Company introduction
Company background
South Tax Consulting Co., Ltd (STC), founded in July 2011 and located in Phu Nhuan District, Ho Chi Minh City, specializes in providing accounting services for small and medium-sized enterprises (SMEs) in the area Led by CEO Mr Vuong, who brings over 10 years of experience in the accounting sector, the company operates with a straightforward organizational structure.
The company consists of 11 employees, including 10 in the Accounting department—comprising 4 senior accountants (2 with over 3 years of experience and 2 with more than 2 years) and 6 junior accountants with up to 1 year of experience Additionally, there is 1 delivery man responsible for handling the receipt and delivery of accounting documents between the company and its clients Mr Vuong, the CEO, oversees general management, develops new customer relationships in a sales capacity, maintains existing customer care, and supervises the Accounting department.
Company structure is presented as following
Figure 1 Company structure of South Tax Consulting Co., Ltd – March 2019 (Source:
South Tax Consulting Co., Ltd)
As of the end of 2018, STC has served a total of 182 customers, categorized into four business sectors: service, manufacturing, construction, and trading Additionally, customers are segmented by size into three revenue groups: those with annual revenues under 10 billion VND, those with revenues between 10 and 50 billion VND, and those exceeding 50 billion VND.
As of the end of 2018, South Tax Consulting Co., Ltd primarily serves corporate clients engaged in trading, with 65 out of 182 customers generating annual revenues of less than 10 billion VND This demographic represents a significant portion of the company's clientele, highlighting its focus on smaller businesses in the trading sector, in accordance with Clause 1, Article 6 of Decree 39/2018/ND-CP dated 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, particularly valuing the consistent and accurate delivery of promised services STC's competitive advantage lies in its strong relationships with the tax authority in Phu Nhuan, Binh Thanh, Tan Binh, and Go Vap Districts, which benefits local businesses by providing supportive services at competitive prices As a micro enterprise, STC generates a revenue of 3.7 billion VND.
2018, thus it takes a trivial part of market share of this area in Ho Chi Minh City
Accounting service providers in Phu Nhuan District offer similar services and pricing to their customers Mr Vuong identified three companies as key competitors in the Phu Nhuan area.
In the district, several corporations offer identical services to customers, with their pricing being comparable In terms of company size, their revenue in 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 these prices are influenced by the customer's revenue and the volume of invoices or documents processed in their accounting reports The pricing among competitors is quite similar, making their offers highly competitive in the market.
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, with the core service being accounting This includes the preparation of tax reports, accounting books, and financial reports, which serve as the main revenue source for the company.
Supplementary services are complimentary offerings designed to enhance customer experience, which include the classification, organization, and storage of accounting documents.
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 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 these reports Once finalized, the tax and financial reports are submitted to the tax authority, while the accounting books and annual documents are returned to the customers.
Business performance
Between 2014 and 2018, the company's revenue showed a consistent upward trend Notably, in 2018, revenue reached an increase of 554 million VND, reflecting a growth rate of 17.6% compared to 2014 From 2014 to 2017, revenue rose from 3.15 billion VND to 3.75 billion VND, indicating a significant growth trajectory.
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 faced significant challenges that could worsen if the underlying issues are not identified and addressed with appropriate solutions.
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)
In 2018, trading customers were the primary contributors to the revenue of South Tax Consulting Co., Ltd, generating sales of 1.99 billion VND.
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
The article categorizes businesses based on their annual sales, highlighting various sectors For services, sales are divided into three brackets: less than 10 billion VND, between 10 billion and 50 billion VND, and over 50 billion VND Similarly, manufacturing is classified with sales under 10 billion VND and between 10 billion and 50 billion VND The construction sector also follows this pattern, with sales categorized as less than 10 billion VND and between 10 billion and 50 billion VND Lastly, trading is segmented into three sales categories: under 10 billion VND, between 10 billion and 50 billion VND, and exceeding 50 billion VND.
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 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 trading customers with sales under 10 billion VND per year, making them the focal point of this study The following chart illustrates the revenue growth rate of micro trading customers from 2015 to 2018.
The revenue growth rate of micro trading customers at South Tax Consulting Co., Ltd increased steadily from 2015 to 2018, as illustrated in Figure 6 This data highlights the company's successful strategies in catering to micro trading clients during this period.
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 falling to -1.79% by 2018.
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 slowing revenue growth rate primarily affecting our core group of micro trading customers The increasing number of existing customers leaving has outpaced the acquisition of new customers, 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
In 2018, the number of micro trading customers at STC decreased to 64, reflecting a loss of 2 customers compared to 2017.
Between 2014 and 2018, STC experienced a decline in its customer base, as the number of clients discontinuing their accounting services surpassed the influx of new customers This trend was particularly pronounced in 2018, leading to a significant reduction in the firm's micro customer segment.
