You won’t believe it but even veteran business owners fall into several accounting and bookkeeping blunders. The risk of falling prey to these hazards is even bigger among newly minted startup entrepreneurs with little accounting know-how.
If you are starting a business in Singapore, here are some accounting and bookkeeping tips and tricks you can do to keep your records straight.
Predict major expenses and gear up for them
Taking the entrepreneurial route is a roller coaster ride of, sometimes emotional, events. So before you embark on this crazy ride, you need to suit up and gear up for the major hurdles ahead.
Starting and operating a business is not like making ends meet by living from paycheck to paycheck. In the beginning, you might spend more than you earn, especially during in the first few months when the business is still gaining its momentum.
This is why you need to have a sufficient (and if possible, bigger) working capital.
How do you do this? First, you need to predict major expenses and plot it out on your financial calendar.
Predicting major expenses such as software upgrades or getting new hires can help your bookkeeper in preparing the records for some major changes in the cash flow. He or she can also give advice if a certain cash move at a particular period will not jeopardize a predicted and incoming rainy day in the business lifecycle.
Becoming an entrepreneur is pretty much like getting your ducks in a row so you don’t miss out on big opportunities. Plotting your big expenses will also keep you from falling into a trap when it comes to unplanned spending.
Monitor Small Expenses
In operating a business, it is easy for small expenses to balloon and blow up faster than you can imagine. Expenses, big or small, are part of running a business.
The key is to oversee the company’s expenditure regularly to prevent small, unmonitored expenses from piling up to a size you can no longer pay. Richmond offers accounting and bookkeeping services to help keep records and expenses in order and ensure a smoother tax payment activity year-round.
While you can very much do this using Microsoft Excel and other similar programs, seeking professional bookkeeping services ensures the proper maintenance of your books of accounts including your Equity Statement, Profit and Loss Account, Balance Sheet and Cash Flow Statements as required by the Singapore Financial Reporting Standard or SFRS.
Internally, you can standardize your cash flow by using project management software. The program runs on any browser as long as you have Wi-Fi connection. Apart from tracking expenses and its mileage, it helps you create proposals and manage sales lead.
Due is another good project management program that helps your track time and expenses for billable hours. The dashboard provides a single window view of your financial state of health in terms of cash flow. Due’s performance graph gives you a quick view of your strong and weak points and a snapshot of the completed and pending tasks.
Due also offers an online invoicing system that allows you to easily upload your company logo and send invoices to your clients in a few clicks. The online program can easily be integrated with PayPal so if you already have PayPal account, you can easily make the switch and make online payments easier for your patrons.
Keep Your Records Straight and Accurate
We cannot stress the importance of keeping straight and accurate records often enough. Many fledgling businessmen and even veteran entrepreneurs record large sums of money as income and end up paying more taxes that what is required.
Not all inbound money can be considered income. Keeping an accurate and regularly updated documentation of your finances will help you quick tax allowable tax-allowable expenses for a Year of Assessment (YA).
You can use Microsoft Excel or Google Sheets to keep track of your expenses. However, outsourcing this important task to the accounting and bookkeeping professionals at Richmond ensures that your papers are ready and accurate in time for the tax season.
And speaking of tax season…
Allocate Tax Money
Some business owners, especially the new ones, dip into their income for tax money. While this is something pretty normal for some of the small and medium-sized enterprises, the best business practice is to allocate tax money ahead of time.
Having a separate silo for tax allocations prevents you from seeing an inaccurate picture of your financial status and business health. Sometimes, when the business is booming, it is easy for forget to set aside money for tax payments. Probably because at the back of your mind, the cash flow is smooth sailing that you can easily slice a piece from this month’s income to pay for the corporate tax later. Boom, no harm done, right?
But many business owners fall prey into this type of routine. If you are setting up a company in Singapore, one of the best practices is to treat taxes as expenses. Just like in tip #1, taxes are predictable expenses that you can plot in your financial calendar early on. The figures could very well change in the course of business operations, however, the estimated figures are easy enough to determine.
Save a sizable chunk of your working capital for yearly tax payments at least for the first two or three years so you won’t have to touch your income or worse, scramble for money to pay the needed tax requirements. This way, you can also avoid penalties and interests.
Segregate Your Expenses
A mom-and-pop venture often finds it hard to keep personal and business expenses separate. A single, unmonitored personal expense can quickly add up and mess up your business finances.
Keep it simple and separate. Have two expense silos – one for personal (like new backpacks or school shoes for your kids) and one for business (such as new working desk for your newly hired sales person).
Many small businesses, especially sole proprietors only have a single bank account for both business and personal expenses. This shouldn’t be the case if you want to grow your business into a reputable one. If you don’t have a separate bank account for your business and personal expenses, get it done as soon as possible.
Call in the Accounting Pros
Accounting and bookkeeping are vital business processes that you can easily outsource. While there are many project management and accounting programs available online, professional bookkeepers help make sense of your financial activities and prevent avoidable financial burdens in the future by keeping the books straight, accurate and updated.
Accounting and bookkeeping services go hand in hand with taxes. Calling in the professionals will ensure that taxes are paid right and on time to prevent penalties and ensure that your business is in good standing with the Inland Revenue Authority of Singapore (IRAS).