indian ship, you’ll be considered a Resident Indian.

If you don’t satisfy any of the above conditions you will be considered a Non-Resident Indian (NRI).

Q2. How and why the status of a Resident Indian is further classified?

As said earlier, your tax liability is a factor of your residential status. Resident Indians are further divided into two classes – Resident And Ordinary Resident (ROR) and Resident But Not Ordinary Resident (RNOR).

You’ll be considered a ROR if:

• You have lived in India for at least 2 complete years out of 10 years preceding the FY in question, or
• You have spent 730 days or more in India, during the 7 FYs preceding the FY in question.

You’ll be considered an RNOR if your status doesn’t match with the above.

If you are a ROR, your income from activities outside India will be taxable in India. However, if you are considered an RNOR, you’ll be exempt from paying tax on income that is not accrued or arisen in India. But there is a caveat – if your income from outside India results from a business/professionally controlled set up in India, you’ll be liable to pay tax on that income.

There lies the advantage of an NRI over an RNOR. For the same condition mentioned above, an NRI would be exempt from paying tax on global income from business activities within India.

The eligibility for the RNOR status is further amended through the FA 2020 that now allows an Indian citizen or a PIO (person of Indian origin), who comes on a visit to India from outside in any FY shall be considered an RNOR if:

• His/Her total income, accrued and arisen in India in that FY, exceeds Rs.15 Lakh, and
• His/Her stay in India is 120 days or more but less than 182 days.

Q3. What is Deemed Residency?

This new status has resulted from an amendment provided through the FA 2020 to curb tax evasion. This says that an Indian citizen shall be deemed to be Resident of India(ROI), if:

• His/Her total income in an FY, other than income from foreign sources, exceeds Rs.15 Lakh, and
• He/She is not liable to pay tax in any country or territory due to domicile or residency in that country, or any other criteria of similar nature.

The residential status of an individual who is deemed Resident Of India will be the same as that of an RNOR.

Taxability at a glance based on Residential Status

Income	Ordinary Resident(ROR)	Not Ordinary Resident (RNOR)/ Deemed Resident	NRI
Income generated in India	Taxable	Taxable	Taxable
Foreign Income from the business set up in India	Taxable	Taxable	Non-Taxable
Foreign income from business activities outside India	N/A	Non-Taxable	Non-Taxable

NRI Tax liabilities at a glance

Nature of Income	Taxable to NRI
Income earned in India	Yes
Income deemed to accrue or arise in India	Yes
Income earned outside India but received in India	Yes
Income earned outside India but received outside India	No

Q4. What are the common types of taxable income for the NRIs?

NRIs are entitled to have incomes the same way a resident Indian has, such as:

• Salary received in India
• Capital gain on realty and other assets in India
• Receipt of gifts
• Income from interests in the resident accounts
• Income from interests earned from NRO, NRE, and FCNR accounts
• Interest from savings account/ Bank or non-Bank FDs
• Income from rent in India.

Q5. What tax rebates are available to the NRIs?

Most of the Tax Rebates under section 80 are also applicable to the NRIs, such as:

• 80C
• 80D
• 80E
• 80G
• 80TTA

However, NRIs are not allowed to get deductions from the following schemes:

• Investments in NSC, Post office schemes, PPFs and Senior Citizen schemes under section 80C
• Investments under RGES scheme under Section 80CCG
• Deductions for differently-abled under section 80DD, 80DDB, and 80U

Q6. Why should NRIs file Tax returns in India?

Irrespective of whether you are a Resident Indian or Non-Resident Indian if your income in India enters the tax slab, you should file tax returns. If you are an NRI, filing tax returns (mandatory in some cases) helps you in many ways such as:

• Maintaining a clean image and financial accountability to continue to have incomes from India.
• It helps if you ever decide to return to India and start a business.
• Carry forward losses or claim a tax refund
• Ownership of two or more house properties
• Selling your only house property in India

Hope, this article helped you understand some of the essentials of NRI taxation, but there are much more in this realm. Kindly mail us to learn more at inquiries@fluidscapes.in. We are a virtual CFO service provider specialized in NRI taxation services. If you are an NRI and looking for an able partner to take care of your financial, legal, and tax requirements in India then you have come to the right page. Surely we can talk and take it forward.

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