What makes a good Singaporean bookkeeper

Being in the business of bookkeeping, we have often encountered people who have the wrong idea of the bookkeeping process. Bookkeeping is predominantly meant to record transactions pertaining to the business in the accounting system - and that is where bookkeeping ends.

People often confuse it for producing management reports, filing corporate taxes with Inland Revenue Authority of Singapore (IRAS), and annual filing with Accounting and Corporate Regulatory Authority (ACRA). This falls under accounting – a task that is different from bookkeeping.

Here are some crucial characteristics your Singaporean bookkeeper should display.

1. Bookkeeping is not auditing

Yes, bookkeeping is not auditing. As per corporate laws in Singapore, a company whose turnover has not reached 5 million Singapore Dollars or any that does not have a corporate shareholder does not have to go through an audit process.

There are times when the bookkeeper may have to record transactions that do not have a proper trail. It still needs to be done to ensure the transactions of the business are reflected correctly, as required by Singapore Financial Reporting Standards.

For example – an expense of 100 Singapore Dollars appears in the bank account, the company official does not have a bill for the same and has only a vague idea that it might be some paper for office printer. The bookkeeper should account this expense rather than ignore it completely. The fact that this may be disallowed for taxation by IRAS is a different issue.

An accountant should be able to ensure that he can produce meaningful documents such as management reports from the information he has – limited as that may be.

2. Accounting profits may differ from taxable profits

Surprisingly this is a concept that gets many araised eyebrows. It is quite natural to have differing profits under accounting and taxation. Singapore tax laws allow certain expenses to be taken for taxation while some others are disallowed.

For example – the business owner uses his S-plate (personal) car to meet clients. These are legitimate business expenses where accounting is concerned.

But for taxation, S-plate car expenses are disallowed by IRAS. So when we compute taxable income for the company it will differ to the extent of this expense. Accounting will record this expense whereas taxation will ignore it.

A good bookkeeper knows this and appreciates this subtle difference.

3. The three key questions you can ask your bookkeeper every month

In Singapore, as we mentioned before, we don’t have a mandatory audit requirement for most SMEs. So it is upon a company to ensure the accounts are maintained accurately.

In that context, we discuss some crucial questions you should ask your bookkeeper on a monthly basis.

• Are all the bank statements tallied to the accounting transactions in the software? If not, is there well presented and understandable bank reconciliation statements available? (Cash and bank balances.)
• Have all the sales invoices been keyed in correctly? Is there any income taken into “income account” without raising invoices? (Accounts receivable.)
• Have we covered all payments that have to go out of accounts in the near future? (Accounts payable.)

4. A knowledge of applicable Singapore Financial Reporting Standards (SFRS) and Singapore tax laws are valuable

How does your bookkeeper decide what's the method of depreciation they use. What's the inventory valuation technique they would employ. These matters demand a specific kind of knowledge from a bookkeeper. A basic understanding of the applicable Financial Reporting Standards can prove a valuable tool – this means lesser corrections during an audit or compilation process.

In Singapore, we know that the applicable standards are the SFRS which are very similar to the International Financial Reporting Standards (IFRS). Hence a knowledge of SFRS would equip a bookkeeper to apply the same principles for other regions where standards similar to IFRS are used.

Similarly an understanding of Singapore tax laws and recent deductions claimable for the company are essential. IRAS provides a Productivity and Innovation Credit (PIC) grant for all eligible companies. A prudent bookkeeper should demarcate the items where he can claim PIC, under a separate account head – like “PIC claimable Fixed Asset” accounts. This can be easily done through the “Chart of Accounts” feature in most accounting software.

5. Historical bookkeeping vs real-time accounting

Singapore has always been a tech-savvy location and with the advent of cloud-based accounting software, many SMEs are embracing a real-time accounting regime.

As the stakeholder in a Singapore company, especially an SME, it is crucial for you to understand and embrace a versatile accounting software. It is in this context, we explain the difference between historical and real-time bookkeeping.

Most bookkeeping assignments are historical in nature – perhaps your bookkeeper records transactions that have already taken place. For most SMEs this kind of accounting serves the purpose, though there are demerits to this method.

Real-time accounting is when transactions are entered into the accounting system on an immediate basis. We do not mean a cash basis of accounting here – we still mean that accrual basis accounting has in some ways become historical recording of transactions.

This method ensures small lead times – transactions are up to date for anyone who needs to check. With modern software, real-time accounting is achievable – it only requires a day-to-day engagement with bookkeepers. They should be able to gauge your requirements in terms of product needs (like what features would be useful) and deliverables.

Embracing tech-enabled bookkeeping is crucial to maintaining up-to-date numbers for your business. From maintaining physical books of accounts to desktop software and to the cloud; change has hit this sector like all others.

Today it's the day of the savvy accountant who understands cloud-based software quickly and effectively - something business owners should look for in their bookkeepers.