Tips for Efficient Bookkeeping in Singapore
Topics Covered In The Article
Understanding the Difference between Bookkeeping and Accounting
Bookkeeping and accounting in Singapore are two distinct yet interconnected activities that contribute to the financial management of a company.
- Bookkeeping involves the systematic recording and organization of financial transactions, ensuring accuracy and completeness. It focuses on tasks such as recording sales, purchases, and expenses and maintaining ledgers.
- Accounting encompasses a broader scope, analyzing and interpreting financial data to provide meaningful insights for decision-making. It involves preparing financial statements, conducting financial analysis, and providing strategic guidance.
To illustrate the difference, let's consider an example. Suppose a retail store in Singapore records its daily sales transactions, tracks inventory, and manages cash flow. This is the realm of bookkeeping, where meticulous records of sales, inventory purchases, and expenses are maintained. Bookkeeping ensures that financial data is organized, allowing for accurate financial reporting.
However, accounting takes it a step further. An accountant in the same retail store would not only maintain the books but also analyze the financial statements, evaluate profitability, assess the store's performance against industry benchmarks, and provide recommendations for cost-saving measures or revenue enhancement strategies. Accounting goes beyond the numbers to provide valuable insights into the financial health and overall business performance.
What Should You Know About Bookkeeping in Singapore?
Who Is Overseeing the Bookkeeping in Singapore?
Singapore Financial Reporting Standards (SFRS)
financial statements are prepared and presented in Singapore. They are based on the International Financial Reporting Standards (IFRS) but have some modifications to suit the local context. For example, SFRS has different rules for real estate valuation, inventory valuation, and deferred taxes. However, the Singapore government intends for SFRS to move towards full convergence with IFRS in due course.
The key provisions of SFRS are crucial in guiding bookkeeping practices in Singapore, ensuring consistency, transparency, and accurate financial reporting. Businesses must familiarize themselves with these provisions and apply them appropriately in their bookkeeping processes.
Small Company Concept
Singapore introduced the "small company" concept to simplify regulatory requirements for smaller businesses. Qualifying as a small company provides certain exemptions, such as reduced disclosure requirements, simplified record-keeping requirements, etc. A company is considered to be a small company if it fulfills at least two out of the following three conditions:
- The total annual revenue of the company must not exceed S$10 million;
- The total assets of the company for the financial year end must not exceed S$10 million;
- At the end of the financial year, the number of full-time employees must be at most 50.
This initiative helps alleviate the burden on smaller enterprises, enabling them to focus on growth. You are welcome to read our guide on how to incorporate a small company in Singapore.
Singapore Financial Year
Unlike the calendar year financial reporting standard in many countries, Singapore allows companies to choose their financial year-end. This flexibility allows businesses to align their financial reporting with their operational needs while complying with the stipulated regulations.
Please note that the financial year cannot exceed 12 months, and the chosen financial year-end date should be consistent for subsequent years.
Singapore Goods and Services Tax
Singapore imposes a Goods and Services Tax (GST) on the supply of goods and services. Businesses with an annual turnover of more than SGD 1 million must register for GST and charge it on taxable supplies. Bookkeeping for GST involves:
- Maintaining detailed records of transactions.
- Collecting and remitting the appropriate GST amounts.
- Filing regular GST returns.
Computerized Accounting Systems
Singapore encourages the use of computerized accounting systems to enhance efficiency and accuracy. Companies are encouraged to implement accounting software that complies with the Inland Revenue Authority of Singapore's (IRAS) e-Tax Guide, which outlines requirements for computerized bookkeeping and records retention. You are welcome to learn more about the most popular bookkeeping software in Singapore.
Since taxes are involved, bookkeepers also need to know the relevant requirements of the Inland Revenue Authority of Singapore (IRAS). Let’s discuss them in the next section.
IRAS Requirements for Bookkeeping in Singapore
1. 5-Years Requirement to Keep Proper Records and Accounts
You should keep proper records and accounts for five years so that the income earned and business expenses claimed can be readily determined. You must be able to support your records and accounts with invoices, receipts, vouchers, and other supporting documents. Failure to do so may result in the following:
- Expenses claimed being disallowed; or/and
- Additional income assessed by IRAS based on the best estimate; and/or
Note! Suppose your Singapore company has chosen a non-December financial year-end (e.g., May, September). In that case, you must retain the accounting records and supporting documents for the calendar end of the 5th year.
