Approaches Made by the Tax Consulting Firms Business Division
For defending the business area of public accountants
The Tax Consulting Firms Business Division is engaged in its business activities in close collaboration with the TKC National Federation organized by our customers of 11,000 certified public tax accountants and certified public accountants ("TKC members"), based on one of TKC's business objectives stipulated in its Articles of Incorporation (Article 2, Paragraph 1: "Management of the EDP centers for the purpose of defending the business area of public accountants").
Our relationship with the TKC National Federation
The relationship between TKC and the TKC National Federation can be compared to two wheels (front wheel and rear wheel), as in the illustration below. The TKC National Federation, the front wheel, has the role of "upholding the principles" of tax consultants and "setting the goals" for its business activities, or giving the direction to go forward; and TKC, the rear wheel, develops the "management strategies" to achieve the goals and input the manpower to each of them.
What operates as the joint between them is "self-interest is in the realization of others' interest" (page 2), the TKC's company motto and also the basic principle of the TKC National Federation, and "defending the business area of public accountants" as stipulated in TKC's Articles of Incorporation, the two of which represent the raison d'être of TKC and its strategic direction.
Environment Surrounding SMEs and the Activities of the TKC National Federation
The "Report on the Status of Corporation Tax Returns for Tax Year 2016" released by the National Tax Agency shows that the percentage of companies filing tax returns stating profits is 33.2% of all companies, meaning six consecutive years of increase. However, such a percentage of profit-making companies has long been unchanged in the range of 30%, and small and medium-sized enterprises (SMEs) still remain in a challenging management environment.
Under such circumstances, the government enacted the Act for Support for Strengthening Management Functions for SMEs (*1) and is focusing on providing professional and highly skilled support to SMEs, through such measures as recognizing certified public tax accountants and firms and other organizations as the official "support institutions for management innovation" (approved support institutions) which work to provide management support to SMEs and small businesses.
The TKC National Federation announced the "Policy Agenda and Strategic Targets towards the 50th Year from the Establishment of the TKC National Federation (2021)", based on the current status of SMEs and expectations from society of certified public tax accountants. This added the TKC National Federation's new role of "support for SMEs' survival and development" to its business objectives and gave the strategic targets and important themes for achievement of the objective.
*1 Act for Partial Revision of the Act for Facilitating New Business Activities of Small and Medium-sized Enterprises for Facilitating Cultivation of Overseas Demand for Their Commodities (Act regarding Support for Strengthening Management Functions for SMEs) (enacted on August 30, 2012)
Approach to "Support SMEs for Their Continuity and Development"
Approaches taken by the TKC National Federation are on the assumption that the systems provided by TKC are utilized as tools for making such approaches. The systems include the Continuous MAS (Management Advisory Service) System, and the systems for clients such as the Strategic Financial Information System (FX Series) and the Tax Accountants Office Management System (OMS Cloud).
TKC is working on the development and provision of the following services and systems to support the continued development of TKC member firms and their clients:
Helping to enhance TKC members' capabilities for giving accounting guidance
Amid the challenging business environment where 65% of companies are recording deficits, "shifting the bottom line of financial statements from deficit to surplus" is the biggest issue for SMEs.
To solve it, companies must "clarify their management vision" and "develop their business plan."
TKC offers the Continuous MAS System as a system for helping TKC members develop "business plans" and "plans for management improvements" of their clients. The Continuous MAS System is utilized as a tool to help develop a "mid-term business plan" based on the manager's visions and a "single-year budget" for the performance management of the following business year, as well as to let the PDCA cycle and the system for performance management take root with their clients. The TKC National Federation encourages TKC members to practice the Support for Early Drafting of Business Improvement Plans promoted by the Small and Medium Enterprise Agency. The Continuous MAS System is recognized as a specific tool in such practices.
Helping managers to make appropriate decisions
Today, increasing numbers of small businesses are using accounting systems, as cloud-based accounting systems have been put into use in addition to those using PCs. However, a closer look at how they are actually used reveals that the companies still practice their bookkeeping on a cash basis during the accounting period, and they prepare financial statements based on an accrual basis only for the year-end closing. This practice makes it difficult for managers to grasp the company's financial results accurately and timely.