During this period, 23 firms represent 29.87% of the total ex-customers, making them the primary customer group for STC and significantly influencing the company's overall revenue.
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 customers leaving increased steadily, rising from 2 to 8, with a significant spike observed between 2016 and 2018 Specifically, 5 customers left in 2016, followed by 7 in 2017, and 8 in 2018 Conversely, the number of new customers declined during the same period, dropping from 9 in 2016 to 6 in 2018.
From 2014 to 2018, there was a decline in the number of customers, particularly among micro trading enterprises, which mirrored the overall trend of the company's total customer portfolio This suggests that the downturn may reflect the broader customer base of the company However, it is important to note that there were significant fluctuations during this period.
Between 2016 and 2018, STC experienced a decline in sales growth due to a reduction in new customers and a loss of existing customers within the micro trading segment.
The corporate revenue is derived from two main sources: existing customers and new customers A decline in the total number of customers signals potential issues within STC's business operations To address this, we must investigate two key factors: the increasing rate of existing customers leaving the company and the decreasing number of new customers Understanding these aspects is crucial for identifying the underlying problems affecting the business.
The article discusses the Pareto Rule, commonly known as the 80/20 rule, which suggests that a small percentage of inputs can lead to a large percentage of outputs In the context of STC, the focus is on micro trading customers, who may represent the broader customer base Identifying issues faced by micro trading customers could reflect challenges within the entire company Additionally, the importance of fostering long-term relationships with existing customers is highlighted as a means to enhance profitability The study specifically examines the rising number of existing micro trading customers leaving STC, rather than the decline in new customer acquisition.
Why number of existing micro trading customers leaving the company increase?
As responses of Mr Sang – CEO of Minh Sang Co., Ltd:
Mr Sang, the CEO of Minh Sang Co., Ltd, expressed his dissatisfaction with STC's accounting services due to inaccuracies in his company's tax reports, which resulted in fines from the tax authority.
Minh Sang Co., Ltd faced penalties from the tax authority due to South Tax Consulting Co., Ltd's preparation of tax reports that inaccurately reflected corporate tax values As a result, customers were required to submit supplementary taxes and fines, leading to financial losses and dissatisfaction This situation has 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, which has led to failures in providing precise tax reports.
Vuong, CEO of STC, 34 years old)
Mr Vuong emphasizes that in accounting services, clients prioritize accuracy in tax report preparation and the timely delivery of these reports.
Recent interviews with Mr Vuong and data from South Tax Consulting Co., Ltd reveal a significant issue: inaccurate calculations of corporate income tax for clients Following the 2018 tax finalization, 25 customers were affected, leading to the loss of 8 micro trading clients who discontinued their accounting services with the firm due to this problem.
According to responses from Mr Vuong:
Problem analysis
Problem identification
In the accounting process at STC, four key elements are involved in generating tax reports: customers, STC accountants, and the accounting supervisor.
Mr Vuong's company, STC, utilizes 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 analyze 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)
In an interview with Mr Vuong, it was revealed that inaccuracies in customer tax reports, particularly deficits in tax values, can result in fines from tax authorities If STC prepares incorrect corporate tax values in these reports, customers may submit erroneous tax amounts, leading to potential penalties during tax finalization To address this issue, the interview focused on identifying the root causes of mistakes in tax report preparation by Mr Vuong and his accountants The findings will be summarized in a cause and effect map, which aims to provide 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 key issues affecting corporate tax reporting The primary symptoms identified include a deficit in corporate tax values in client tax reports, inadequate customer tax submissions to the tax authority, and subsequent penalties from the tax authority for these deficiencies The root cause of the deficit in corporate tax values stems from discrepancies in reported sales or costs Accountants identified several contributing factors to these discrepancies, including the entry of inaccurate invoice values into accounting software, insufficient invoice inputs, inadequate manipulation of accounting software, and incorrect account classifications.
20 supervisor, insufficient manager‟s supervision that results in hidden mistakes in client‟s tax reports leads to discrepancy in sales or costs value in client‟s tax reports
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, as noted in interviews with Mr Vuong and his accountants These inconsistencies can significantly impact the calculation of corporate tax values.
21 accountants sometimes miss some particular steps on software; or wrong account determination by accountants Each of these problems will be in turn explained clearly as following
Inserting inaccurate invoice value to accounting software
To prepare tax reports in STC, customers submit their accounting documents to the service provider After receiving these documents, STC accountants input the invoice information into their accounting software However, they often make errors by entering incorrect invoice values.
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.
One significant issue faced by STC is the inaccurate input of invoice values by its accountants, which adversely affects both the revenue and expenses reported by client firms This inaccuracy leads to discrepancies in the corporate tax amounts that clients must submit to tax authorities Consequently, many STC clients find themselves submitting insufficient tax payments, resulting in the need to file supplementary taxes and incur fines for late submissions.
