Pitfalls Hiring an Accountant in China
Are you considering starting a business in China or expanding your products and services to the Chinese market? Whether you have a well-established business or are in the initial stages of setting up your entity, it is essential to have an accountant that thoroughly understands Chinese compliance requirements.
Given the complex and strict nature of compliance requirements in China, attempting to understand all the requirements can be an overwhelming task. This is why many businesses choose to employ an accountant in China. Here are some common pitfalls to avoid when hiring an accountant in China.
1. Neglecting Cultural Differences
Firstly, it is important to acknowledge the potential challenges posed by language barriers, which can easily lead to miscommunication. Furthermore, there are notable differences in the processes, work schedules and values that accountants in China follow.
In terms of work culture in China, teamwork and collaboration is prioritized over individualism, and a strong moral code is centered around fostering meaningful relationships. Neglecting to understand such cultural differences can potentially compromise the quality and longevity of your working relationships in China.
Therefore, in order to maximize the potential for a successful partnership with a local Chinese accountant or accounting firm, it is critical to conduct due diligence around core cultural beliefs, values and understanding.
2. Missing Reporting Differences
Recognizing the significant disparities between Chinese accounting standards and international GAAP or IFRS is critical when outsourcing your accounting services to China. Being aware of these differences will help ensure the accurate production of financial reports.
For instance, when a US-based business is applying for a loan from an American bank, statements in compliance with GAAP or IFRS is required. Failure to ensure that your accountant in China is knowledgeable about, and adheres to certain regulations, could result in the submission of inaccurate information, which could potentially impact the credibility of your business.
It is advisable to inquire about the standards used by your outsourced accountant in China. As some accountants in China possess an understanding in IFRS and GAAP, selecting those ones can be beneficial in adding assurance to the accuracy of your financial reporting.
3. Not Prioritizing Security
China has adopted increasingly stringent measures on data storage and cross-border data sharing. Failure to comply with these regulations could lead to severe consequences, including the closure of your business. Therefore, it is essential that your accountant in China upholds the highest standard of security to safeguard your data and ensure compliance.
To further mitigate risks, it is prudent to consider implementing up to date software and conduct frequent security checks, seeking assistance from IT experts to strengthen data protection and perform regular check-ins with your Chinese accountant to ensure adherence to authorized security protocols.
Furthermore, maintaining regular check-ins with your local accountant in China reduces the probability of noncompliance, adding an extra layer of protection and peace of mind when operating your business.
Failing to Choose China Friendly Software
It is well known that China’s “Great Firewall” imposes internet restrictions which have led to a number of popular websites and platforms, such as Google and Facebook, being restricted from being accessed in the country. In an effort to protect national security a number of platforms, websites and apps have been blocked. Therefore if you are intending on using an ERP system or payroll software, it is crucial that you implement one that is not blocked in China and can be easily accessed (such as our Business Central or Moore – MS Advisory Payroll platforms).
Engaging in a thorough discussion with your accountant regarding the type of software to be used and ensuring that they are well-versed in the chosen software is imperative during the onboarding phase.
Adopting a universal software and programs that allow for reporting capabilities to all members of the team can prevent difficulties in information access. A viable software solution could include a cloud-based software or program that seamlessly translates between languages.
Choosing the Cheapest Option
When hiring an accountant in China, it is important to ensure that your chosen accountant fully understands reporting requirements, deadlines, and performance expectations. Selecting the cheapest option without considerable due diligence can result in accounting inaccuracies, which can prove to be detrimental if the reports are relied upon to make informed business decisions.
Therefore, it is advisable to perform a comprehensive evaluation of the company you select based on their level of experience, education, availability, and pricing. The investment in the most suitable company to handle your accounting and administrative needs should be based on the value and insights that they are able to bring to your business.
Selecting a Company Without a Foreign Link
Another major common pitfall that companies make when hiring an accountant in China is selecting a non-reputable localized firm, that has no previous experience working with foreign companies. In such cases, not only does language play a role, but also work processes and values can easily be misunderstood and not align. Opting for a firm that has a comprehensive understanding of GAAP and has a strong track record of working with foreign companies, can help reduce the risk of mishandling and miscommunication.
Opting For In-House Accounting
For foreign companies with a subsidiary in China, in-house accounting is generally not the most optimal choice, especially for smaller operations or when there is considerable uncertainty regarding the scope of required work. Finding qualified and specialized accounting staff, who are able to handle both high-quality reporting to the headquarters, while managing administrative tasks can be challenging.
Additionally, a qualified in-house accounting team, that is able to communicate with the headquarters, typically comes with higher costs when compared to working with a local Chinese accountant.
By outsourcing your accounting processes, you can often avoid expenses associated with payroll taxes and employee benefits, such as health insurance and paid time off. This provides a cost-effective solution without compromising the level of expertise required to maintain accurate accounting records.
Overcoming These Challenges
Overcoming and addressing the aforementioned challenges should be a top priority to properly position your business for success. After all, redirecting your focus from accounting related concerns such as data entry and invoice management allows you to better achieve more strategic goals.
Fortunately, there are several effective approaches to take to successfully surmount these obstacles. One viable option is to deploy or outsource a seasoned CFO with a strong background and experience in the Chinese market to oversee operations in the country. This allows you to ensure that business objectives are meticulously followed.
Alternatively, collaborating with a reliable and experienced business partner in China, like Moore – MS Advisory, can prove to be invaluable. A dependable business partnerships helps overcome any barriers associated with language differences, and ensures sound adherence to local reporting requirements, as well as compliance with regulations, which can enhance the reliability and accuracy of accounting records.
We have supported foreign businesses in China for over a decade with services ranging from accounting, to tax advisory and corporate set-up. Our experts are highly experienced in all aspects important to navigating China’s complex business environment. To learn more about working with our team, reach out to schedule your consultation.
Disclaimer: all articles and its related content are the property of Moore Stephens Consulting Company Limited and may not be reproduced either in part or in full without prior consent.
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