Knowledge of accounting is essential even in Japan. It can optimize business

Performing Financial Settlements Personally for Cost Savings and Business Operations

With Japan’s expansion, while product development and marketing become crucial tasks, the reality demands accounting tasks cannot be overlooked. Financial settlements are mandated regardless of company size, requiring the creation of documents summarizing the income and expenditure for the year for non-listed companies.

Typically, financial settlements are handled by certified public accountants or tax accountants, regardless of listing status. While one might manage to create financial settlement documents with some accounting knowledge for individual tax returns, corporate financial settlement procedures are complex, often relying on experts.

For small-scale non-listed financial settlements, the annual fees for certified public accountants or tax accountants range from 300,000 to 500,000 yen. The compensation structure often involves monthly advisory fees of around 10,000 yen and an annual financial settlement fee of several hundred thousand yen.
However, despite operating a company for over six years, I’ve never sought assistance from these professionals.

The primary reason for personally handling a series of tasks like accounting, financial settlements, and taxation is cost savings. Feeling personally that several hundred thousand yen for financial settlements only once a year is wasteful, I believe it would be more effective to use that amount for advertising expenses to aim for increased sales.

Moreover, understanding the essence of company management is another reason. Through practical work, I’ve realized that for small businesses, accounting and taxation tasks are as crucial as marketing or business strategies. Experiencing the micro-fields not covered in my MBA has been fascinating.

Accounting and Tax Work Generally Takes Place Twice a Year

Our company’s fiscal year-end is at the end of April. The deadline for submitting financial statements in Japan is within two months from the fiscal year-end to the tax office. Within this time, we conduct accounting and tax work only twice a year—during the year-end adjustments and the end-of-year settlements.

Many small and venture businesses conduct monthly settlements. Managing monthly allows understanding the company’s performance with a one-month delay, and depending on this performance, adjustments to goals and strategies might be necessary. Nonetheless, there are many benefits obtained through monthly settlements.

However, our business deals solely with managing internet media and digital marketing services, making it easy to understand our performance without the need for bookkeeping. Therefore, we conduct annual settlements to focus as much as possible on business operations.

Year-end adjustments involve adjusting the withheld tax amount with the income tax that shoul be paid. It’s a procedure that only requires entering numerical values like insurance premiums into Excel, taking no more than an hour. While settlements are complex and can take several days, we now have SaaS (Software as a Service) that automatically generate settlement documents by inputting journal entries, enabling quick creation.

Should Overseas Businesses Seek CPA?

The answer to this is Yes. Financial statements and corporate tax filings are submitted in Japanese, posing a high hurdle for foreigners. Even for Japanese individuals not accustomed to accounting terminologies, understanding these documents can be difficult. Hence, it’s advisable for overseas businesses to rely on certified public accountants or tax accountants.

However, understanding the fundamentals of accounting and taxation is crucial for managing a company. Studying for the USCPA, I’ve realized that while terminologies differ between Japan and America, most rules remain the same.

Moreover, many accounting firms catering to small and venture businesses have employees who previously worked at firms like Deloitte Touche Tohmatsu, PwC, Ernst & Young, and KPMG, and there are numerous experts proficient in English. Some also offer accounting and tax services specifically tailored for foreigners, making it relatively easy to find specialized help.

In Conclusion

Despite performing accounting and tax work myself to save costs and deepen my understanding of company management, I reaffirm that these are critical tasks for small and venture businesses. Limited funding for small businesses might lead to bankruptcy despite a good performance. Therefore, managing working capital while ensuring investment funds for future business expansion necessitates accounting knowledge.