Company introduction
Company background
Established in July 2011, South Tax Consulting Co., Ltd (STC) is located in Phu Nhuan District, Ho Chi Minh City, specializing in accounting services for small and medium-sized enterprises (SMEs) Led by CEO Mr Vuong, who brings over a decade of experience in the accounting sector, the company boasts 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 over 2 years) and 6 junior accountants with up to 1 year of experience Additionally, there is 1 delivery man responsible for the transfer of accounting documents between the company and its clients The CEO, Mr Vuong, oversees general management, develops new customer relationships, maintains existing client satisfaction, and supervises the Accounting department The structure of the company is designed to ensure efficient service delivery and effective management of customer accounts.
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 182 clients across four primary business sectors: service, manufacturing, construction, and trading The clientele is categorized into three revenue groups: those earning under 10 billion VND, between 10 to 50 billion VND, and over 50 billion VND annually Notably, the majority of STC's customers are trading corporations with annual revenues below 10 billion VND, comprising 65 out of the 182 clients This aligns with the regulations outlined in Clause 1, Article 6 of Decree 39/2018/ND-CP, enacted on March 11, 2018.
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 essential aspect of reliability in accounting services is the consistent and accurate delivery of promised services STC's competitive advantage lies in its strong relationships with the tax authorities in Phu Nhuan, Binh Thanh, Tan Binh, and Go Vap Districts, which benefits its clients operating in these areas Additionally, STC offers services at competitive prices, positioning 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, with little differentiation in service offerings and pricing among competitors Mr Vuong identified three key competitors in the local accounting sector.
In the district, several corporate entities offer identical services to customers, with their pricing being comparable In terms of company size, their revenue for the year 2018 ranged between 3.3 and 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)
The prices offered by four companies for their services range from 800,000 to 6,000,000 VND per issuer client per month, as detailed in Table 1 According to Mr Vuong, this pricing is influenced by the customer's revenue and the volume of invoices or documents processed in each issuer client accounting report The competition among these companies results in minimal price variation, making their offerings highly competitive The services provided by the company include a range of solutions tailored to meet client needs.
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 services 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 addition, STC provides supplementary services at no cost, which include the classification, organization, and storage of 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 in the accounting services provided by STC, which include the preparation of tax reports, financial reports, and accounting books The process begins with gathering 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 related documents for the entire calendar year are returned to the customers.
Business performance
Between 2014 and 2018, the company's revenue showed a consistent upward trend, with a notable increase of 554 million VND in 2018, marking 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 steady 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 faced significant challenges, indicating that the company's business was in trouble Without identifying the underlying issues and implementing appropriate solutions, the firm's situation may deteriorate further.
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
The article categorizes businesses based on their annual sales, segmented into various industries For services, companies with sales under 10 billion VND are classified separately from those earning between 10 billion and 50 billion VND, and those exceeding 50 billion VND Similarly, in manufacturing, businesses are divided into three groups based on the same sales thresholds The construction sector follows the same classification, with distinctions for sales below 10 billion VND and those in the 10 to 50 billion VND range Lastly, the trading industry is also divided into three categories based on annual sales, highlighting companies with sales under 10 billion VND, between 10 billion and 50 billion VND, and above 50 billion VND This structured approach provides a clear overview of the performance across different sectors.
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, the primary revenue contributors are divided into three key customer groups: trading sales under 10 billion VND per year (35.29%), trading sales between 10 to 50 billion VND per year (16.93%), and construction sales under 10 billion VND per year (12.83%) Notably, the trading sales under 10 billion VND per year represent the largest segment for STC, making micro trading customers the focal point of this study The following chart illustrates the revenue growth rate of micro trading customers 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 exhibited a continuous decline, starting at 9.52% in 2015 and dropping 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 has experienced declining performance, with a slowing revenue growth rate primarily affecting our core demographic of micro trading customers The rate of existing customers leaving has increased significantly, outpacing the acquisition of new clients, which has adversely impacted 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 overall 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 discontinuing services surpassed the influx of new customers This trend was particularly evident in 2018, when many micro customers ceased utilizing STC's accounting services.
During this period, 23 firms represent 29.87% of STC's total ex-customers, making this group the primary contributor to STC's 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)
Between 2014 and 2018, the number of departing customers increased significantly, rising from 2 to 8, with a sharp uptick observed from 2016 to 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 just 6 by 2018.
Between 2014 and 2018, there was a significant decline in customer numbers, particularly among micro trading enterprises, mirroring the overall trend of the company's total customer portfolio This downturn suggests that the challenges faced by micro trading enterprises may reflect broader issues affecting the entire customer base However, the data also reveals notable fluctuations during this period.
