Company introduction
Company background
South Tax Consulting Co., Ltd (STC), established in July 2011 and located in Phu Nhuan District, Ho Chi Minh City, specializes in providing accounting services tailored for small and medium-sized enterprises (SMEs) in the area Led by CEO Mr Vuong, who brings over a decade of experience in the accounting sector, STC maintains a straightforward organizational structure to efficiently serve its clients.
The company consists of 11 employees, including 10 in the Accounting department and 1 delivery man The Accounting team features 4 senior employees, with 2 having over 3 years of experience and 2 with more than 2 years, alongside 6 junior employees who have up to 1 year of experience Mr Vuong, the CEO, oversees general management, develops new customer relationships, maintains existing ones, and supervises the Accounting department The accountants provide direct accounting services to clients, while the delivery man handles the receipt and delivery of accounting documents between the company and its customers.
Figure 1 Company structure of South Tax Consulting Co., Ltd – March 2019 (Source: South Tax Consulting Co., Ltd)
As of the end of 2018, South Tax Consulting Co., Ltd (STC) served a total of 182 customers across four business sectors: service, manufacturing, construction, and trading The customer base is categorized by size into three groups based on annual revenue: those earning under 10 billion VND, those between 10 and 50 billion VND, and those exceeding 50 billion VND Notably, the majority of STC's clientele consists of trading corporates, with 65 out of 182 customers generating less than 10 billion VND in revenue annually This demographic aligns with the stipulations set forth in Clause 1, Article 6 of Decree 39/2018/ND-CP, issued on March 11.
2018 about Determining Small and Medium-sized Enterprises, this group of customer is determining as micro enterprises Thus the main group of customers of STC is micro enterprises in trading
Figure 2 Number of customers in each group of business of South Tax Consulting Co., Ltd at the end of 2018 (Source: South Tax Consulting Co., Ltd)
Customers prioritize reliability as a key measure of accounting service quality, often influenced by recommendations from their partners The critical factor in this reliability is the provider's ability to deliver promised services consistently and accurately STC's competitive edge lies in its strong relationships with the tax authority in Phu Nhuan, Binh Thanh, Tan Binh, and Go Vap Districts, which benefits its clients operating in these regions Additionally, STC offers services at competitive prices, establishing itself as a micro enterprise with a revenue of 3.7 billion VND.
In 2018, accounting service providers in Phu Nhuan District, Ho Chi Minh City, held a minimal market share and exhibited little variation in service offerings and pricing Mr Vuong identified three key competitors within the area, highlighting the competitive landscape for accounting services in Phu Nhuan.
The district's corporates offer comparable services to customers, with prices that are largely equivalent across the board In terms of company size, their revenue for the year 2018 ranged from approximately 3.3 to 5 billion VND.
Name of company Year of establishing
Revenue in 2018 (VND) - in rounded
Price (VND/issuer client/month)
Bo Cong Anh Co., Ltd 2010 4,500,000,000 1,000,000 - 5,500,000 South Tax Consulting Co., Ltd 2011 3,703,273,200 1,000,000 - 4,000,000
Table 1 Fundamental information about competitors of South Tax Consulting Co., Ltd – March 2019 (Source: South Tax Consulting Co., Ltd)
According to Table 1, four companies are offering prices ranging from 800,000 to 6,000,000 VND per issuer client per month Mr Vuong noted that this pricing varies based on the customer's revenue and the volume of invoices or documents processed in each issuer client accounting report The prices among competitors are relatively similar, indicating a highly competitive market for these services.
Services are offered by the company as follows:
Supplementary service Classifying, arranging and storing accounting documents
Table 2 Categories of service provided by South Tax Consulting Co., Ltd – March
2019 (Source: South Tax Consulting Co., Ltd)
STC offers two primary types of services to its customers: core and supplementary services The core service encompasses essential accounting functions, such as preparing tax reports, maintaining accounting books, and generating financial reports, which serve as the main revenue source for the company In contrast, the supplementary service is provided at no additional cost and includes organizing, classifying, and storing accounting documents for clients.
The process for main accounting service such as preparing tax reports, financial reports and accounting books for customers at STC is presented as below diagram
Figure 3 Process in accounting service of South Tax Consulting Co., Ltd – March
2019 (Source: South Tax Consulting Co., Ltd)
Figure 3 illustrates the key steps involved in the accounting services provided by STC, which include the preparation of tax reports, financial reports, and accounting books The process begins with the collection of accounting documents from clients and culminates in the completion of tax and financial reports, which are subsequently submitted to the tax authority Additionally, the accounting books and all relevant documents for the entire calendar year are returned to the customers.
