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Building a company is no a piece of cake. A hard and testing journey, it is mired with pitfalls along the way.
We touch upon a few in this piece, more relevant to when you’re raising capital and those that have an impact when you are raising capital.
Not Maintaining Proper Paperwork and Clean Accounts
Whether your company is based on an existing, in use business model, or is a disruptively innovative model in it’s own right, the law of the land stands equally applicable.
You need to abide by the rules and regulations that exist within the legal framework, and ensure you have the right compliances in place. The smallest of lapses can have major impact; right from missing key one time requirements – having the right HR policies in place, to repeat requirements – internal audits, filing of taxes, MCA filings, etc.
It is always cheaper, less time consuming and better to get these things done early and on time, than having to deal with them retrospectively or only once they become an issue. A recent example of this was when Enforcement Directorate found a FEMA violation with Flipkart, penalties of which could have gone up to INR 1400 Cr.
Further, the threat of being on the wrong side of the law isn’t the sole reason why proper paperwork and cleaner accounting is recommended. Investors appreciate a company that has its paperwork and compliances in place, with transparent accounting. They find it easy to trust the company and management and are far likelier to invest in it as well.