Today’s sophisticated worldwide economic climate necessitates that businesses get the most out of their finance and payroll functions – essentially, meeting statutory prerequisites is not, at this point adequate.
It’s no secret that Small and Medium-sized (SMEs) businesses are the backbone of the Singapore economy.
However, the need to record all financial transactions and exchanges clearly and methodically cannot be overstated.
For SMEs in Singapore, this spells a need for flexible, creative, and financially savvy solutions that arm them with the information necessary to maintain their business.
As we shall see throughout this article, bookkeeping records empower organizations to contrast results of one financial period from another period.
Furthermore, tax authorities are also more likely to believe the facts constituted in good bookkeeping records, if they are prepared according to Singapore Financial Reporting Standards.
To that end, Singapore companies critically require bookkeeping service providers as such exercises are typically not readily deducible, and somewhat time-consuming.
What is Bookkeeping?
Generally speaking, bookkeeping is the procedure of recording and tracking income and expenses accrued in one’s commercial operations in their business’s books and records.
In practice, bookkeeping principally revolves around recording commercial activities and transactions in a manner that can be presented to business management and tax authorities, in order to influence decisions, streamline operations, or maintain regulatory compliance.
Historical records show that bookkeeping existed as early as 6,000 BC, while verifiable artefacts establish that practically every ancient civilization had some form of monetary and mathematical record keeping.
That being said, the term we have come to know was probably derived from the fact that financial information was typically recorded utilizing pen and ink in paper books – henceforth the name “bookkeeping.”
Bookkeepers Vs Accountants
Interestingly, numerous individuals fail to perceive that accountants are not necessarily bookkeepers, albeit all accountants know how to do bookkeeping.
As an entrepreneur, you may choose to institute your own bookkeeping, and instead rely on an accountant to prepare tax returns, handle intricate transactions or audit your books.
Regardless of whether you do your own bookkeeping or depend on another person, you ought to at least be acquainted with the difference between bookkeepers and accountants, so you clearly comprehend why things work in the manner they do.
A bookkeeper is responsible for recording all financial transactions, whether cash or credit, in the appropriate daybook, supplier’s ledger, customer ledger, and general ledger.
On the other hand, accountants are responsible for preparing reports from the information pertaining to the financial transactions recorded by the bookkeeper. As such, bookkeeping is a very fundamental and critical activity in every business in Singapore.
Put simply, bookkeeping concerns tracking the entirety of an organization’s financial data (sales, purchases, expenses) while accounting creates a readable financial information from all the records a bookkeeper has created.
An overview of Bookkeeping Systems
Before we delve into why you need to outsource bookkeeping services, we need to briefly paint the picture of what the bookkeeping world basically constitutes.
Single-entry and Double-entry Bookkeeping.
Generally, the two primary bookkeeping systems employed worldwide are: single-entry and double-entry bookkeeping. In practice, single-entry bookkeeping can be equated to a checkbook, where you either increase or decrease the sum in the checking account. This approach is relatively simple to use and reveals your account’s cash balance.
However, it gives no insight on where the money came from or went to.
Essentially, to properly account for your revenue and spending, a double-entry system is typically advised as it dictates two or more accounts for each transaction.
Fundamentally, double-entry bookkeeping maintains the principle that there is consistently an equal charge for each debit and credit balance.
Consequently, double-entry bookkeeping offers the benefit of not only complete information collection, but also facilitating financial comparisons of financial information for different financial periods.
Fortunately, single-entry bookkeeping is becoming outdated in the modern era, while modern bookkeeping now relies heavily on technological solutions that have somewhat programmatically translated double bookkeeping techniques.
Five benefits of Bookkeeping
1. Complete records can help to properly identify different income sources
Saving organized records of one’s income sources is a fundamental piece of any business. For instance, the business may have money deposited into its company account from different sources and might require a means of proving that some of the deposits are non-business or non-taxable.
That’s where bookkeeping steps in!
2. Tax Savings
As hinted earlier, some deductible expenses and tax credit opportunities can be overlooked without appropriate bookkeeping when filing income tax returns.
3. Prevention of income tax issues
Generally, sound bookkeeping is the best safeguard in case of a tax audit. Without organized records to support one’s income tax assessment, non-income items can be enforced as taxable income, and valid expenses may be excluded from potential tax benefits or deductions.
4. Continual awareness of the financial position of the businesses.
Generally, proprietors always need records to know whether their business is bringing in cash or not. Good bookkeeping gives owners a 360 view of their business and helps in decision making.
5. Facilitates the process of getting loans and advances from banks
Typically, banks and creditors need factual data about the financial position of a company. If the business is monetarily stable with evident bookkeeping practices as proof, they have a higher chance of getting a better for the loans and advances.
