Day 2 : Recording Financial Transactions

Two years ago, it took random ten minutes to evaluate how much it took to calculate input money in cakes. Presently, however, our products are more than ten, workers are ten, and our working hours are all 24 hours of the day. It has become so complicated for us to calculate the input money into all the production lines of the day. Calculating revenue collected from daily sales is even a bigger maze. However, we have no option but to find a way of calculating them. In fact, that information is mandatory when registering for Value Added Tax (VAT). This is how Malawi VAT system works:

  • Any business with expense of MK 1 million ($1100 USD) per month should register for VAT (Cake Palace is eligible for registration). In VAT system, there are two types of taxes, input surtax and output surtax. Input Surtax is the VAT paid by a business when purchasing raw materials. An instance of input surtax is when Cake Palace is charged 16.5% of the cost of 50kg flour, as VAT, when purchasing flour.
    Output surtax is the addition of 16.5% of the price of a product to the product. For example, instead of selling a doughnut at MK100, we sell it at MK116.5, where MK16.5 goes to the government as tax.
    But most business, including Cake Palace, are thrilled that tax paying could ruin their revenue. However, thanks to a conversation I had with Author, a friend working in one of the biggest businesses in Malawi, Rub Processor, I learnt that there is a good news rapped in tax payment. That good news is what makes the biggest supper markets make high revenues, even if they sell their items cheaper than shops that do not pay tax. There is a big reason.
    Payment of VAT, by a business firm, has three steps involved. The first is calculating the input surtax, and justifying it with receipts of purchase. The second is paying output surtax, which is accurately calculated using a sales machine sold by Malawi Revenue Authority (MRA). The last step is calculating the different between input surtax and output surtax. That difference is the amount that a business firm pays to the government as VAT.
    The catch is, when one is not keeping records of input surtax, MRI will collect output surtax, instead of the difference, as VAT. That is when VAT payments choke a business firm.

Driven by an advice from Author, Cake Palace chose one of the workers, Mrs Kangwau, to start keeping receipts of purchase and recording them in a hard copy file. However, papers become bulk and difficult to keep. In fact, the exercise failed to continue.

After making myself available for 3 months at Cake Palace, during my holiday, I decided to introduce record-keeping on google sheets. Rather than hard copies, that are limited in space, the sheet can be update by my parents and me, even if we are miles away from each other. Right now, we are celebrating one month of recording daily expenses. We started on 16th May 2018 and it is still happening today on 16th June 2018. I hope that we will be consistent with recording daily expenses and keeping paper receipts.

To make record keeping an easier task, we have bought a desktop. Below is me with a new computer for Cake Palace!
Masa_withPC.jpg

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