The profitability of an organization depends on its financial health. Profitable investments, a healthy cash flow and timely adherence to regulatory compliance can easily add 10-15% to the profitability of the company. Many companies neglect to do an overall Financial Health Assessment. As a result, they may miss some hidden avenues to boost their profitability
One such case happened with one of our clients. The client was engaged in the business of providing analytic solutions to US based customers. The business was completely people driven. The major cost to the client, was salary cost and marketing, over-head and administrative cost. In the process of providing the services, client used to incur lot of expenses locally like telephone, consultant, travel, internet and technical fees on which it paid taxes.
We were called to do a complete Financial Health Assessment of the client. During the assessment, we listed down all the tax benefits relevant to the client by segregating various cost and the related revenue. Almost 100% of the business was international, such services would typically qualify as export of services.
When you export a service, you do not have to pay tax. This resulted in non-utilization of the tax credit which was paid on using services like telephone, travel and internet. Since the tax credit was not utilized, our client could claim for the refund for taxes and increase their profits
To our surprise, the client had not claimed for the refund of taxes. When we inquired, client responded that they were not aware of such provision. Then we organised all the information, document and guided the client to apply for the refund of taxes. The net result of this exercise resulted in the savings to the tune of INR 0.42 million. In our estimate, going forward client would be saving close to 0.55-0.60 million on year to year basis.
This example shows that just like for healthy body we go for regular health checkup similarly for improving organizational profitability we must go for Financial Health Checkup. Ready for a Free Financial Health Checkup? Contact us for details.