Between 2016 and 2018, STC experienced a decline in new customers and a loss of existing customers within its micro trading segment, which significantly impacted sales growth.
The revenue of STC is derived from both existing and new customers, making the decline in total customer numbers a critical concern To address this issue, we must investigate two key aspects: the increasing departure of existing customers and the decreasing acquisition of new customers According to the Pareto Principle, which suggests that a small percentage of inputs can lead to a significant portion of outputs, our study will concentrate on micro trading customers, who may reflect broader customer trends at STC Understanding the challenges faced by this primary customer group could reveal underlying issues affecting the entire business Additionally, research emphasizes the importance of nurturing long-term relationships with existing customers to enhance profitability Consequently, this study will prioritize examining the reasons behind the rising number of existing micro trading customers leaving STC, rather than focusing on 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, CEO of Minh Sang Co., Ltd, expressed his dissatisfaction with STC due to inaccuracies in his company’s tax reports, which led to fines from the tax authority This experience has significantly eroded his trust in the accounting services provided by STC.
Minh Sang Co., Ltd faced penalties from the tax authority due to South Tax Consulting Co., Ltd's preparation of inaccurate tax reports, which resulted in a corporate tax deficit Consequently, customers were required to submit supplementary taxes and fines, leading to financial losses and dissatisfaction This situation undermined 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 faced multiple instances of inaccuracies in corporate income tax calculations, which have raised concerns among clients.
Mr Vuong highlighted that clients prioritize accuracy in tax report preparation and timely delivery from their accounting service providers However, a significant issue has arisen at South Tax Consulting Co., Ltd, where inaccurate calculations of corporate income tax were reported Following the 2018 tax finalization, the company experienced a loss of 8 micro trading customers—part of their focus group—due to these inaccuracies, indicating a pressing need for improved service quality.
According to responses from Mr Vuong:
In corporate tax finalization, companies often face penalties from tax authorities due to underreported corporate taxes When a business submits insufficient tax, it must pay supplementary taxes along with fines for the late submission of those amounts.
Mr Vuong highlighted that if his company prepares tax reports reflecting a deficit in the customer's corporate tax value, it results in the customer underreporting their taxes to the tax authority During tax finalization, the authority identifies this underreporting and requests the corporation to submit supplementary taxes along with fines for late submission Consequently, customers face penalties from the tax authority for insufficient tax submissions, leading to dissatisfaction with the quality of accounting services provided by STC, which may result in the termination of their service contracts Specific cases of inaccuracies in corporate tax values in tax reports are detailed below.
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, resulting in these clients terminating their accounting services with the company The total fines imposed by the tax authority for these discrepancies amounted to 103,012,137 VND The inaccuracies primarily involved negative discrepancies in corporate tax values reported by STC, leading customers to pay taxes based on incorrect calculations Upon review, the tax authority identified these errors, prompting penalties that required firms to submit corrected tax reports along with 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 utilizes CeAC accounting software, which has been linked to potential errors in clients' corporate income tax reports To identify the factors contributing 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)
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 prepares incorrect corporate tax values, customers may submit erroneous tax amounts, leading to complications during tax finalization when authorities identify these errors To address this issue, an in-depth interview was conducted with Mr Vuong and his accountants to uncover the underlying problems causing mistakes in tax report preparation The findings will be summarized in a cause and effect map, aiming to identify the main issues and propose effective solutions.
3.1.1 Initial cause and effect map
An in-depth interview with STC CEO Mr Vuong and ten accountants from the Accounting department revealed critical issues affecting corporate tax reporting Three main symptoms were identified: deficits in corporate tax values in client tax reports, insufficient tax submissions to authorities, and subsequent penalties from tax authorities The root cause of the deficits stems from discrepancies in reported sales or costs Accountants noted that these discrepancies arise from errors such as inaccurate invoice entries in accounting software, inadequate invoice input, insufficient manipulation of accounting software, and incorrect account classifications Additionally, Mr Vuong highlighted that a lack of managerial supervision contributes to undetected mistakes in client tax reports, further 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 impact corporate tax values Interviews with Mr Vuong and his accountants revealed that these issues often arise from missed steps in software usage or incorrect account classifications by accountants Each of these problems will be detailed further.
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 details into their accounting software However, it is common for accountants at STC to make errors by entering incorrect 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 incorrect customer sales figures and affect tax reporting.
Inaccurate invoice value input by STC's accountants leads to discrepancies in the revenue and expenses reported by customer firms, ultimately affecting their corporate tax submissions As a result, many clients of STC find themselves submitting insufficient tax amounts, necessitating the submission of supplementary tax payments and incurring fines for late submissions to the tax authority.
In 2018, following tax finalization, several instances arose where my accountants entered inadequate output invoices from customers into our accounting software, resulting in a lower revenue value reported for taxes, according to Mr Vuong, CEO of STC.