In 2018, after the tax finalization, several instances arose where my accountants entered inadequate output invoices from customers into the accounting software, resulting in an undervaluation of revenue in the tax reports (Mr Vuong, CEO of STC, 34 years old)
Mr Vuong highlighted that inadequate invoice submissions can adversely affect the corporate tax obligations that businesses must report to the tax authority During the corporate tax finalization process, the tax authority reviews the output invoices submitted by the business By examining the accounting documents and tax reports, discrepancies in the number of invoices reported can be identified If a corporation submits fewer output invoices than required, it may lead to a reported revenue that is lower than the actual revenue, resulting in significant financial implications.
The firm reported a negative discrepancy of 22 in corporate tax, indicating that the amount submitted to the tax authority was insufficient Consequently, the firm is required to submit supplementary tax payments along with fines for the late submission of taxes.
Insufficient manipulation on accounting software; Wrong account determination
In an interview, Mr Vuong highlighted the crucial importance of accounting software for his business He noted that the right accounting software significantly reduces manual data entry and minimizes errors in data processing Currently, his company utilizes the basic package of CeAC accounting software.
The software has performed effectively in supporting his work, but he has identified several inconveniences with the accounting software that could potentially affect the accuracy of customer tax reports.
Despite advancements in software, certain functions like account determination, account closing, and the handling of coincident codes remain manual processes This reliance on manual intervention by accountants can lead to inaccuracies in tax reports, as highlighted by Mr Vuong, CEO of STC.
After interviewing Ms Nga, an accountant at STC, it was revealed that she overlooked a crucial step in the accounting software for T&F Co., Ltd, specifically failing to close and forward the revenue account for May 2017 This oversight resulted in a revenue shortfall of 527 million VND, which adversely affected the company's revenue in the second quarter of 2017 Consequently, T&F Co., Ltd experienced a decrease of 527 million VND in revenue, leading to a reduction of 105 million VND in the income tax owed to the tax authority As a result, the company must submit supplementary tax payments and incur fines for the late submission of this tax amount Additionally, errors in account determination by accountants can lead to inaccuracies in clients' tax reports, as highlighted by Ms Thanh, another accountant at STC.
„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)
Problem validation
Analysis from the previous section identifies key issues such as work overload, employees lacking necessary knowledge and skills, insufficient supervisory support, and low motivation among staff Notably, work overload is particularly pronounced in the accounting sector, especially during the first quarter of the year, commonly referred to as the "busy season."
"tax season" (20) Work overload, time pressure and overtime requirements are mentioned as typical issues in accounting especially in tax season (21, 22, 23, 24) Mr
Vuong noted that his company experiences a significant workload during tax season, a challenge common among accounting service firms He views working under time pressure and putting in overtime to meet client tax report deadlines as standard practice that employees must accept Consequently, he believes this potential issue is effectively managed.
Secondly, in terms of employee with unqualified knowledge, skill and ability, Mr
Vuong expressed challenges in attracting top talent to his small company, as many potential employees view it merely as a temporary stop in their careers.
Many employees typically leave Mr Vuong's company within two years for better opportunities, seeking career advancement This necessitates the recruitment of recent graduates with accounting degrees, leading to inexperience and errors in their work Mr Vuong acknowledges this challenge and believes that providing training for employees is the most effective solution.
Research indicates that training plays a crucial role in helping employees acquire knowledge and skills, which in turn impacts corporate performance Mr Vuong acknowledges this reality, recognizing the challenges of implementing change within his company His primary responsibility involves training and guiding employees, effectively addressing this potential issue.
Insufficient supervisor support significantly impacts employee performance, as highlighted by researchers who stress the supervisor's crucial role in maintaining work standards and quality In the case of STC, Mr Vuong acknowledged that his limited support for employees stemmed from his need to manage multiple functions within the company, resulting in insufficient time to dedicate to his team.
In small-sized companies, top managers often experience a workday that is "unplanned, informal, hectic, and fragmented," requiring them to constantly shift roles and responsibilities This is a common challenge faced by firms like STC Mr Vuong has determined that during this critical period, it is essential for him to directly manage the key functions of STC, as delegating these roles could lead to potential issues By taking on these responsibilities himself, he effectively mitigates potential problems within the organization.
Mr Vuong acknowledged that he had never considered low employee motivation as a significant factor in managing his firm, focusing instead on maintaining good customer relationships to ensure daily operations His priority lies in the company's immediate survival rather than investing in long-term employee development Research indicates that many small business owners primarily operate to meet basic needs for their families and to gain the satisfaction of self-ownership, with survival being a key motivation for running their companies.
Mr Vuong recognizes that enhancing employee motivation is crucial for effective business management He believes that understanding the factors that drive employee motivation can help address the challenges his company is currently facing To improve business performance and overcome existing difficulties, Mr Vuong is committed to identifying elements that can boost employee motivation, making it the primary focus for resolving issues at STC.