The end of the company’s financial year can be a stressful time for any ill-prepared business owner. The thought of having to backtrack on all the different business records from the last 12 months of work isn’t just tedious, but also affects your current business dealings, perpetuating the vicious cycle of ineffectiveness. Here are some quick steps of what to do (and what not to do) to get your financial statements in order.
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Know your corporate tax rates in Singapore
Depending on whether you’ve started the Sole-Proprietorship or a Private Limited company, there are varying tax rates you need to be clear of. For the former, you’re looking at business taxes in the range of up to 22 per cent, while Private Limited entities face 17 per cent across the board. That said, don’t forget that most new companies have a tax exemption for the first three years that you could take advantage of.
It’s all about the bottom line
Essentially, it’s about the reconciliation of your business numbers — a balance sheet and supporting documents to clearly indicate all the revenue that has come in and all the costs that have been paid out by company. These need to tally with the final numbers in your business bank account at the end of your financial year. You probably already know this activity isn’t the simplest or quickest thing to do. But that’s mainly because of the next point…
What’s deductible and what is not
If you only compile your invoices to customers and payments to suppliers, reconciliation would be considerably easier. But it would also mean a considerably higher taxable amount. For business owners, every dollar counts and knowing what business expenses are legitimately deductibles can greatly help your company reduce its tax bill. You can find a handy guide from IRAS on deductible and non-deductible business expenses here.
If you want to make the most of your deductible business expenses so you can keep your business taxes in check, don’t wait till the end of the year before you scramble to compile all your paperwork. Regular bookkeeping done at least once a month means you won’t need to go through the frustration of searching for crumpled or faded receipts that have fallen into the depths of your bag. Also, this gives you a chance to regularly review how your business has been performing so you can make more calculated business decisions moving forward.
You need ALL the documentation
To track your business accounts and financial statements clearly and in good order, you need clear documentation of every business transaction with clients and vendors to support that balance sheet. In the past, business owners were required to keep the physical hardcopies of receipts, delivery orders, invoices and more. Now with the handy inclusion of a digital camera on most smart phones, you can simply snap a picture of the necessary documents for posterity (and possible audit) sake. You can work even smarter with cloud-based accounting platforms like QuickBooks Online, which lets you categorise and store the various documentation soft copies so they correlate to the respective cost and payments indicated in your balance sheet.