Uncovering All the Secrets: Writee's Expenses Revealed!

As a student and an early-stage founder, managing money is among the most important things that I have to do daily to keep the company afloat. My co-founder and I couldn't afford to invest lakhs from our own pockets nor could we take investor money as it would've hampered our college life. We ended up investing Rs 10,000 ($122) each to get the business up and running. While it might seem like a meager amount of money, this was the only way that we could keep our business afloat at the time. The importance of being aware of all expenses when it comes to running a business cannot be overstated.

To help entrepreneurs stay on top of their finances, I am revealing a comprehensive list of Writee's expenses, which includes everything from government fees, founder compensation, and taxes to legal fees, marketing costs, and employee expenses. This important data provides crucial insights into where and how each rupee is spent, which can be invaluable in helping entrepreneurs make informed financial decisions. Armed with this information, entrepreneurs can now reduce wasteful spending, improve efficiency and invest more strategically.

Writee's expenses also demonstrate how a comparatively leaner ship can both save money and deliver results. This approach with its negatives, has resulted in the development of a full-fledged product that is focused on the customer first, propelling the business towards success.

Background on my experience as an entrepreneur

I started Writee — an AI writing assistant — in my second year of college, which has enabled me to pursue my interests and experiences in tech, business, and entrepreneurship. Having bootstrapped the business and I've had to do most of the work myself, from product management and design to marketing and customer service.

I started Writee to help entrepreneurs with their writing. I wanted to create a tool that not only saves them time but also produces high-quality, well-written content better than they could produce themselves. I believe that Writee’s AI-driven platform is a valuable resource for entrepreneurs and businesses who are looking to stay ahead of the competition.

To give back to the community I decided to reveal all of Writee's expenses and explain how much money we spent and where it went.

A Breakdown of My Expenses

Here are all the expenses borne by Writee in its year of existence:

You'll observe that the line items can be broadly classified into 5 broad headings. I'll list them out first and then discuss them in-depth individually:

1. Incorporation Expenses
2. Government Expenses
3. Fixed Costs
4. Marketing Expenses
5. Initial Investments

Incorporation Expenses

This is the initial cost to incorporate the company. According to Investopedia -incorporation describes a business registered with the government to become a separate legal entity. So, to officially call yourself a business, you need to register your identity with the government. There are many different structures you can choose to go with like LLP or Proprietorship etc. At Writee, we decided to go with a Private Limited Company. You can find more about registering your first company here.

This is an expensive affair and we had to shell out Rs 7,767/- to get the process done. This is 42% of the total expenses incurred by Writee till 3rd April 2023. The main headings under this expense were:

1. Registration of Name: Writee's registered company name is Whixic Technologies Private Limited. You need to get approval for your name from the government through the SPICe+ Part A form. This costs Rs 1000 + taxes.
2. Incorporation of Entity: This used to be a multi-step process in the past, but in the spirit of ease of doing business, you can now get multiple registrations done through a single form itself. Here are the different registrations:

• Incorporate your company
• Get Director Identification Number (DIN) allotment
• Get PAN number
• Get TAN name
• Register for EPFO (Employee Provident Fund)
• Register for ESIC (Employees' State Insurance Corporation)

1. Digital Signature Certificate: This is arguably the most expensive part of the process. As you become directors of a company you'll have to sign innumerable documents. To ease the process, you now get cryptographic signatures in a pen drive which are legally accepted and are used throughout the life of the company. Each DSC costs around Rs 1,500 to get and you'll have to renew it every year. This is an expense you must bear.
2. NOC/ Stamp/ Seal: The full form of a NOC is a No Objection Certificate. It refers to a legal document you take from your landlord (whoever the owner of your office is) that states that the landlord has no objection to renting the premises for a company. In case you sign as the director of a company on any legal papers, you need to first attach your stamp to it. A company seal is a round stamp that is attached to any document that is officially approved or rejected by the company.
3. Professional Fees: It is the fees you pay to whoever you employ to get the incorporation process done. It is essential to hire a CA or some firm to do your incorporation or else you'll get stuck in the paperwork.

