As you approach the end of your business’ financial year, you must start preparing your business accounts. Besides helping you close out the current year on a high note, it also starts your business off in the next year on the right foot. As December can be a busy time, it pays to start your preparations early. This checklist helps you plan your year-end accounting tasks to help you stay compliant and avoid last minute stress.
File your invoices
Filing and documenting invoices and receipts regularly may seem like a chore, but it eases bookkeeping at the end of the year. Organise your invoices and receipts by keeping digital copies, or start a new file for different categories of transactions, such as a vendor file, or a payroll file.
Check your payroll
Before the year ends, ensure that your employees’ taxable benefits such as scholarships, insurance, and transportation subsidies are accounted for. If you are rewarding your employees with company bonuses, ensure that you include them when submitting the income tax returns (Auto inclusion scheme (AIS) or IR8A form) or of your employees to the Inland Revenue Authority of Singapore (IRAS). This is because company bonuses are also considered income that is subjected to tax. The amount of bonuses you decide to disburse will also make a direct impact on the profits you report.
Chase for outstanding payments
Avoid letting late payments pile up as it affects your business cash flow. To help you track outstanding payments, keep a running list of unpaid invoices and clients who still owe you money, especially for work that has been completed during the year. Send reminders or make calls and try to get payment collected before the year ends. As chasing and calling customers to pay can be time-consuming, consider creating a system that automatically sends payment reminders.
One of the most overlooked areas in accounting is your inventory. Your inventory comprises goods in three stages of production: raw materials, work-in-progress and finished goods. Take time out to assign values to each of these baskets of items and record them as company assets. However, take note that your inventory can change in value due to factors such as slow moving items or allowance for stock obsolescence or change in customer demand. Compare the counts recorded in your accounting system and plan your purchases accordingly.
Statement of Comprehensive Income
The Statement of Comprehensive Income is otherwise known as the Income Statement, Statement of Profit and Loss, or simply P&L. It tells you at a glance your business’ total revenue and expenses. It reveals if your business has been profitable, and the extent of your profit or loss. Before the year ends, prepare a Statement of Comprehensive Income to make year-on-year comparisons of your business’ performance. This also helps you find out where the problem areas are. Compare the Statement of Comprehensive Income with your company budget to find out how closely you followed through on your plan for the year.
Statement of Cash Flows
To determine if your business has sufficient capital to get through the new year, generate a Statement of Cash Flows. List your company’s cash inflows and outflows and include revenue, expenses, investments, assets purchased or sold, and loans paid or taken. As such, besides reconciling the cash generated and used, the Cash Flow Statement shows you where the money has gone. It also shows you whether there was a net increase or decrease in your business’ cash flow over the past year.
Statement of Financial Position (Balance Sheet)
The Statement of Financial Position, also called the Balance Sheet, lists all your business’ assets, liabilities and equities, including resources, obligations and ownership details. In short, it tells you your business’ net worth and financial health as of a given date. Balance sheets are typically prepared monthly, quarterly and annually. By comparing your balance sheets, you can track the growth or contraction of your business and get better clarity of how your assets and liabilities are performing. You can also look out for any significant trends and anticipate future outcomes.
Determine Your Financial Position
It is important to consider all three statements – the Statement of Comprehensive Income, Statement of Cash Flows and Statement of Financial Position – to find out how your company is doing. This involves a financial analysis, which usually results in an actual investment decision. Additionally, it allows you to identify the areas in which your business did well and the areas that can be improved on. Deep dive by reviewing your business’ current ratios, total debt ratios, and profit margins.
Track tax deadlines
Whether you are a foreign or local company, all companies in Singapore are taxed at a flat rate of 17%. The two corporate income tax forms that companies need to submit to IRAS are: Estimated Chargeable Income (ECI) and Corporate Income Tax Returns (Form C-S or Form C). Companies must file their income tax returns by 30 November (for paper filing) and 15 December (for e-filing) each year. If possible, speak to a corporate services provider or tax professional for advice on optimising your taxes.
Now that you have done your books, reflect on whether your company has managed to achieve the goals it set for the year. Make plans for the coming year by refining your vision and mapping out new milestones. If there were mistakes, review what went wrong, and examine your business processes to see if there are opportunities to cut expenses.If your company does not handle its accounting in-house, consider engaging a professional corporate services provider to ensure your business stays fully compliant. This frees up your time and also gives you better focus on your operations and profits.
Access expert financial advice and solutions and stay on top of your business with Corporate Services Singapore. To find out more about our customised outsourced accounting services, give us a call at 6602 8286 or email us at firstname.lastname@example.org to get started today.