TKC offers the Integrated Accounting Information System (FX4 Cloud) and the Strategic Financial Information System (FX2), the systems for clients as well as e21-Meister, a one-package solution containing accounting, invoicing and payroll operations for small businesses, all of which help managers to quickly grasp each company's financial results and make appropriate decisions under the guidance provided by certified public tax accountants, experts in accounting and taxation. These (FX Series) systems are effectively utilized to monitor the progress of implementing plans for management improvements that are developed using the Continuous MAS System.
Helping to enhance the reliability of financial statements
The most significant benefit of the financial accounting system offered by TKC is that it allows no retrospective correction or addition/subtraction processing (corrections, additions, or deletions) to any transaction data during an accounting period once the field auditing (*2) is completed, on the assumption that TKC member firms conduct for their clients the field auditing monthly and at the time of the year-end account closing as well as monthly closing. Leveraging this benefit, TKC issues the Certificate of Bookkeeping Timeliness ("certificate of timeliness in preparing accounting books (Article 432 of the Companies Act) and certificate of electronic filing of the tax return") for the purpose of contributing to smooth funding activities by the clients.
In this practice, TKC Corporation certifies as a third party that all accounting processes, all the way from monthly closing to year-end closing and electronic filing of tax returns have been timely completed and tax returns are prepared in a consistent manner from accounting evidence to income tax returns, while TKC members visit their clients on a monthly basis to provide timely guidance for accurate bookkeeping (field auditing).
This practice enjoys great appreciation by financial institutions across Japan, leading to a series of announcements about financial instruments with the conditions on loans based on the certifications given by the Certificate of Bookkeeping Timeliness.
*2 The term "field auditing" means to actually visit every client each month and at the time of year-end account closing, to confirm the truthfulness, existence, and completeness of the facts on which the accounting is based, in order to ensure the legality, accuracy, and timeliness of the accounting materials and records, and to give relevant guidance. In conducting field auditing, efforts should be made to examine the soundness of management principles. Field auditing has two types: one is the monthly field auditing conducted every month, and the other is the account-closing field auditing conducted at the time of year-end account closing.
(Provisions for the Practices in Chapter 3 of the Standards of Conduct for TKC Members by the TKC National Federation)
TKC's Approach to FinTech Services
Offering Data Receiving Functionality from Banks and Credit Card Companies
TKC implements Data Receiving Functionality from Banks and Credit Card Companies into the FX Series and provides them as part of the FinTech services it offers to clients.
In recent years, more and more cloud-type accounting software products have the data aggregation function, in which they receive transaction data from an account of a financial institution through the internet and automatically convert them into accounting data. This function is very convenient and effective in reducing the clients' workloads. However, the data aggregation functionality must be used with great care in cases where one transaction involves multiple financial institutions, such as inter-bank transactions or payments by credit card, because of the risk of such transaction data being recorded more than once.
The Data Receiving Functionality from Banks and Credit Card Companies offered by TKC automatically collects each transaction data from financial institutions via the internet and achieves timely and accurate journal entries through such functionalities as TKC's proprietary methods for avoiding duplicate accounting entries while increasing efficiency in bookkeeping operations.
Offering the TKC Monitoring Information Service
TKC offers the TKC Monitoring Information Service as part of its FinTech services for financial institutions. It is a service in which tax consulting firms, with approval of their clients, provide financial institutions with the financial data of which compliance, accuracy and timeliness are ensured by the monthly field auditing by the TKC member firms, as the material for the screening before and after monitoring for providing financial loans. It consists of (1) provision of financial statements, etc., (2) provision of monthly trial balance sheets, and (3) online disclosure of updated performance data (under development), which enable financial institutions to receive relevant information from clients in a timely manner.
This service enjoys a good reputation for the high reliability of monthly trial balance sheets and financial statements provided by TKC member firms and has been adopted by more than 300 financial institutions nationwide.
Offering the Local Benchmark Cloud
TKC offers the Local Benchmark Cloud for the purpose of enhancing the management capabilities of the clients of TKC member firms and strengthening the relationship of mutual trust between the clients and financial institutions.
