Every small to mid-sized enterprise (SME) needs accounting to maintain finances and regulate statutory obligations. This becomes even more important when you have just stepped into the business world in Singapore. Start-ups need to be very cautious of their expenditure, financial obligations, and regulations. Failing to comply with legal financial requirements leads to serious penalties, which can be quite damaging for your new business.
8 Accounting Tips for SMEs in Singapore
We have gathered these productive accounting tips for SMEs in Singapore to help them get ahead of their accounting needs and meet their requirements in time:
1. Purchase an Accounting Software
Gone are the days when accounting was solely a manual job; nowadays, like all other business processes, it has turned into a digital process. Purchasing an accounting software right at the start helps assemble your data and record it at one place. You will not need to shift all your data manually into a digital system at some later stage, as that could get quite expensive and tiresome.
Getting an accounting software as per your business’s needs is the best way to ease out your accounting processes and keep everything cost-effective.
Accounting software helps you keep track of all finances, transactions, reports, and it notifies you when it’s time to deal with a legal financial obligation such as an annual audit, XBRL filing, or IRBA payroll. This also eliminates the need of hiring an entire accounting team; a single accounting expert can manage the software quite well.
2. Get to Know Singapore’s Accounting Standards
Each country has its own standards of financial dealings, and accounting is a significant part of that. Accounting standards include all the principles, procedures, and obligations that you need to know and adhere to. Being an SME, you should know how to classify your assets and liabilities so that you do not lack compliance with any legal requirement.
3. Prepare Charts and Diagrams
One cannot manage the processes and classifications that are involved in accounting without charts and diagrams; they are the easiest ways to sort out accounts. Having all your information in the form of reports can get really difficult at times, so charts allow for easier inputting, formatting, categorizing, and reporting of all financial activities.
You must include five categories in your accounting charts: Assets, Liabilities, Equities, Income, and Expenses; under each category come the respective accounts. For instance, salary, loans, and tax payable are significant accounts that need to be present under Liabilities.
You need to be particular and considerate while categorizing your accounts, as they vary from business to business.
4. Record and Tag Transactions
You should always enter a transaction so that there is a record present; however, this can still be messy. An easy way out is to tag your transactions right when you record them.
By tagging, we mean linking a transaction to its account code, entering the date of the transaction, name of payer/payee, and other such significant details. This largely helps you with financial analysis as you will not have to wonder about what, when, where, and who made the transaction.
5. Remember, Consistency is the Key
Once your chart accounts are ready, it is important to file every transaction right away. Develop a habit of consistency; it is the key to accounts management and to avoiding last-minute filing. Even if you dedicate 20 to 30 minutes to bookkeeping every day, you will have nothing to worry about at the end of the day. All of your finances will be well-sorted and in place.
You will also get to know about any potential issues right then and there, which will make it easier look into current transactions and find out where the problem lies. If you leave it till the end of the month, you will probably have to go through each transaction; that will surely be quite troublesome and is not a trait of a productive and responsible business.
6. Balance Your Books
The most important practice for start-ups and SMEs is to balance your books. By the end of each month, you must reconcile your bank statements. While doing this, you will come across two types of transaction: expenses and revenue.
Tallying your transactions tells you if the amount present on your accounting records is the same as that on your bank statements; hence, you’ll be able to prevent any financial complication. It also keeps your finances accurate and updated.
7. Keep a Check upon Account Receivables
Account receivables play a great role in proper cash flow. In some businesses, you usually sell a product or a service without getting cash up front. If you have delivered a product or service but have not received payment right away, you must mention the amount in account receivables along with the client’s information.
Make sure you give your clients a deadline to pay the amount once the product/service has been delivered. Follow up on your payments and ensure that you receive the amount on time. A little negligence can result in bigger problems later on.
8. Separate Personal Finances from Business Finances
Having a single account for your personal and business finances can make you lose track of how much money you can spend in a month.
To avoid such complexities, it is better to have a separate personal account and transfer money for your personal needs there. How much money you should transfer depends on your profits. Keeping separate accounts will help balance your books and reconcile bank statements.
Accounting is the first and foremost business aspect. As you start your business, you need to think about how you’re going to manage your books and other accounting requirements. Efficient and effective bookkeeping ensures that any other accounting processes go on smoothly as well.
We are confident that the above-mentioned accounting tips will help you manage your finances. Getting some expert guidance, freelance accounting, and outsourcing your accounting requirements to an affordable accounting firm in Singapore will also help.