So, you want to start a business in Singapore and become an entrepreneur. Home to more than 4,000 tech startups and over 400 venture capital companies, Singapore is a popular location for startups and investors. Such fierce competition between companies leads to honest mistakes setting back entrepreneurs from achieving their goals, especially when it comes to the company's financial aspect.
Time and resources spent on bookkeeping and accounting keep business owners from focusing on what they do best: running their business. If that rings a bell, keep reading, as this post reviews the importance of accurate accounting for any company. Also, you will find valuable resources and tips to ease your Singapore startup journey. Let's dive in.
Singapore receives more foreign direct investment (FDI) than most developed economies. With over ten percent of total FDI inflows to Asia and low risks, Singapore is the perfect economy for startups and small-to-medium enterprises (SMEs). One potential threat new business face is the lack of investors or funding, and this country offers the perfect economy to overcome such issues.
Over the past decade, Singapore has earned the reputation of being the best environment for tech startups. With a free-market economy and a competitive atmosphere, small business owners are able to thrive in the country. However, other types of business also succeed here. If you're confident you have a good idea, Singapore is an ideal location for your new company.
Now, what is the importance of accounting for businesses? Whether you run a small, medium, or large firm, accurate accounting is vital for staying afloat and building a reputable brand. Sure, bookkeeping is one of the most tedious and boring tasks in the business world - But also integral.
Here is a list of reasons why you must include accounting services and resources in your yearly budget:
Locating and reporting where your income and expenses are is key to making data-based financial decisions. Maybe the company needs to hire more employees, or perhaps it's time to run a marketing campaign to draw more clients and increase revenue. But is there enough money in the bank account to do so? Accurate bookkeeping gives answers to these questions and more, making the reporting process vital.
It also shows whether some cost-cutting efforts have impacted client commitment, what services are expendable, etcetera. Once you learn how to look at the data with an analytical approach, you'll be surprised at how much information lies hidden in accounting reports.
No company wants to face legal consequences or additional fees for making mistakes while filing taxes. These taxes vary depending on expenses, income, and more. If any reported data is wrong, the company may face repercussions from taxing institutions. Accuracy in bookkeeping can prevent such situations, and thus entrepreneurs can rest assured there are no problems heading their way.
Keeping receipts and bills is essential for every business. It's incredibly easy to overlook expenditures or income, losing track of the cash flow. Accurate bookkeeping every update helps go back to any date and know what happened that day/week/month, financially speaking.
Customers don't want to do business with companies at a loss - And even less so investors. Would you invest money in a stock that has lost value over the past few months? You wouldn't. Accurate bookkeeping and accounting help manage the budget and improve stakeholders' and customers' satisfaction.
As much as you may like doing everything by yourself, there comes a time when it's wise to delegate. Something an experienced bookkeeper does in a few hours may take you an entire day (even more!). This happens in every type of job, and accounting is no exception. Practice makes perfect. To sum everything up, taking care of the financial aspect of your company is essential. Just as with the legal part, a small error can lead to enormous consequences for the company and its employees. One person alone can't do everyone's job, and it's often best to rely on third-party services or hire an accounting expert to work full-time at your new startup.
As with everything, the price varies depending on the workload, the experience of the accountant, the difficulty of the tasks, and more. While there is no straight answer to this question, as it depends on each bookkeeping firm, the fees are somewhere between SGD$ 10 to SGD$ 20 per employee. If you plan on hiring annual tax services, add around SGD$ 400 to the budget. It also depends on whether the accountants work at monthly or hourly rates. An hourly rate is often pricier, meaning it's in your best interest to agree on a monthly budget with the worker. On average, an accounting firm can cost you SGD$ 100 a month.
As aforementioned in this post, hiring professional bookkeeping services saves time and resources. Paperwork and tax filing can take you hours, even days of work - While accountants do it in a few hours or less. They are used to filing documents, sending them, reviewing, and planning budgets, creating financial reports, and more. You can trust these professionals to do the hard work while you can focus on running the company, securing more stakeholders, and growing your business.
Here are three extra tips for finding the ideal accountant:
What are the bookkeeping requirements for companies in Singapore? What legal/financial documents must the business store? And why?
There are two main reasons why you must keep a record of business transactions and accounts. First, companies must be able to explain their transactions and financial position. The second reason is that it helps create accurate financial statements.
That said, here is a list of what companies must keep:
Here you can find an extended checklist provided by the Singapore government.
According to the Singapore government and laws, the company must keep and safely store records of financial transactions and source documents, accounting records, schedules, and bank statements for at least 5 years from the relevant Year of Assessment (YA). For instance, records for the year 2020 must be kept at least until 31 December 2025.
All files and records must be kept following certain instructions. If they are physical, they must be legible and well-organized. All photocopies must be on thermal paper that doesn't fade over time. On the other hand, if they are kept electronically, the company must ensure privacy and reliability.
As a final note, make sure to use proper tools when destroying paperwork and receipts. Many countries hold data protection laws that require firms and corporations to get rid of any sensible information. You cannot throw pristine legal and accounting paperwork in the closest bin. Instead, invest in decent tools like paper shredders.
According to the Singapore government, companies are taxed at 17% of their chargeable income. It refers to taxable income for a Year of Assessment (YA). There are 2 corporate income tax returns your company must file every year:
Here is a video to better understand tax filing obligations in Singapore.
Here are additional tips for accounting and bookkeeping best practices!
So, what do you need to keep in mind regarding accounting in Singapore for small-to-medium enterprises (SMEs) and startups?
Hopefully, this article was helpful and provided valuable insight into Singapore's economy and accounting. If you have further questions or want to add additional information, feel free to ask!