Bookkeeping is more than keeping records and receipts in an orderly manner – it also involves managing and reconciling these records the right way. To avoid financial complications in the future, you are encouraged to get your bookkeeping processes right from the start. While bookkeeping can be tedious, start on the right foot with these 10 bookkeeping tips.
Get an accounting software
For a start, you may consider purchasing an accounting software. This helps you store and manage your transactions digitally. Some software can also detect numbers on receipts and populate the necessary fields for you. If you are facing budget constraints, consider downloading a basic accounting template from the web. Such templates can be very helpful especially if you do not have prior bookkeeping experience. As you get more comfortable using these templates, you may want to switch over to bookkeeping software for more sophisticated functions.
Be familiar with accounting standards
Businesses must comply with accounting standards set out in each country. Accounting standards are a common set of principles, standards and procedures that guide financial reporting. For instance, accounting standards help classify your assets, liabilities and provide guidelines on depreciation. In order to generate your own financial statement, familiarise yourself with Singapore’s accounting standards. If you are a start-up, the “Singapore Accounting Standards for Small Entities” will be particularly useful.
Prepare a chart of account
Instead of labelling all your transactions as “income” or “expense”, develop a chart of accounts to guide how you categorise your transactions. There are five main groups of transaction categories, namely “Assets”, “Liabilities”, “Equities”, “Income” and “Expenses”. Under each category, provide account codes for each account. For instance, under “Assets”, “office equipment” can be one account, and “rent” can be another account. Common accounts under “Liabilities” include “salary”, “loans” and “tax payable”.
For each transaction you record, ensure you tag it to its account code, the date of transaction, the payer or payee, and a description of the transaction. These details help you determine the intent of these transactions, and will be useful should you need to conduct a financial analysis for your business.
Once your chart of account is prepared, you may begin to file your transactions. When it comes to bookkeeping, consistency is key. Instead of a last-minute scramble, make an effort to record your business transactions every day. Open your mail, compile and file your financial transactions, and keep track of your expenses. We suggest that you dedicate 10 to 20 minutes to bookkeeping a day. Alternatively, dedicate a specific day of the week to bookkeeping – this helps you keep tabs on issues you have to follow up on. For less work, consider integrating your point of sale system with your accounting software.
Reconcile bank statements
When balancing your books, there are two types of transactions – expenses (debits) and revenue (credits). At the end of each month, tally up your transactions to ensure that the amount reflected on your accounting records and your bank statement is the same. Such reconciliation allows you to manage your company’s cash and keep your accounts in check. In fact, it is good practice to balance your books after each transaction. Any miscalculations can ultimately compromise accuracy.
As a busy business owner, you may be better off with electronic receipts instead of physical ones. This is because you must keep evidence of every business transaction for audit purposes. We recommend the use of transfers or credit cards over cash when making payment. At the very least, the transaction will show up on your credit card statements. These digital statements serve as a record, which saves you time in searching for and compiling your receipts for bookkeeping purposes. The use of credit card is also a good idea as it ensures accuracy since it is not possible to overdraw an account when using transfers and credit cards.
Keep track of accounts receivables
In some cases, you will make a sale without first collecting cash upfront. This is a usual practice in the services industry. If you have delivered the services but have not collected payment, we call the amounts owing “accounts receivables”. Keep track of all your outstanding accounts receivables and follow up with your customers if payment has not been made. If left unchecked, outstanding accounts receivables can affect your business’ cash flow.
Keep personal finances separate
As a business owner, you must keep your personal and business finances separate. To ensure you do not record private expenses in your books, consider paying yourself a salary. This ensures that you do not make claims for personal expenses such as holidays or meals. Another tip is to open a corporate bank account to leave out personal transactions – this helps you cross-check your bank statements and books more efficiently.
Seek professional help
Bookkeeping is something business owners either have to learn or outsource. This because accountants will study bookkeeping data and make sense of them when they develop financial statements. Since bookkeeping requires a certain level of effort, you can consider engaging a part-time or contract bookkeeper. This frees up your time and gives you better focus on your operations and profits. As your business is obliged to adhere to annual compliance requirements in Singapore, it is helpful to engage an accounting firm that can both manage your ledgers and claim tax incentives. Some corporate services firms such as Corporate Services Singapore also provide tax advice and accounting strategies to advance your business interests.
At Corporate Services Singapore, we provide efficient end-to-end accounting services that help you build your dream company. Whether you are looking for assistance on accounting or taxation, give us a call at 6602 8286 or email us at firstname.lastname@example.org to learn more or get started today.