Times are changing. Cloud accounting is here and here to stay. It is scalable, cost-effective and easy to use. This is great news for expats, tourists and locals alike.
Cloud accounting means freedom, freedom to roam the world while monitoring one’s financial matters and business endeavors. It is nothing more than using software and services in the cloud via the Internet.
Software as a Service, commonly referred to as SaaS, can be the key in keeping up with Costa Rica’s fast changing tax regulations.
It’s especially useful for those expats trying to managing a Costa Rican business from some other part of the world.
Many expats renting their second homes short-term here are not collecting and remitting sales taxes as required by law. Ticos working in San José with vacation homes in other parts of the country are culprits too. Others do not pay income taxes if they make a profit in a business venture.
Some are willing tax evaders. Others just find keeping up too difficult because they find accounting tedious.
The good old days when the tax department was lackadaisical are over. Those evading taxes need to wake up. Some apartment and villa owners are reporting that homeowners associations are turning in tax dodgers on short-term rentals. Other are prohibiting the activity if owners cannot confirm tax compliance.
Getting up-to-date does not need to be difficult or time consuming. It also has other benefits. Renting property legally can exempt owners from taxes under Law 8683. Most people refer to this assessment as the luxury tax.
The answer to simplified accounting is in a single-ledger system. This means having one set of books in the cloud accessible by all the users connected to the system.
The accounting to run a business, track investments, and prepare tax returns is all in the ledger.
Xero, Kashoo, Wave Accounting, Zoho Books, Freshbooks and FreeAgent all offer single-ledger options. QuickBooks’ new international offering, QuickBooks Online Global, is giving the contenders a run for their money. It is designed for small businesses aspiring to save time and mental energy by simplifying small business accounting. It allows full capabilities to up to five users and limited functionalities for an unlimited number of others.
How does cloud accounting work?
It is simple. Just like all accounting, it is based on a chart of accounts, customers, suppliers, employees and transactions. The latter transactions, are made up of invoices, payments, bills, expenses and other types of activity and documents to produce reports like a balance sheet and profit and loss statement among others.
What makes it better is that these transactions can be input into the cloud accounting system by using a smartphone, tablet, or computer. Receipts can be photographed or scanned and then attached to the transactions.
Originals, in most cases can be trashed. Yes, thrown away.
The tax department’s resolution number DGT-02-09 of 2009 and clarification AIA-I-013-2010 states in summary that as long as documents are kept in good conservation with adequate backup procedures they do not need to be physical. They can be stored digitally.
Keeping one’s own backup system is very expensive. However, nowadays, there are a multitude of cloud backup options. The key players in this area are Amazon, Google, Dropbox, and Box. There are many others. New companies are emerging all the time to fill in the gaps where the leaders are weak. This is especially true in the area backup services.
Google is one of the pioneers of these new services and one of the least expensive. Microsoft has only recently in the last few years decided it should get on the bandwagon with its OneDrive and Office 365 offerings.
Several owners of luxury villas in Playas del Coco have converted their entire rental operation to digital. All accounting is done in the cloud. All paper is scanned and attached to transactions. The partners in the villas live in different parts of the world. They all have access to the system and keep tabs on it daily.
SaaS is not just for small business. A foreign cattle rancher with a big operation in Costa Rica moved his entire accounting into the cloud using a different twist. He uses QuickBooks Enterprise, a desktop based system, and hosted it with Elucentra Cloud Services.
His employees use smartphones to send accounting documents to an independent accounting office run by certified public accountant Kevin Chavarria located in San José. He is a pioneer in QuickBooks hosted desktop.
All this may sound a bit techie for some, but really it is not. It is all pretty simple stuff, and it is getting easier to use by the day.
In almost all areas of business, it is now possible to get rid of paper entirely. Digital documents are simpler, easier to store and send, more searchable and more versatile than paper. It has taken almost a decade but online accounting solutions are closer to rivaling more complicated desktop systems.
Expats should dump the paper, move into the cloud, and manage business from anywhere as they join the freedom revolution.
Garland M. Baker, a certified international property specialist, is a 45-year resident and naturalized citizen of Costa Rica. His firm’s team provides multidisciplinary professional services to the country’s international community. Reach him at email@example.com. Baker has undertaken the research leading to these series of articles in conjunction with A.M. Costa Rica. Find the collection at http://crexpertise.info, a free reprint is available at the end of each article. Copyright 2015. Use without permission prohibited.