It is a service that automatically creates from the financial data accumulated in the TKC Internet Service Center the "financial information (six indexes)" that the Ministry of Economy, Trade and Industry indicates as a tool to grasp the management state of a company. Also, in this service, TKC member firms create the "non-financial information (four perspectives)" from the insights obtained in interviews with their clients. The benchmark information prepared in this service is provided, with the approval of the manager, to financial institutions by TKC members through the TKC Monitoring Information Service.
This service also enables comparison between the "six indexes" and the "TKC Management Indicators" (BAST) which is created from financial data from approximately 235,000 companies, and automatically generates five-year sales revenue comparisons that can be used by financial institutions for classifying the "number of companies to which the loans are provided and their amount, each by life stage of the companies", the disclosure of which is required by the Financial Services Agency.
Retention of Clients in Good-standing of TKC Members and Support for Increasing the Number of Clients
Promoting the Accounting Systems for Medium-sized Companies
TKC offers the Integrated Accounting Information System (FX4 Cloud) to medium-sized companies with annual turnover from 500 million to 5 billion yen, with an aim to "retain the clients in good-standing of TKC Members" and "increase the number of clients" through enhancing the added value offered by TKC members. Its most significant benefit is that TKC member firms are in charge of the entire process, from consulting services for implementation of a system to support in its operation and the effective use of the accounting information. FX4 Cloud is also a system which enhances the compatibility between the accounting works of a company with the system and the field auditing conducted by the TKC member in charge.
FX4 Cloud now boasts its number-one record of implementations* in the field of cloud-based accounting software for medium-sized companies.
Promoting the accounting systems for non-profit organizations
Today, an increasing number of social welfare corporations, public interest corporations, hospitals and clinics are revising or reviewing their accounting principles or policies in response to the changes in legal and social systems. The TKC National Federation has organized a research council consisting of TKC members with expertise in accounting and taxation in order to help the organizations adapt to such changes in the social system and is actively supporting the efforts to improve their management.
TKC, for its part, offers services such as the FX4 Cloud (for the accounting of social welfare corporations), the FX4 Cloud (for the accounting of public interest corporations), and the Financial System for Medical Institutions (MX3 Cloud/MX2) to support these activities.
*2016 cloud-based accounting software for medium-sized companies with an annual turnover of 500 million to 10 billion yen, published in the monthly magazine BT in its September 2017 issue by the Fuji Chimera Research Institute, Inc.
*"SaaS ERP market No.1 vendor by sales revenue for 3 consecutive years (fiscal years 2015, 2016, and 2017 (forecast)), published in ‘ITR Market View: ERP Market 2018' issued by ITR"
Helping Tax Consulting Firms to Stay Compliant with Laws
Tax consulting firms are required to establish internal systems to prepare "the workbook processed" (Article 41 of the Certified Public Tax Accountant Act) and to "supervise its employees" (Article 41-2 of the same Act), in addition to the full implementation of monthly field auditing and practicing the attachment of documents pursuant to Article 33-2 of the Certified Public Tax Accountant Act.
TKC offers the Tax Accountants Office Management System (OMS Cloud) which interacts with the Corporate Financial Reporting System (TPS1000), the Field Auditing Support System and other systems from TKC which automatically generate the bookwork processed, in order to help tax consulting firms to achieve the required management that complies with the laws.
Our strengths lie in the fields of accounting and taxation. We will further reinforce them and will support the TKC members' business operations as well as the growth and development of SMEs and small businesses, which are the backbone of the Japanese economy.
Reliable Support Structure for Customers
In March 2018 we completed the construction of the "TKC Customer Support Service Building" in Kanuma City, Tochigi Prefecture. This was built as a site of the TKC Customer Support Service Co., Ltd. established in October 2017, a specialized subsidiary of TKC for providing customer support.
In line with the start of work at the new office building, the service of the TKC System My Support which had previously been provided to some areas earlier in the fall of 2017 is now in its full operation. We will expand our service area and supporting system in stages, targeting its completion by the fall of 2018, and work to further strengthen our support structures for customers.