Business performance
From 2014 to 2018, the company's revenue showed a consistent upward trend, culminating in a significant increase of 554 million VND in 2018, representing a growth rate of 17.6% compared to 2014 Specifically, revenue rose from 3.15 billion VND in 2014 to 3.75 billion VND in 2017, reflecting a robust growth trajectory during this period.
19%) In 2018, the revenue decreases slightly from 3.75 billion VND to 3.7 billion VND (equivalent to the growth rate of -1.22%)
Revenue (VND) Net Profit (VND)
Figure 4 Revenue and profit from 2014 to 2018 of South Tax Consulting Co., Ltd (Source: South Tax Consulting Co., Ltd)
The growth rate of revenue tends to decrease from 10.57% in 2015 down to minus 1.22% in 2018 The revenue growth rate tends to decrease continuously from 2015 to
In 2018, South Tax Consulting Co., Ltd is experiencing significant challenges that could jeopardize its business operations It is crucial to identify the underlying issues and implement appropriate solutions to prevent further deterioration of the firm's performance.
Based on data that the company provided, revenue in each group of customer is listed as follows:
> 50 billion VND/year Total (VND)
Table 3 Revenue in each group of customer at South Tax Consulting Co., Ltd in 2018 (Source: South Tax Consulting Co., Ltd)
From Table 3, group of trading customer contribute the most in revenue of South Tax Consulting Co., Ltd in 2018, with the value of 1.99 billion VND in sales, equivalent to
53.7% over total sales Particularly, the group of micro trading customer takes 65.8% sales in trading group This is the one that contributes the most in total revenue at STC
Businesses are categorized based on their annual sales revenue, which can significantly impact their operations and strategies For services, companies generating less than 10 billion VND in sales are classified separately from those with sales between 10 billion and 50 billion VND, and those exceeding 50 billion VND Similarly, the manufacturing sector is divided into groups based on sales figures: under 10 billion VND, between 10 billion and 50 billion VND, and above 50 billion VND In the construction industry, businesses are also segmented according to their annual sales, with distinct classifications for sales under 10 billion VND and between 10 billion to 50 billion VND Lastly, trading companies follow the same pattern, with categories for sales below 10 billion VND, between 10 billion and 50 billion VND, and those surpassing 50 billion VND Understanding these classifications is crucial for analyzing market trends and developing targeted business strategies.
Figure 5 Revenue in each group of customer of South Tax Consulting Co., Ltd in 2018 (Source: South Tax Consulting Co., Ltd)
According to the company data presented in Figure 5, three key customer groups significantly contribute to revenue: trading customers with sales under 10 billion VND per year (35.29%), trading customers with sales between 10 to 50 billion VND per year (16.93%), and construction customers with sales under 10 billion VND per year (12.83%) Notably, the primary customer group for STC is micro trading customers, who represent the largest proportion of sales Consequently, this study will focus on micro trading customers, with the subsequent chart illustrating their revenue growth rate from 2015 to 2018.
Figure 6 The revenue growth rate of micro trading customers at South Tax Consulting Co., Ltd from 2015 to 2018 (Source: South Tax Consulting Co., Ltd)
Between 2015 and 2018, the revenue growth rate for the micro trading customer group showed a consistent decline, starting at 9.52% in 2015 and ultimately dropping to -1.79%.
2018 In the next part, the symptom that links to sequential decrease in revenue growth rate of this group of customer will be figured out.
Symptoms
As interview with Mr Vuong – CEO:
In recent years, my company's performance has declined, with a noticeable slowdown in revenue growth, particularly among our primary customer segment—micro trading clients The rate at which existing customers are leaving exceeds the number of new customers acquired, significantly impacting our overall revenue (Mr Vuong, CEO of STC, 34 years old)
Mr Vuong noted a recent slowdown in revenue growth, attributing it to a decline in existing customers that has surpassed the increase in new customers, ultimately affecting the company's revenue The accompanying chart illustrates the year-end number of micro trading customers at STC during this period.
Number of micro trading customers
Figure 7 Number of micro trading customers at the year end in the period of 2014 –
2018 (Source: South Tax Consulting Co., Ltd)
In general, the number of micro trading customers increase in the period of 2014 –
2018, in particularly, there were from 53 customers in 2014 up to 64 customers in
2018 However, the growth rate of customer of the firm tends to decrease in this period We can see that the increment in number of customers each year from 2014 to
2018 has decreased continuously in this period of time In 2018, number of micro trading customers in STC is 64, decreased 2 customers compared to the one in 2017
Between 2014 and 2018, STC experienced a decline in its customer base, as the number of clients ceasing to use its services surpassed the influx of new customers This trend was particularly pronounced in 2018, leading to a significant reduction in the number of micro customers relying on STC's accounting services.
