Recommendation from Accounting Services – In the New Normal, the Most Important Thing is to Normalize Business Operations

It is an old story that frequent changes in the law burden business operations and require quick adjustments, while also complicating the work of accounting services that provide services to companies and crafts. Penalties for failing to meet legal obligations on time are costly for companies, making it very important to align business operations with new provisions in a timely manner. The past year has been exceptionally chaotic and difficult as the coronavirus pandemic has tectonically disrupted business operations, necessitating urgent digitalization of business processes and the introduction of new business models. One of the consequences of the pandemic is hybrid work (a combination of remote and office work), which must be regulated as soon as possible, as is expected from the new Labor Law, but in addition to it, the Public Procurement Law and the Law on Obligations are also being amended and supplemented. How they navigate these changes themselves, what they do for clients, and how interested clients are in changes and amendments to the law are discussed by the owners and directors of accounting services.

– After last year’s struggle with COVID-19 and business restrictions, the year 2021 for most of our clients is focused on normalizing business operations, especially due to a significant increase in distribution costs, which has also manifested in rising product prices. Additionally, the recovery of economic activity for some clients is greater than expected, and in such an environment, clients are increasingly focused on ensuring a sufficient quantity of products and services (especially in the tourism sector) for end customers, as well as a sufficient number of quality employees to sustain this economic growth. In such an environment, most entrepreneurs are not overly interested in changes to the legislative framework – explains Dubravka Kopun, director of Kopun Audit, a member of Nexia International.

Positive Changes

Kopun Group is engaged in accounting services, auditing, tax and legal consulting, and identifying business difficulties. For in-depth analysis of clients’ businesses, it applies data analysis. In addition to offering complete accounting services, Kopun Group also prepares investment studies, engages in consulting for the purchase and merger of companies or ownership division. Its clients are small, medium, and large companies, and services are provided not only in Croatian but also in English and German. Kopun Group is a member of Nexia International, a global network of independent accounting and consulting firms, and follows the latest global trends in the accounting and consulting sector. Dubravka Kopun claims that there is a significant delay regarding changes to the Labor Law related to hybrid work.

– Issues related to the hybrid work model were tied to the beginning of the pandemic. Today, as a large part of entrepreneurs fully returns to office operations, especially starting from September this year, questions related to the legislative framework of the hybrid work model have quieted down. It is very positive that the legislative framework for the hybrid pay model will be regulated. Regarding the minimum wage, even in sectors subject to low forms of income, due to a lack of quality personnel, the issue of the minimum wage is not particularly relevant. Currently, we do not have a single client who pays the minimum wage; the market is very competitive when it comes to employee earnings – emphasizes Kopun, adding that she currently does not see significant adjustments from Kopun Group clients related to the legislative framework as they are focused on normalizing business operations hindered by rising distribution and product prices.

Absence of Effect

Ms. sc. Sandra Žager, a certified internal auditor and owner of the accounting and finance company Manufaktura jedanaest, claims that in Croatia, changes and amendments to the law are too frequent, and they are often of a cosmetic nature, thus lacking the substantive effect they should bring.

– The best example is the reduction of the corporate income tax rate from 12% to 10% while retaining the taxation institute on capital income upon profit distribution (also reduced from 12% to 10%) instead of, for example, retaining the VAT rate at 12% but abolishing the tax on capital income upon distribution. That is the effect that small and micro entrepreneurs would really ‘feel’. The problem with frequent changes and amendments is that not all legal and sub-legal acts that accompany them are adequately changed, so you have an example where the Labor Law mandates reimbursement of costs to the employee for using their own machines, tools, and other equipment and other costs related to performing jobs, but the Income Tax Law has not been amended in a way that would consider that a non-taxable income – explains Žager.

According to her, the biggest problem with frequent changes is that it creates systemic distrust in the tax system, and entrepreneurs are constantly on ‘slippery’ ground because even with continuous and professional monitoring of the law, there is always a chance to get a little lost in that forest of regulations.

– Not to mention foreign investors, they cannot believe some provisions they must comply with, e.g., the 24-hour deadline for submitting reports on paid salaries, i.e., JOPPD, the obligation to write the time, i.e., hours and minutes, issuing invoices, the 24-hour deadline for deregistering employees, penalties for formal errors, and generally punishing without prior warning – emphasizes Žager.

Steps Forward

In this context, she praises the novelty that from the beginning of August this year, users of family pensions can work four hours without losing the right to pension payments, and also, supplements to pensions for those with the lowest pensions will no longer be deducted in the case of working four hours, which has been the case until now.

– I would also praise the informatization of the state and the START application, which allows for the establishment of d.o.o./j.d.o.o./craft within just a few days. This is an important step forward – emphasizes Žager, who founded the accounting office Manufaktura jedanaest in 2011 and provides accounting and consulting services to small and micro entrepreneurs, while collaborating with medium-sized companies as external support in audits, tax inspections, tax optimizations, and generally controlling and analyzing business operations in the field of accounting and business. She also offers forensic accounting services, implementation of in-house accounting processes, and employee education in the field of accounting and taxes.

Mirjana Jagatić, founder of the company Recordum, which provides bookkeeping and accounting services to companies, crafts, and associations from various industries, emphasizes that it is extremely important to leave enough time for adjustment for accounting services and their clients when enacting laws.

– Almost every change in the law requires a programming change, which creates additional costs in our business – notes Jagatić.

Foundation of Accounting Services

Director of Portal AFC Vlatka Beketić observes frequent changes in the law from a global perspective. She emphasizes that with the onset of globalization, the world began to change rapidly, and thus changes in laws and regulations have become more frequent.

– Monitoring changes is the foundation of our work because for quality accounting management we must follow news and adapt to changes. Compliance with legal changes, accuracy, and precision are what we base our service on in our accounting service – emphasizes Beketić.

Portal AFC is a company whose parent company has been operating in France since 1846, and it has been present in Croatia since 2003, providing services in the field of accounting and finance. Portal AFC offers online accounting services: no visits, no paper, but with a lot of communication. It constantly invests in new knowledge for employees, and its work is based on knowledge of new legal regulations.

– The situation we find ourselves in due to the pandemic has changed in many ways the ways of doing business for the vast majority of companies. For the most part, we have been monitoring the situation with COVID-19-related incentives over the past year, but also other news – emphasizes Beketić.

Leap into the Future

The pandemic, she says, has accelerated digital advancement in many sectors, and for jobs that entrepreneurs thought would still be done physically for years and which have complicated business operations multiple times, circumstances have forced them to adapt. Beketić emphasizes that this is a significant leap into the future as it represents the end of wasting time on printing and physically transferring forms, invoices, and information, which means that digitalization has facilitated business not only for companies but also for accounting services, and that this is the path that companies that have not yet completed this process should take as it will be easier for them to monitor and adapt to legal changes.

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