Government Expenses

At Writee, we've spent Rs 6,850/- in government expenses in the last year of operation. These do not include the incorporation cost. This accounted for 37% of our total expenses. While incorporation charges are unavoidable, they are a one-time payment. Government expenses are recurring payments, like filing fees, taxes, and various other fees required to run a business. Here is a list of all the government expenses we incurred in the last year of operation:

1. ADT-1: This is a form you must file within a month of incorporation to inform the government who your company's auditor is. Having an auditor is mandatory for a private limited company.
2. INC-20A: You must file this form within 3 months of incorporation. This declares to the government that all required processes in incorporating your company are complete (which includes the transfer of paid-up capital and opening of a bank account) and you are ready to commence operations.
3. AOC-4: This is filed within a month of filing your company's Income Tax Return. It is used to file your firm's annual report with the Registrar of Companies. The annual report includes the director's report, auditors' report and all your financial statements. This annual report is the same report you see for public companies.
4. MGT-7A: MGT-7A is used to inform the government strictly of the financials of your company. MGT-7A is used for small companies and MGT-7 is filed by larger organisations. It is to be filed within 2 months of filing your company's income tax report. The difference between AOC-4 and MGT-7A is that, in the case of the prior you file your complete annual report but for the latter, you only fill in the financial information.
5. WB Professional Tax: This was by far the biggest expense we've incurred at Writee after our incorporation expenses. According to the West Bengal government rules, we must pay the government Rs 2,500 per financial year for the right to pay taxes once we reach a certain number of users. Since we were incorporated on March 9th, we had to pay Rs 2,500/- for that financial too.
6. DIR-11: One of our co-founders quit Writee earlier in 2023. To intimate the government of this update, the resigning director must file the DIR-11 form informing the government about the reasons for his exit. This is generally filed by the director but given that we were friends first and co-founders later, the company decided to pay for his form filing.
7. DIR-12: Once the director informs the government about his resignation, the company is intimated and is obligated to inform the government about the change in directorship too. Thus, the company files the DIR-12 form to let the government know that the company has accepted the said director's resignation.

Along with these, you will in all probability have to pay Chartered Accountants hefty fees for facilitating the process. It will be a major expense you will have to incur. We were lucky in this regard. Our CA is an old family friend of mine and has seen me grow up. In honour of our longstanding relationship, he agreed to defer his fees till the time we start seeing returns on our business. In any case, this is one expense that every new entrepreneur has to incur and so, could not be avoided.

Initial Investment

On close observation, you will notice that there are a lot of big transactions under this head. This is also the most interesting head of them all. Let me start by introducing to 2 terms - authorised capital and paid-up capital:

1. Authorised Capital: It is the maximum amount of capital for which the shares can be issued. This is mentioned in the Memorandum of Association of the company. The authorised capital is often not used completely and some amount is left as a buffer. At Writee, our authorised capital is Rs 1,00,000/-. This was our first mistake during incorporation. According to the government norms in 2022 for authorised of Rs 1,00,000 to Rs 10,00,000 we had to pay the same and should've thus chosen Rs 10,00,000.
2. Paid-up Capital: It is the actual amount of money for which shares had been issued and the payment has been made by shareholders. At Writee, our paid-up capital is Rs 1,00,000. That is to say, the shareholders have bought shares worth Rs 1,00,000. This was our second mistake during incorporation. I was told that 1 lakh is the minimum paid-up capital for incorporation this is not true. There is no minimum requirement set out by the government.

With a basic understanding of these two terms, I'll explain the initial investment section. According to the law, it is necessary to transfer the amount equal to the paid-up capital to the company's bank account. This signifies the completion of the sale of shares of the company. Given that we were students, we didn't have Rs 1,00,000 to put into a venture that was so risky. But we were bound by government regulations. To circumvent this, we decided to get a loan from our parents and put in Rs 10,000 each from our own pockets to run the company. Thus the transaction shows an inflow of Rs 1 lakh and an outflow of Rs 70,000 in cash. According to our books, the company has Rs 70,000 in cash which we either need to spend for the company or put back in the company's bank account at some point.

The interesting part is the Rs 23,000 which was deposited in the bank account by Arghadeep Sadhu. He was our third co-founder, who had resigned due to personal reasons. He now had to give back the amount of paid-up capital he had taken out in cash. His Rs 10,000 was already in the bank account, thus he had to deposit Rs 23,000 to make a total contribution of Rs 33,000 which was the value of the shares he bought during incorporation. My co-founder and I bought out his shares of the company and gave him an exit but those are transactions the company is bothered with.

Tips for budgeting and money management for early-stage start-ups

After going through literally every transaction at Writee you'll realise that we are running a very lean ship. We operate at almost ZERO operational costs and have developed the entire product and market in-house through various benefits offered by the government. It is this frugality that allows us to sustain our business without having to rely on external funding through this tumultuous time in the content industry. The focus on operational costs has enabled us to stay agile, be creative and experiment with new product offerings or business strategies and reposition our offerings based on current market conditions.

This obsession with near-zero costs has its downsides too - it means we must live with more limited resources and that creativity is often limited by what is available, it curtails us from making larger beneficial investments that could potentially take the business to the next level. I do not suggest businesses follow our approach to business building. Instead, I advise you to imbibe the principles of frugality and a laser-sharp focus on cost reduction to make your business sustainable to a great extent antifragile. For any other questions on our expenses and my philosophy for making business decisions, please feel free to reach out to me here.