During this period, 23 firms represent 29.87% of STC's total customer base, making them the primary contributors to the company's revenue Their significant impact underscores the importance of this group for STC's financial performance.
At the beginning of year 47 53 61 65 66
At the end of year 53 61 65 66 64
Table 4 Fluctuation in number of micro trading customer of South Tax Consulting Co., Ltd in the period of 2014 - 2018 (Source: South Tax Consulting Co., Ltd)
From 2014 to 2018, the number of departing customers increased annually, rising from 2 to 8, with a notable spike between 2016 and 2018 Specifically, 5 customers left in 2016, followed by 7 in 2017, and 8 in 2018 Conversely, the influx of new customers declined during the same period, dropping from 9 in 2016 to 6 in 2018.
From 2014 to 2018, there was a significant decline in customer numbers, particularly among micro trading enterprises, which mirrored the overall trend of the company's total customer portfolio This correlation suggests that the downturn in micro trading enterprises may reflect broader challenges faced by the entire customer base Additionally, the period experienced notable fluctuations, indicating varying dynamics within the market.
Between 2016 and 2018, STC experienced a decline in sales growth, attributed to a reduction in new customers and the loss of existing customers within the micro trading segment.
The revenue of STC relies on both existing and new customers, making a decline in total customer numbers a significant concern for the business To address this issue, it is essential to investigate two key factors: the rising number of existing customers who are leaving and the decreasing influx of new customers Utilizing the Pareto Principle, which suggests that a small percentage of inputs can lead to a large portion of outputs, this study will concentrate on micro trading customers, who may represent the broader customer base Understanding the challenges faced by this group could provide insights into the overall issues affecting STC Moreover, research highlights the importance of fostering long-term relationships with existing customers to enhance profitability Consequently, this study will primarily examine the reasons behind the increasing departure of existing micro trading customers from STC.
Why number of existing micro trading customers leaving the company increase?
As responses of Mr Sang – CEO of Minh Sang Co., Ltd:
Mr Sang, CEO of Minh Sang Co., Ltd, expressed his dissatisfaction with STC's accounting services, citing inaccuracies in his company's tax reports that led to fines from the tax authority This experience has significantly eroded his trust in STC.
Minh Sang Co., Ltd faced penalties from the tax authority due to South Tax Consulting Co., Ltd preparing inaccurate tax reports that reflected a deficit in corporate tax value As a result, customers were required to submit supplementary tax payments and fines, leading to financial losses and dissatisfaction This situation eroded customers' trust in the quality of accounting services provided by South Tax Consulting Co., Ltd.
As interview Mr Vuong – CEO of South Tax Consulting Co., Ltd:
To meet customer expectations, it is essential to ensure both accuracy in tax report preparation and timely delivery Recently, STC has encountered several issues, particularly concerning the inaccurate calculation of clients' corporate income tax, highlighting the need for improvement in these areas.
Mr Vuong highlights that clients of accounting services prioritize accuracy in tax report preparation and timely delivery However, South Tax Consulting Co., Ltd recently faced a significant issue with inaccurate calculations of corporate income tax Following the 2018 tax finalization, the company reported that 25 clients, including 8 micro trading customers, ceased their accounting services due to these inaccuracies.
According to responses from Mr Vuong:
During the finalization of corporate taxes, companies often face penalties from tax authorities due to underreported corporate tax liabilities If a firm submits insufficient tax, it must file supplementary tax returns and may incur fines for late payment.
Mr Vuong emphasized that if his company prepares customer tax reports reflecting a deficit in corporate tax values, it results in customers underreporting their taxes to the tax authority During tax finalization, the tax authority will identify this shortfall, prompting them to request supplementary tax payments and impose fines for late submission Consequently, customers face penalties for insufficient tax payments, leading to dissatisfaction with the quality of accounting services provided by STC, which may result in the termination of their accounting service contracts Instances of inaccuracies in corporate tax values within tax reports are detailed as follows:
No Name of customer Year of report Missing tax (VND) Total fine (VND)
Table 5 Details about cases that inaccurate in tax reports in micro trading group – announced by tax authority in 2018 (Source: South Tax Consulting Co., Ltd)
In 2018, STC inaccurately prepared tax reports for eight micro trading customers, leading to their subsequent termination of accounting services with the company The total fines imposed by the tax authority for these discrepancies reached 103,012,137 VND The inaccuracies primarily involved negative discrepancies in corporate tax values reported by STC, resulting in customers being liable for corporate taxes based on incorrect calculations Upon review, the tax authority identified these inaccuracies, prompting penalties that required the firms to submit corrected tax reports and pay fines for late submissions.
