Singapore is a business-friendly nation. That means that if you’re entrepreneurially-minded, it’s a great place to start something. However, amid all the planning that goes into launching your dream business, sometimes it can be easy to forget about the nitty-gritty details that go into ensuring a business runs smoothly. One of those oft-forgotten elements is the decision of how you’re going to handle your accounting.
In the beginning, rather than going with an accounting service provider, you might decide it’s best to take care of it yourself – which is a valid choice. It’s just important to remember that accounting is trickier than it looks, so before you dive in headfirst, you’ll want to educate yourself on the basics of accounting and how to interpret what the numbers in your books are telling you. This is because when your accounting is done right, it should allow business owners to not only see at a glance how their business is doing financially but also help them to identify and act swiftly upon any opportunities or problems as they arise.
Creating a system for recording business transactions is the core of accounting. You need to ensure that you follow a structured method that clearly displays money coming in and money going out. These should be recorded under the correct account categories, such as sales revenue to the income accounts, invoices from suppliers to the expenses account, and inventory outflow in the cost of sales. This will allow you to stay on top of all your financials without becoming confused as to where certain money is coming from or why it’s being spent.
Anyone that’s ever worked for an accounting services provider in Singapore will tell you that it’s never a good idea to use your business funds on personal expenses and vice versa. All of your business expenses should be kept within the company bank account or credit card and only used for things related to the business. When done otherwise, not only will it confuse you on your company’s financial status, but this can also leave room for miscalculations of your overall business expenditure. And when it finally comes down to filing your corporate income tax, it can become a labour-intensive and time-consuming process for anyone, having to recall past business transactions and categorise them accordingly. As such, your personal expenses must be kept totally separate to avoid issues surrounding tax deductibility of the expense as tax season approaches.
Not all transactions go through the bank. To ensure that you’re properly reflecting the financial performance and financial position of the company, you should record any adjusting entries at the end of every month and at the end of the financial year. This might include recording provision on expenses that have incurred during the year but have yet to be paid i.e. bonus accrual, warranty provision etc, recognising revenue in line with the timing of the transfer of goods and services rather than upon receipt and documenting the depreciation expenses for fixed assets used in business operations. If you’re not sure what else you might need to keep an eye on, it’s a good idea to speak to an accounting service professional in Singapore for advice.
Closing your books monthly can help you prevent all sorts of mishaps. To successfully close your books at the end of every month, you’ll need to reconcile bank statements, follow up with customers on overdue payments, pause delivery to customers that are over their credit limit until they pay, replenish inventory before it runs out, etc.
Familiarise yourself with Singapore’s corporate tax requirements and how they impact you. The Inland Revenue Authority of Singapore Website has all the information you need regarding your legal responsibilities.
Accounting blunders are to be expected as you get the hang of things. To help with teething issues, we previously covered some of the most common accounting mistakes so that you’ll know to avoid them. Even an in-house accountant might make these mistakes if they’re not fully qualified. If you’d rather avoid the hassle and ensure that your accounting is properly taken care of from the beginning, consider engaging an experienced accounting service provider in Singapore like Chartsworth for expert support.
Accounting and taxes are difficult to navigate at the best of times, but they can be even more of a headache when you’re trying to run your own business at the same time. If you’re committed to taking care of your own books, then follow these tips to stay on top of the process and outcomes. Otherwise, have peace of mind when you leave it to the account service professionals.