Guide to Accounting for Small Companies in Singapore

Small and Medium Enterprises (SMEs) make up 99% of all enterprises in Singapore – and these companies started by strong entrepreneurs form the backbone of the country. To ensure their success, their focus on running their business is critical.

Accounting for Small Businesses: Why it’s important and 5 tips for success

One of the first steps towards their success is keeping their business finances organized.

If you’re a small business owner double-hatting as your own accountant, continue reading. This article will cover the role of accounting, its importance in small businesses, and a few key tips to get your company off on the right foot.

Supporting your company's growth

Accounting, sometimes known as bookkeeping, is the organization of financial accounts. Put very simply, it is verifying and recording of all business transactions including expenses and earnings. Accounting for small businesses usually comprises three things: balance sheet, income statement, and cash flow statement.

These financial reports will also be used for external reporting and tax compliance. In Singapore, the corporate income tax rate is 17% of your company’s chargeable income. However, there is a tax exemption scheme for start-ups.

Corporate income tax exemptions for start-ups

Starting a business? Singapore’s got your back with tax exemptions to ease your journey. Imagine not having to pay taxes on your first S$100,000 of income for each of your first three years, and then getting a 50% exemption on the next S$200,000. It’s like having a financial boost to kickstart your dream business and turn it into reality.

Why accounting for small businesses is important

Accounting is a crucial function in every business, but it is especially important for SMEs and start-ups. In fact, studies show that as many as 61% of small businesses around the world struggle with insufficient cash flow.

Keeping clean records of your finances helps you to manage your money more effectively, which is essential during the early stages of your business. Proper accounting helps you track what’s working (and what’s not) for your business, helping you to identify and discover new potential avenues of growth. Not to mention, it also makes your company’s payroll and tax filing processes easier.

But keeping up with administration work is one of the biggest challenges for SMEs. Accounting for small businesses is very time-consuming. Plus, most small businesses don’t have the budget or resources to hire a dedicated accounting department. This is why many small business owners choose to either do the bookkeeping themselves, hire just one accountant to do it, or use an accounting software

5 Tips for small business accounting

1. It’s like keeping your receipts and invoices in a treasure chest, so you always know where to find them.

2. Think of it as having two wallets—one for your business and one for yourself—to keep things simple and clear.

3. It’s like having a personal assistant for your finances, helping you stay on top of things without the stress.

4.Keep an eye on your cash flow like you would with your own pocket money, ensuring there’s always enough for what you need.

5. : Think of it as tidying up your financial room—regularly checking and organizing to keep everything in order.