What is a Bookkeeping Service?
Bookkeeping services develop, manage, and maintain a company’s financial processes and all its monetary transactions. In essence, bookkeeping services guarantee that your business runs in an ideal state by tracking all payables, receivables and keeping all the financial documentation intact.
Bookkeeping services also oversee payrolls, make and maintain monthly financial reports, address tax issues, and handle all company deposits. They additionally evaluate bank statements and attend to all the internal accounts to avert any issues during IRAS audits.
Essentially, bookkeeping services give extensive oversight to every one of their clients’ financial transactions and daily operations, such as balance sheet and income statement.
Basic Services Offered by Bookkeeping Firms
- Cash flow management – this service is based on cash inflow and outflow in a business. It’s imperative to record every transaction to know about the business cash flow.
- Account payables & receivables – This essential service revolves around handling invoice processing, credit or debit notes, and vendor or customer accounts statements.
- Accounting charts – Bookkeeping services build charts of accounts that offer a complete structure that defines the customer’s business accounts.
- Bank account and credit card reconciliation – Bookkeeping agencies are specialists at account reconciliation as this exercise typically poses a significant risk in every business. Reconciled statements provided by bookkeeping services can help a business visualize where it stands financially and identify fraudulent transactions that might impact profits.
- Payroll and tax preparation services – Bookkeeping services can help handle tax preparation and deliver employees’ wages in a timely manner, without any delay.
Relatedly, other bookkeeping services offered entail:
- Income Statement Reporting
- Financial Reporting
- Fixed Assets & General Ledger Management
- Balance sheet Reporting
Why do SMEs in Singapore need to outsource bookkeeping services?
Entrepreneurs in Singapore face new difficulties every day. Productive accounting processing and bookkeeping measures are at the top of the list. Bookkeeping outsources typically helps address these vital inherent questions:
- How much does a business owe its suppliers, tax authorities, banks, debtors, and employees?
- How much does each client owe the business?
- How much capital is invested in the organization by the proprietors?
- Is the business profitable?
As the foundation of an accounting system, outsourced bookkeeping can help Singapore companies to:
- Save considerable time and focus on their core business duties
- Gain greater business notoriety
- Improve customer relationships
- Give owners better peace of mind by helping organize information that will help with the business’s smooth running
- Make data-informed decisions to enhance the business.
- Keep highly updated financial records to maintain consistent business standards.
- Comparatively analyze revenue and profitability in a granular manner over different periods (months/weeks/years).
- Streamline cash management, and avoid over-budgeting or under-budgeting in financial years.
- Have detailed oversight of the entire payroll process in order to evaluate employee bonuses, commissions, or per diem payments.
- Have more straightforward access to loans from banks and creditors.
Why outsourcing bookkeeping is a No-brainer!
Efficient bookkeeping, especially for SMEs, can be challenging to execute. In most instances, proper preparation of financial statements cannot be achieved by most business owners or untrained staff. As such, it ends up costing the company, or at worst, can lead to excessive loss or unwarranted tax liability.
It is widely recommended to outsource bookkeeping activities to a third-party, typically a bookkeeping or accounting firm. Bookkeeping organizations are well-versed with financial operations.
Consequently, a business simply needs to collect all the financial documents it produces and receives, then pass them to the firm. After an agreed time, receive information about its status or tax liability.
On the other end of the spectrum, a company can just sign a contract to get the entire scope of bookkeeping management from the bookkeeping agency and focus on their core business.
Qualities of a Reputable Bookkeeping Service
Aside from having the capacity to keep up-to-date books and records regularly, bookkeeping services should not only meet the requirements of the government, but also:
- Possess the ability to detect financial inconsistencies and deviations in a timely manner
- Have superior abilities to control cash flow (liquidity)
- Avoid cost errors and loss of documents.
- Be mindful of the client’s performance and growth in real-time
All things considered, thousands of small businesses in Singapore still need efficient bookkeeping services to better manage their finances, relieve business stress, and work towards long-term profitability. Not forgetting, to comply with financial regulations and avoid the risk of penalties.
That being said, procuring a professional bookkeeping team’s services ensures that you always know where your money goes, what comes in, and your profit margins.
Furthermore, outsourcing bookkeeping can save you money as SMEs usually have no extra cash to squander. By outsourcing to a bookkeeping service instead of hiring an in-house bookkeeper, you save overhead costs, and won’t have to pay a monthly salary.
An immense benefit for any small business owner, with much-needed peace of mind. This is important as most first-time business owners typically have no accounting experience, or already face difficulties mixing their own personal expenses with business costs.