Mr Vuong highlighted that inadequate input of invoices affects the corporate tax submissions required by businesses to the tax authority During corporate tax finalization, the tax authority reviews the output invoices reported by the business By examining the accounting documents and tax reports submitted by companies, discrepancies in the number of invoices can be identified If a corporation fails to submit the correct amount of output invoices, it may report lower revenue than actual, leading to a negative discrepancy in the corporate tax owed Consequently, the tax amount submitted may be insufficient, necessitating the submission of supplementary taxes and incurring fines for late payments to the tax authority.
Insufficient manipulation on accounting software; Wrong account determination
In an interview with Mr Vuong, he highlighted the crucial importance of accounting software for his business operations He noted that the right accounting software significantly reduces manual tasks and minimizes errors in data entry and processing Currently, his company utilizes the basic package of CeAC accounting software, which has been effective in supporting his work However, Mr Vuong expressed concerns about certain inconveniences within the software that could potentially affect the accuracy of customer tax reports.
Despite advancements in software, several key functions like account determination, account closing, and the handling of coincident codes remain manual processes As a result, accountants must manually process and 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 while preparing tax reports for T&F Co., Ltd Specifically, she failed to close and forward the revenue account for May 2017, resulting in a revenue shortfall of 527 million VND This deficit negatively impacted T&F Co., Ltd'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 a supplementary tax return and incur fines for the late submission of this tax amount Furthermore, as highlighted by Ms Thanh, another accountant at STC, errors in account determination can lead to inaccuracies 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 Each account serves a specific purpose, and selecting the wrong one for an expense can compromise the accuracy of clients' tax reports Ms Tuyet shared her experience with Hanh Ngan Co., Ltd, where she frequently made mistakes in account selection due to her limited experience and knowledge in accounting This highlights how insufficient familiarity with accounting software and incorrect account determination can adversely affect the precision of 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 Mr Vuong, the manager, which affects the ability to review the accountants' work results and provide timely support to the accounting team.
In the accounting process, Mr Vuong, the manager, is responsible for overseeing the work at three critical stages: after accountants input data into the software, upon exporting draft tax declarations, and after generating draft tax reports However, his multiple responsibilities, including acquiring new clients and managing existing ones, hinder his ability to focus on supervising the accounting team effectively This lack of attention has led to numerous undetected errors, compromising the accuracy of customer tax reports Additionally, Mr Vuong occasionally delegates the supervision of junior employees to senior staff without proper oversight, further exacerbating the issue These senior employees, overwhelmed with their own tasks, struggle to manage and supervise junior accountants effectively, resulting in inaccuracies in tax reporting Therefore, Mr Vuong's supervision is crucial for ensuring the quality of accountants' work, as insufficient oversight can lead to significant discrepancies in clients' corporate tax reports.
Problem validation
Analysis reveals key issues such as work overload, employees lacking necessary skills and qualifications, insufficient supervisory support, and low motivation among staff Notably, work overload is particularly pronounced in the accounting sector during the first quarter, commonly referred to as the "busy season," when demands are at their highest.
During tax season, accounting professionals often face significant challenges such as work overload, time pressure, and the necessity for overtime Mr Vuong highlighted that his company, like many others in the accounting sector, experiences a heightened workload during this period He views the pressure to meet client deadlines for tax report submissions as a common aspect of the job, indicating that employees in this field must adapt to these demands Consequently, this issue is perceived as a standard part of the accounting profession during tax season.
Mr Vuong faces challenges in recruiting qualified employees due to his company's small size, leading to high turnover as employees often leave for better opportunities within two years This necessitates hiring fresh graduates in accounting, resulting in inexperience and mistakes To address this issue, Mr Vuong recognizes the importance of training, as literature suggests that training plays a crucial role in enhancing employees' knowledge and skills, ultimately improving corporate performance He has accepted the current situation and sees his responsibility as training and guiding his employees to mitigate this potential problem.
Insufficient supervisor support significantly impacts employee performance, as highlighted by Mr Vuong's admission of not providing enough assistance due to his extensive management responsibilities at STC Research indicates that top managers in small companies often experience unplanned and fragmented workdays, necessitating constant role changes Mr Vuong believes that directly managing key functions is essential to mitigate potential issues Furthermore, he has not prioritized employee motivation, focusing instead on maintaining customer relationships for immediate survival Literature suggests that many small business owners prioritize basic needs and self-ownership satisfaction, aligning with Mr Vuong's short-term focus However, fostering employee motivation is increasingly recognized as a vital managerial responsibility Mr Vuong acknowledges that understanding motivational factors could address the challenges STC faces, making employee motivation a key issue to tackle for improving business performance.