Problem analysis
Problem identification
In accounting process in STC, there are four elements that participate in the process to make tax reports such as customers, accountants of STC, accounting supervisor in
Mr Vuong's company, STC, has been using CeAC accounting software, which may contribute to errors in clients' corporate income tax reports To identify the factors leading to these mistakes, an interview was conducted to investigate the elements affecting the accuracy of the tax reports prepared by STC for its customers.
„After reviewing inaccurate cases that announced by tax authority, I figured out that faults came from my company.‟ (Mr Vuong, CEO of STC, 34 years old)
An interview with Mr Vuong revealed that inaccuracies in customer tax reports, particularly deficits in reported tax values, can result in fines from tax authorities If STC provides incorrect corporate tax values in these reports, customers may submit erroneous tax amounts, leading to potential penalties when tax authorities conduct finalizations To address this issue, the interview focused on identifying the root causes of these mistakes in tax report preparation The findings will be summarized in a cause and effect map that outlines the insights gained from discussions with Mr Vuong and his accounting team, ultimately aiming to propose effective solutions to rectify the underlying problems.
3.1.1 Initial cause and effect map
An in-depth interview with STC's CEO, Mr Vuong, and ten accountants from the Accounting department revealed critical issues affecting corporate tax reporting Key symptoms identified include deficits in corporate tax values on client tax reports, insufficient tax submissions to authorities, and subsequent penalties for these shortcomings The root cause of the corporate tax value deficit lies in discrepancies in reported sales or costs Accountants attributed these discrepancies to factors such as inaccurate invoice entries in accounting software, inadequate invoice input, insufficient software manipulation, and incorrect account classifications Additionally, Mr Vuong highlighted that a lack of managerial oversight contributes to unnoticed errors in client tax reports, exacerbating the discrepancies in sales or costs.
Figure 8: Initial cause and effect map (Author synthesis)
Discrepancy in sales or costs value in client’s tax reports
South Tax Consulting Co., Ltd has identified discrepancies in clients' sales and costs that can affect corporate tax values, as discussed in interviews with Mr Vuong and his accounting team These discrepancies often arise from accountants missing specific steps in the software or making incorrect account determinations Each issue will be elaborated on in detail.
Inserting inaccurate invoice value to accounting software
To prepare tax reports at STC, customers submit their accounting documents, which accountants then input into the accounting software However, STC accountants often encounter challenges, frequently making errors by entering inaccurate invoice values into the system.
As response from Ms Oanh – accountant in STC:
Accurate input of invoice values is crucial, as any discrepancies can result in errors in customer sales and tax reporting According to Bui Thi My Oanh, a 25-year-old accountant at STC, ensuring precise data entry is essential for maintaining financial integrity.
STC faces challenges due to inaccurate invoice values inputted by its accountants, leading to discrepancies in both revenue and expenses for client firms This miscalculation often results in insufficient corporate tax submissions to the tax authority, forcing clients to file supplementary tax returns and incur fines for late submissions.
In 2018, several instances arose where my accountants failed to accurately input the output invoices provided by customers into our accounting software This oversight resulted in a lower revenue value reported in our tax filings (Mr Vuong, CEO of STC, 34 years old)
Mr Vuong highlighted that inadequate input of invoices significantly affects the corporate tax that businesses are required to report to the tax authority During the corporate tax finalization process, the tax authority can verify the output invoices submitted by the business By reviewing the accounting documents and tax reports from corporations, discrepancies in the number of invoices submitted can be identified If a corporation submits fewer output invoices, it leads to an understatement of revenue, resulting in a negative discrepancy in the corporate tax owed Consequently, the amount of tax initially submitted by the firm is insufficient, necessitating the submission of supplementary tax along with penalties for late payment to the tax authority.
Insufficient manipulation on accounting software; Wrong account determination
In an interview with Mr Vuong, he highlighted the critical importance of accounting software for his business, noting that the right software significantly reduces manual data entry errors and enhances efficiency His company currently utilizes the basic package of CeAC accounting software, which has generally performed well in supporting his operations However, Mr Vuong pointed out certain limitations within the software that could potentially affect the accuracy of customer tax reports.
