While it may not be the most exciting and growth-contributing aspect of running a business, bookkeeping is nonetheless crucial in more ways than one. Certainly, making money off a great business idea is essential for a company to flourish. However, if the organisation cannot properly manage its financial resources, issues such as unpredictable cash flow and inaccurate financial records will likely arise, leading to significant problems for the company. If these issues cannot be resolved, the company might even go out of business.
Therefore, it is vital for every entrepreneur to always stay on top of their companies’ finances by maintaining proper bookkeeping. But not every business owner has an accounting background. As such, the methodology of bookkeeping may often seem overwhelming to them. So if you find yourself in a similar situation, let us share four essential aspects of this task that you need to be aware of.
1. Read up on the SFRS and IRAS guidelines
Possessing knowledge of the Singapore Financial Reporting Standards (SFRS) is crucial for every entrepreneur. For instance, knowing whether to apply an accelerated or a straight-line depreciation method for particular financial statements, whether it is for accounting or tax purposes, should be known to you if you are responsible for regularly updating your company’s financial records. Moreover, specific items like real estate valuation, deferred taxes, and inventory valuation must be treated as per the SFRS’s guidelines.
Similarly, you need to be fully aware of the Inland Revenue Authority of Singapore’s (IRAS) regulations, especially where tax deductibles are concerned. The lack of knowledge can cost your company to miss out on a significant sum in tax credits. Moreover, your tax submission must align with IRAS guidelines, or your company might be penalised for breaching the regulations.
2. Every transaction must be recorded
No matter the transaction, whether it is profits generated from a significant sale, a business cost incurred during a meeting with a client, or a recurring expense for pantry supplies, it is vital for you to take note of it and record it down for bookkeeping purposes. This stringent process ensures accurate management and reporting of financial records, making it easier for you to keep track of your company’s financial performance.
Entrepreneurs who fail to do so may find it a nightmare to reconcile the discrepancies between recorded and actual expenses, especially if the breakdown for the costs are not recorded properly. Therefore, it is crucial for you to record every transaction in a detailed manner and ensure the records are in accordance with SRFS guidelines.
3. Learn to differentiate between account payables and receivables
Unlike global conglomerates and multi-national corporations, small and medium enterprises (SMEs) are not required to undergo a stringent auditing process to ensure compliance. As such, these business owners can leverage this flexibility to maintain accuracy when preparing their companies’ financial statements.
When you are maintaining your company’s financial records, you need to ensure that your bank statements tally with every transaction that is recorded on a monthly basis. If you notice any discrepancy, you should request a bank reconciliation statement from your company’s bank to reconcile the differences.
Similarly, you should vet every sales invoice thoroughly against your records. Income records that lack a sales invoice need to be correctly labelled as accounts receivables, while unpaid bills or those that must be paid in the future should be treated as accounts payables.
While maintaining proper bookkeeping may seem like a daunting task, there are ways to make this task simpler for entrepreneurs. Given how crucial it is to possess accurate financial records of your company, as it impacts the business’s daily operations, it is imperative for you to get this process right from the start.
However, we understand entrepreneurs are busy people, and they may not be able to dedicate the time and resources needed to maintain their companies’ books. If you are facing a similar issue, it is best to outsource your bookkeeping needs to a specialised accounting firm.
At Ackenting Group, we provide a suite of trusted accounting and bookkeeping services that are tailored to meet your company’s needs. Our seasoned team of bookkeepers have assisted in maintaining the financial records of multiple clients from various industries. With the assistance of our reliable bookkeepers, you can rest assured that you will receive timely and accurate financial reports to help you keep abreast of your business’s performance.
If you require any assistance on accounting services, feel free to drop us an email at email@example.com or contact us at +65-66358767. At Ackenting Group, we offer a complimentary 30 minutes online consultation for us to better understand your business requirements.