2. Financial Accounts in Foreign Currencies
If you maintain your business accounts in a currency other than the Singapore dollar, you should also file your tax computations and financial statements to the Comptroller in that currency.
However, you must declare the equivalent Singapore dollar amount in the Singapore Income Tax Return. You are welcome to read the IRAS Circular regarding this requirement.
3. Requirement to Issue Receipts
If the total amount payable for your supply, including GST, is below S$1,000, you can issue simplified tax invoices. For detailed guidelines on invoicing customers, please refer to the IRAS Guidelines.
If you are not registered for Goods and Services Tax (GST), you can provide receipts as evidence of sales made to your customers. These receipts should be sequentially numbered, and you must retain duplicate copies for record-keeping purposes.
In cases where you have implemented practices that guarantee the completeness and accuracy of recording all sales receipts, issuing receipts may not be mandatory. However, you must still issue a receipt upon customer request.
What Records Are Acceptable to Verify Income and Claims for Deduction in Singapore?
- For sales/income: Records include cash register tape, daily sales record book, and invoices.
- For expenses/claims: Records include receipts and daily purchases record book.
Singapore Bookkeeping Checklist
Is It Possible to Manage Bookkeeping in Singapore by Yourself?
First of all, the answer is “Yes!”
The decision to manage bookkeeping independently or seek external expertise depends on various factors, such as
- The complexity of the business's financial transactions,
- Time availability, and
- Need for specialized knowledge.
Taking on bookkeeping responsibilities personally allows small business owners to develop a hands-on understanding of their financial operations. Also, managing bookkeeping without external help can be cost-effective, especially for businesses with more superficial financial structures.
However, many owners realize the benefits of outsourcing their bookkeeping and accounting, especially with the rise of bookkeeping software which corporate services or accounting firms usually use. Outsourcing to a corporate services firm allows business owners to focus on other aspects of their business. They can be sure that their financial records are appropriately done using the latest technology and comply with SFRS and IRAS regulations.
Medium-sized companies also find value in outsourcing specific accounting functions, such as billing, payroll, claims and benefits processing, and accounts payable. This not only provides convenience but also offers cost savings for the business.
In general, while the needs of each business may vary, it is generally advisable for businesses with a staff of approximately 10 or fewer to consider outsourcing all their bookkeeping and accounting tasks. On the other hand, small and medium-sized enterprises (SMEs) with more than 10 but fewer than 75 employees may choose to employ full-time bookkeepers while outsourcing their accounting requirements. This approach allows SMEs to balance between in-house expertise and external support, tailored to their specific needs and resources.
Helpful Advices for Managing Bookkeeping by Yourself
Best Bookkeeping Software for Small Businesses in Singapore
How to Find a Professional Bookkeeping Service in Singapore?
If you decide to outsource bookkeeping services, you need to choose the right service provider to work with. Below are some tips on how to find a qualified bookkeeping service in Singapore:
- Seek recommendations from trusted sources and read Google reviews about the company.
- Consider as a bookkeeper your corporate service provider as they possess comprehensive knowledge of the nuances specific to your business.
- Consider their experience working with businesses similar to yours. You can research their website and find companies they are already working with.
- Discuss expectations, timelines, and pricing upfront to establish a transparent working relationship.
- Consider their range of services and whether they align with your specific business needs.
- Evaluate their technological proficiency and ability to work with bookkeeping software or tools.
At CorporateServices.com, we offer specialized bookkeeping services exclusively to companies under our corporate secretary services. Our approach sets us apart and ensures that our clients receive comprehensive and tailored bookkeeping solutions that perfectly align with their business needs.
By contacting us, you gain the peace of mind that comes with knowing your financial management is in the hands of professionals who possess comprehensive business knowledge. With our expertise and insights, you can focus on core business activities, confident that your financial records are accurate, compliant, and optimized for success.