Record keeping of accounts, when it comes to keeping good records we all seem to acknowledge that things could be done better.
The law requires every business to keep proper accounts and records. You will need them to substantiate your business transactions & claims to IRAS for income tax purposes. When you don’t keep proper records, you risk having your claims disallowed and getting into trouble with the authorities. But once you start keeping proper records, there’re perks as well. You get an accurate picture of your cash flow position and how business is doing at any point in time. This can help you plan the next steps for your business more accurately and confidently. To help businesses manage their record-keeping, the IRAS issues guidelines on record keeping requirements for businesses. Generally small businesses that are non-GST registered have simpler record keeping requirements as compared to GST registered businesses. If you’re a small business that is not GST registered, here are a few basic things that you should know about record keeping for your business.
The questions go as What types of records to keep, How long to keep business records, How to keep records, Manual or electronic?, What about my physical source documents if I keep electronic records? All the questions will be answered along the way.
You need to keep records of source documents relating to your business transactions. Some examples of source documents would be invoices, receipts, bank statements, contracts, and any documents related to your business including those issued by your customers, suppliers, the Government. Another type of record to keep its accounting records and ledgers relating to your income, expenses, assets, and liabilities.
Beginning from the Year of Assessment 2008, you need to keep business records for a period of five years from the relevant Year of Assessment. For example, your business records for Year of Assessment 2013 need to be kept until 31 Dec 2017 (this is often referred to as the record retention period).
Records can be kept in manual form by maintaining a ledger book and keeping the physical invoices and receipts. You can also keep records in electronic form using a computer and accounting software. If you’ve had the experience of spending a lot of time finding the receipt for an expense, you’ll appreciate the advantages of keeping a record of source documents in electronic form. When you scan and upload the documents to your cloud software while on the go, you archive them instantly and this makes retrieving them later much easier as you can do a search based on the date or description. Ctrl+F is something you can’t do with paper. Keeping accounting ledgers electronically is also advantageous as they don’t fade over time unlike paper records. If you’re not using cloud software that automatically takes care of this, it is sure to keep them secure and backed up. Source documents in electronic form can be used to substantiate business transactions. However original physical source documents should still be kept. Certain official documents should also be retained in hard copy.
But why is keeping good records important?
Let share a bit, no one knows your business better than you do, but reliable information can only be extracted from the records you keep. If you don’t have good records, it’s much harder to make good decisions. Besides that, Producing invoices, quotations, and estimates promptly are vital. An early estimate can be the difference between winning and losing a job. Similarly do not rely on supplier’s statements. You need to know before they tell you how much you owe.
Have you ever wondered whether you are making or losing money? Management accounts do that for you. You want to know how your business is performing. With management accounts you can compare one period with another, this year with the previous year. Then, you have to makes it possible to find important information and documents quickly because by being organized you can quickly and easily find information regarding the original order and the goods and work supplied.
It also helps you plan in advance for tax payments and other liabilities. Tax planning is for everybody. Set money aside when you have the cash. Or make an arrangement with IRAS in good time. Moreover, it does help to reduce your accountant’s fees and save them time. Meaning, We will always help by giving you extra value for your money but if records are really untidy eventually this will cost you more. It Will supports your claims to some tax reliefs or capital allowance what are capital allowances? They are provisions that can save you a lot of tax when you purchase equipment or similar assets. Don’t miss out on the opportunity just because you have lost the paperwork.
Last but not least, Recordkeeping complies with the law. So, good record keeping is a legal requirement under the rules of assessment. So, by being organized not only you have all of the above benefits, but you stay within the law. Getting a good system set up will ensure that things are organized when you need to do up your accounts and taxes.