Implementing Statutory Compliance in 5 Easy Stepsadmin
Statutory compliance refers to an organization’s adherence to laws passed by a local, state, or central government. The practices taken up by employees to adhere to these regulations and codes and the management of those practices by higher-ups is called statutory compliance management. Most organizations avoid compliance failure by investing in statutory compliance services, third-party concerns that assess compliance risks and threats in an organization.
Findings by a survey by TaxMantra in 2020, have found that in India:
- Every second startup receives an income tax notice for tax demands or for non-compliance.
- Three out of seven Startups find places on the defaulter list of the Registrar of Companies due to non-compliance.
- Two out of four startups are forced into unnecessary pay-outs due to interests and penalties.
- Seven out of ten startups shut down their business within first 3 years of their operations.
The cost of non-compliance is a costly affair. For instance, Bank of America had to pay a penalty fee of USD 30 million. This was for violating the non-home loan compliance.73000 customers had to be compensated. Some of the immediate effects include:
- Difficulty in obtaining funding or investments and bank loans.
- Difficulty in acquiring government contracts, tenders and projects.
- Lack of credibility and goodwill in the eyes of the public and its shareholders
- Cost to the company in terms of penalties and effort to mitigate damage to credibility.
Compliance however, can be implemented in an organization in 5 simple steps:
- Involve Leadership in Developing Policies and Procedures
To ensure practices and initiatives essential for an organization to follow certain compliances; top leadership must be involved. They will be major driving forces for key processes and practices implemented for better compliance with an organization. For instance, involving department heads in initiatives to curb fraud will go a long way in ensuring better monitoring practices and lesser roadblocks between different departments’ hierarchies. Statutory compliance services can help managers overcome hurdles in this regard.
- Conducting Regular Training Programs and Assessments
Employees must be made aware of regular training and development initiatives. This practice will enable employees to develop areas where they may lack certain skills. This practice will also allow employees to learn specific skillsets for certain specialized tasks or jobs. This, in turn, is directly related to compliance as employees need to have certain qualifications to take on niche tasks. For instance, in engineering or manufacturing firms, employees are required to take on mandatory programs in order to operate critical pieces of equipment or machinery.
- Ensuring That Compliances Are Regularly Updated
Compliances are subject to regular change. Managers and compliance specialists need to ensure that compliance policies and initiatives should be enforced by a fully updated knowledge of current laws and regulations. This small step can go a long way in ensuring that compliance failure becomes obsolete.
- Regular Audits and Reports
Regular compliance audits and assessments should be conducted on a periodic basis. These audits can help organizations understand whether there are gaps in their compliance or their policies. It is also an effective way for employees to know potential areas for compliance failure. Report generation is a great way to understand trends, practices and growth while staying compliant. This can be handled with the help of statutory compliance services.
- Involving Specialists and The Right Software
Investing in specialists or third-party statutory compliance services can ease the burden that managers and business owners go through in the name of compliance. Third-party concerns can save enormous amounts of time and cost to an organization, not to mention the labour involved in looking into compliance-related activities in an organization. (Read more: Need and importance of statutory Compliance)