Accounting and Controlling Services in China
Accounting Agency License of Fiducia Management Consultants (Shanghai) Co, Ltd. in China
Due to the language, cultural and legal barriers, the head office of a foreign investor and its subsidiary in China may find challenging situations arising when trying to reach a mutual understanding in accounting and controlling. The above factors influence the quality of the data available and ultimately, the results of the company.
The implementation and orderly execution of an accounting and controlling process in line with western standards is a constant challenge.
This is due to various reasons, for example:
- Different Language
In compliance with local requirements accounting in Chinese language is mandatory.
However, for easy comprehension, the foreign investor requires the accounts in his native language (or at least in English). This necessitates the production of bilingual accounts.
- Risk of misinterpretation of the terminology.
- In China true and correct accounting/controlling has a low priority. This influences the timely production of data.
- Different educational background
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Due to the established economic system, China is suffering from a lack of qualified and experienced personnel. (The World Bank is financing a program, with the goal of training 25,000 Chinese accountants to reach the International Accounting Standard - IAS. This, however, will take time). -
This is reflected in Fiducia’s experience obtained during controlling and bookkeeping assignments. Some examples are:
- Values (e.g. of stocks) are inaccurate
- No provision for bad debts
- Bookkeeping (sales!) is done only on cash-flow basis
- Wage, salary and benefits structure unclear
- Separation of assets and liabilities between the Chinese parent company and the joint venture is lacking
- Shortcomings, reasons for revenue losses are recognized but remedies not implemented due to the corporate culture in China
- No proper separation between accounting and controlling
- Lack of controlling in marketing, sales and distribution
- Integrated EDP-System implemented too early or system too sophisticated
On the basis of our many years of experience in the China business environment Fiducia offers various services to help foreign investors with the challenge of controlling in China.
Setting up, reviewing or improving the accounting system
A precondition for an efficient Controlling System that generates accurate data, is the existence of a reliable and up to date accounting system. Fiducia can provide the following services based on its experiences:
- Design and establish internal organizational structures (policy & procedure, documentation flow, forms, etc.) and accounting systems
- Reviewing the existing accounting system
- Deficiency analysis and improvement recommendations
- Implementation
- Training
- Bookkeeping as an outsourcing service
Business controlling
- Preparation of a controller manual including controlling systems and procedures (based on head office standards) with detailed job description (in English and Chinese)
- Implementation
- Set standards for corporate governance (compliance with company rules) and corporate compliance (compliance with laws and regulations)
- Marketing, Sales and Distribution Controlling
- Financial Controlling (accounts receivable/payable control, cash flow management, etc.)
- Risk Controlling (assessing risks, implementing an effective internal control system)
Process controlling
- Monitoring of business processes as a continuous improvement process, "forward controlling"
Multilingual computer based controlling system
Fiducia co-operates with Factum GmbH, Duesseldorf, Germany, who developed "MISICAL", a unique multilingual (English, Chinese and German) controlling software offering numerous advantages: The system is added to the existing or preferred accounting software, and provides, as a standard system, a host of controlling instruments. However, customisation to suit individual needs is possible. It is easy to implement and operate.
MISICAL is being used in China in different industries. References are available upon request.