Despite advancements in software, certain functions like account determination, account closing, and code awareness remain manual processes As a result, accountants must manually verify these tasks, which can lead to inaccuracies in tax reports, according to Mr Vuong, CEO of STC.
In an interview with Ms Nga, an accountant at STC, it was revealed that she overlooked a crucial step in the accounting software for T&F Co., Ltd, resulting in a 527 million VND revenue shortfall for May 2017 This oversight adversely affected the company's revenue for the second quarter of 2017, leading to a decrease of 105 million VND in the income tax owed to the tax authority Consequently, T&F Co., Ltd is required to submit supplementary tax and incur fines for the late payment of this tax amount Additionally, as highlighted by Ms Thanh, another accountant at STC, incorrect account determinations can lead to significant errors in clients' tax reports.
„Account determination is very important However, with inexperienced accountants, it is difficult for them to accurately determinate account in complex case.‟ (Phan Thanh Thanh, STC accountant, 24 years old)
Inexperienced accountants often struggle with account determination, particularly when using current accounting software at STC, which requires manual input and increases the likelihood of errors As Ms Thanh highlighted, each account serves a specific purpose, and selecting the wrong account for an expense can compromise the accuracy of clients' tax reports Ms Tuyet also shared her experience with Hanh Ngan Co., Ltd, where she frequently misidentified accounts while preparing tax reports due to her limited experience and knowledge in accounting Consequently, inadequate handling of accounting software and incorrect account selection can significantly impact the precision of the tax reports prepared by STC for its clients.
Insufficient manager’s supervision; Hidden mistakes in client’s tax reports
According to responses from Mr Vuong and his accountants, they mentioned about lacking prompt supervision from manager, in specific:
Currently, there is insufficient oversight from manager Mr Vuong to effectively review the work of the accounting team or provide timely support.
In the accounting process, the manager, Mr Vuong, is responsible for overseeing three key stages: reviewing information inputted by accountants, checking draft tax declarations, and validating draft tax reports However, due to his multiple roles in the company, including customer development and general management, he struggles to dedicate adequate attention to supervising the accounting team This lack of oversight has led to numerous undetected errors, negatively impacting the accuracy of customer tax reports Additionally, when Mr Vuong delegates supervision of junior employees to senior staff without thorough cross-checking, it exacerbates the issue, as these senior employees also lack the time and capacity to manage their own tasks effectively while overseeing others Consequently, insufficient managerial supervision results in significant inaccuracies in client tax reports, highlighting the critical need for effective oversight in maintaining accounting quality.
Problem validation
Analysis from the previous section identifies key potential issues in the workplace, including work overload, employees lacking necessary qualifications, inadequate supervisor support, and low motivation among staff Notably, work overload is particularly pronounced in the accounting field, where professionals experience heightened demands during the first quarter of the year, commonly referred to as the "busy season."
During tax season, accounting professionals often face significant challenges such as work overload, time pressure, and the necessity for overtime Mr Vuong noted that his company experiences a high workload during this period, a situation common across the accounting service industry He views working under tight deadlines and putting in extra hours to ensure timely submission of clients' tax reports to authorities as standard practice, indicating that this issue is an accepted part of the job for employees in the field.
Mr Vuong faces challenges in recruiting qualified employees due to his company's small size, which often leads to high turnover as employees seek better opportunities elsewhere Consequently, he primarily hires recent graduates in accounting, resulting in a workforce that lacks experience and makes mistakes To address this issue, Mr Vuong recognizes the importance of training as a crucial solution, as research indicates that training enhances employee knowledge and skills, ultimately improving corporate performance Accepting the reality of his situation, he prioritizes the training and guidance of his employees to mitigate potential problems and foster their development.
Insufficient supervisor support is a critical issue in small firms, as highlighted by Mr Vuong's experience at STC, where he struggled to provide adequate support to his employees due to his extensive management responsibilities Literature describes the chaotic nature of a small manager's workday, which often requires constant role adjustments Mr Vuong believes that directly managing key functions is essential to mitigate potential problems Additionally, he acknowledged neglecting employee motivation, focusing instead on maintaining customer relationships for immediate survival rather than long-term investment in his staff Research indicates that many small business owners prioritize basic needs and self-ownership satisfaction, aligning with Mr Vuong's current objectives However, fostering employee motivation is increasingly recognized as a vital managerial responsibility By identifying factors that enhance employee motivation, Mr Vuong aims to address the challenges facing STC and improve overall business performance, making low employee work motivation a primary concern to tackle.