Bookkeeping. The word itself is enough to strike fear into the hearts of many small business owners. Visions of piles of receipts and invoices, columns of mind-numbing numbers, seemingly endless accounting standards– it’s enough to make you want to throw in the towel before you’ve even started!
But having solid bookkeeping practices in place is critically important for any business that wants to survive and thrive. Messy books lead to confusion, errors, missed tax deadlines, cash flow issues, and any number of problems that can drain your time, money, and passion for running your company.
So what’s the catch?
The good news is that by following the strategies in this ultimate guide, you CAN take control of your business finances and conquer the books before they conquer you. We will walk you through everything you need to know.
So don’t let fear of financial paperwork stop you. Use this guide as your roadmap to bookkeeping success, and let’s get your business headed toward growth and profitability.
Getting Started with Bookkeeping
So you’ve taken the leap and started your own business in Singapore. Congratulations! Here comes the not-so-glamorous work of actually managing your company’s financial transactions. Bookkeeping may not be sexy, but it’s critically important to set your business up for success.
The good thing is that getting started with bookkeeping doesn’t have to be painful. Here are the key steps every small business owner should take from day one.
Open a Separate Corporate Bank Account
Your first move should be opening a dedicated business bank account. Keeping your personal and business finances separate is crucial for accurate records, transactions, and information. Plus, it makes reconciling your books much easier when all your daily transactions are in one place.
Decide How You’ll Record Financial Transactions
You have a few options when it comes to the bookkeeping system and record you will use.
- Manual bookkeeping
Go old-school with ledgers, journals, and spreadsheets. The upside is you avoid software costs. The downside is this method is time-consuming and prone to human error. - Accounting software
User-friendly programs like Xero or Quickbooks automate much of the heavy lifting. But subscription fees apply. - Outsource to a bookkeeping professional
The pros handle the books for you and ensure accounting standards are met. The cost may be worth it for the time savings and peace of mind.
Set Up Your Framework
If you want to record your financial transactions effectively, you need a structure in place. Here are some of the important steps you can include:
- Create a standard chart of accounts for classifying transactions
- Establish policies and procedures for bookkeeping
- Set up templates for tracking income, expenses, account reconciliations, and other key financial reports
Essential Bookkeeping Tasks and Best Practices
Now that you have established your bookkeeping foundation, let’s get into the meat of what you need to do on an ongoing basis to keep your financial house in order. Consistently follow these best practices, and you’ll be good.
Record Day-to-Day Financial Transactions
Ideally, you should aim to record any financial transaction for your business on the same day it occurs. The goal is to ensure accuracy and keep everything reconciled in real-time. For every transaction, make sure to capture the following details:
- Date and time
- Type of transaction (if payment, purchase, or deposit)
- Source person or account
- Amount
- Expense or income classification
You’ll be surprised to have a detailed financial report later on if you can accurately capture details like this for every payment your company receives and makes. Organising every receipt and financial record will also save you headaches come tax time.
Example:
Let’s say your business makes a 200 SGD sale to a customer on February 18. Here’s the transaction data you should record:
Date: February 18, 2024
Type: Sale
From: John Smith (or customer account number)
Amount: 200 SGD
Classification: Sales income
Reconcile Accounts with Bank Statements
On a monthly basis, reconcile your bookkeeping record with bank and credit card statements. Compare balances and transactions across all financial documents to spot discrepancies or outstanding payments. Do this regularly to avoid costly errors and keep your finger on the financial pulse of your company.
For example, your bookkeeping shows a 100 SGD deposit made on January 26th, but it does not appear at all on that date in the bank statement. This would merit further investigation.
Send Out Invoices and Manage Accounts Receivable
Don’t let unpaid customer balances pile up. Develop a system for sending invoices as soon as work is completed, then follow up if invoices go unpaid after 30 days. Keep a detailed log of accounts receivable so you always know who owes what and how long they have been unpaid to prevent invoices from falling through the cracks if a customer fails to pay.
For instance, if you invoice customer XYZ company on 14/2/2024 for 500 SGD worth of services, then follow up via email if you have not received payment after 30 days, on 15/3/2024.
Tax Obligations and Compliance Requirements
Running a business in Singapore comes with tax and legal responsibilities you need to stay on top of. Falling short can result in financial penalties or even force you to close up shop. Here’s a quick guide to keeping the authorities happy while you focus on growing your company.
Brush Up on Corporate Tax Rates and Deadlines
Singapore takes pride in having one of the most business-friendly corporate tax structures around. The standard rate sits at a reasonable 17%. Do your homework to capitalise on programs like the Startup Tax Exemption scheme which lets qualifying new companies significantly lower tax expenses for their first three years of operations.
Don’t miss key deadlines either– corporate tax returns must be filed annually by November 30th on paper or December 15th electronically. Mark your calendar and ensure your financial reporting is squeaky clean well in advance.
Follow Goods and Services Tax (GST) Rules
Does your business meet the 1 million SGD revenue threshold for GST registration? If so, you’ll need to start charging 7% GST on applicable goods sold and services provided. You will also need to file GST returns either quarterly or semi-annually, recording everything from sales transactions to inventory numbers.
Stay Compliant with Employment Policies
How you manage your team and payroll comes with legal obligations too. Institute fair hiring practices and anti-discrimination policies. Make your Central Provident Fund (CPF) contributions on time to avoid extra fines. And understand exactly what benefits and protections all employees are entitled to under Singapore’s Employment Act.
Appoint Resident Leadership
Singapore requires at least one local resident director on the board, as well as a named company secretary handling compliance tasks. Don’t leave these positions vacant for over six (6) months or you risk facing dissolution of your business entity.
Seek Expert Advice on the Requirements
It is wise to consult professionals if you want to guarantee full corporate compliance. Engage accounting and tax advisors to steer you through filings, identify available incentives, and get updated on the latest compliance obligations.
When Professional Help is Needed
Even the best DIYers sometimes have to call in the experts. Even though diligently handling your own bookkeeping and taxes saves money in the short run, there are good reasons to get professional help as your business evolves.
1. Complex Accounting and Financial Reporting
As transactions multiply across inventory, payroll, accounts receivable and more, keeping your own books can become extremely tedious. Tax time can be downright painful. Outsourced accounting services by Singapore accounting firms provide customised reporting and insight into financial performance so you can focus on operating your company rather than reconciling ledgers.
2. Payroll, Auditing, and Assurance
Think an independent review could reveal process improvements or cost savings? Financial audits examine internal controls and compliance practices to identify such opportunities. Payroll processing is another area ripe for automation by professionals. The right outsourced solutions scale seamlessly as your staff expands.
3. New Systems Implementation
Upgrading your bookkeeping processes with new software? Migrating to the cloud? An IT project of that magnitude needs expertise. Partnering with an implementation professional ensures your accounting system is properly configured and tested and one that integrates smoothly across the business.
4. Advisory Services
In addition to handling compliance tasks, the right provider becomes a strategic advisor. An outsourced CFO, a qualified accountant, or an accounting firm in Singapore can analyse financial records to highlight competitive advantages. They construct growth-oriented budgets and offer consulting on profit-boosting moves like securing financing or applying for grants. Their big-picture guidance is invaluable for hitting expansion goals.
Don’t DIY Your Business
Even seasoned entrepreneurs struggle to stay on top of the financial paperwork. But there is good news for you! You have options when it comes to reliable accounting support. You don’t have to sacrifice your precious mental bandwidth for the business in which you’ve invested your heart and soul because of bookkeeping worries.
Outsource to an experienced Singapore accounting firm like Corporate Services to get immediate access to an expert financial teammate. Our genuine interest and passion for your company’s success means YOUR success. Contact us today for a nonobligatory discussion!
