Importance of Record Keeping in Singapore & How Long To Keep It

Good business record keeping is crucial, from managing costs for legal, regulatory or tax reasons to simply managing and improving your business. If you are just starting up your business in Singapore, recordkeeping might not be the first thing that comes to mind. However, practising good business recordkeeping can help you build a strong foundation and pave the way moving forward.

What Is Recordkeeping?

Recordkeeping is the process of recording events and transactions in an accounting system. Since accounting depends on accurate and thorough records, record keeping is the basic foundation of accounting.

What’s the Importance of Record Keeping

Good record keeping is important so as to fulfill the company’s financial commitments and provide crucial information for the company’s future decisions. While record keeping helps the business monitor its usual business activities, it is also required because of tax obligations.

1. Comply With Laws

Singapore’s legal requirement makes it necessary for you to practise good record keeping. While record keeping can be a mundane task, a corporate service company such as Osome can provide professional accounting and corporate secretary services at an affordable cost for you.

2. Prevent Theft or Fraud

Theft and fraud happen, but you can prevent this with good business recordkeeping. Maintaining comprehensive records of your company’s expenses and transactions can help you better understand your cash flow, therefore preventing fraud. Moreover, this information will allow you to produce accurate financial statements during audit season.

3. Pay Taxes

In order to prepare your tax returns, you will require good records to support the expenses, credits, and income you report. Generally, these are the exact documentation you use to keep track of your company’s progress and prepare financial statements. Practising good record keeping means things will be a lot easier during tax season, since you do not have to upkeep additional records for your tax returns.

4. Manage Your Cash Flow

To a company that is looking for expansion, cash flow is still king. As proven by the COVID-19 pandemic, having healthy cash flow can help businesses tide over difficult periods.

Record keeping plays an important role, since it allows you to recognise and comprehend where your money is coming in and moving out from to have an accurate assessment of your company's financial health.

5. Make Well-Informed Business Decisions

Don't underestimate the power of your dollar – especially for a Small and Medium-sized Enterprise (SME). Understanding your financial resources is important for you to stretch every dollar, and make sound business decisions that are driven by data.

At Osome, our professionals can help you see your cash balance, check financial health and track metrics, so you can gain more insights into your business spending. This saves you precious time from the pesky paperwork, so you can focus on what is most important to your business.

6. Save Time and Money

When it comes to your financial year end, good record keeping practice can help you save time and costs. Firstly, you can save yourself the anxiety of having to meet deadlines. Additionally, you don't have to spend extra costs to get someone to handle your record keeping at the last minute.

Digitise your paperwork to keep track of everything effortlessly. With your records and documents online, record keeping can be hassle-free and you can easily search your records from different devices.

7. Steer Clear of Loopholes and Oversight

Cash flow issues are one of the main reasons why businesses fail. Recordkeeping allows you to consolidate records for better business decisions, and give reasons to substantiate every choice you make. Loopholes and oversight can cost you your business, but practising good record keeping serves as a precaution for business owners like yourself.

Record Keeping Requirements

Depending on the country's local laws, the record keeping requirements differ. In Singapore, the Inland Revenue Authority of Singapore (IRAS) has detailed its record keeping requirements that companies must upkeep.

How Long To Keep Accounting Records in Singapore

IRAS states that companies must retain their accounting records and supporting documents for a minimum period of five years from the relevant Year of Assessment (YA).

What Business Records Must I Keep?

According to IRAS, companies must upkeep proper records and accounts of business transactions. These include;

• Accounting ledgers, journals and schedules reflecting your company’s income and expenses, assets and liabilities, as well as profits and losses;
• Source documents that detail all business transactions, such as receipts, invoices bank statements, vouchers, and other relevant documents issued to or received from customers;
• Any other written evidence of transactions concerning your business.

Whether your company is registered for GST or not makes a difference in the business records you must maintain. For instance, a GST-registered business has to maintain tax invoices issued for income purposes and records of disposal of business goods. However, these records are not necessary for non-GST registered companies.

Here’s a handy recordkeeping checklist for you to refer to:

What Are The Methods of Keeping Business Records?

Your company’s business records can be maintained either in a physical or electronic method, as long as they are complete, accurate, and can be audited.

Electronic Method

In this digital age, the most efficient method of keeping your business records would be to keep them digitally or as part of a software program. Nonetheless, you should make security arrangements to ensure that your records cannot be tampered with and are kept safe. Since these records are maintained electronically, you do not have to maintain the physical copies of source documents to support your business transactions when tax season comes around.

Electronic records come in various forms, but the most common two are scanned invoices and scanned receipts.

1. Scanned Invoices

You can easily keep a digitised version of your invoices, accounts payable and others simply by scanning them. This way saves you plenty of time since scanning an invoice or taking a picture of it takes just a few seconds. Additionally, there is no need for paper and storage units to keep these records, reducing clutter in your office.

2. Scanned Receipts

The same advantages apply to scanned receipts. Did you know that you can easily scan and keep track of your receipts with the Osome app? This means you can be ​​efficient and fast, storing your receipts securely in no time. Moreover, your financial data can be processed almost instantaneously.

Paper Method

Alternatively, if you prefer the traditional accounting method of maintaining paper records, be sure to have photocopies of your records as a backup. However, there is no significant advantage to maintaining paper records since they are vulnerable to incidents such as coffee spills or misplacing documents.

Where Should I Keep My Business Records?

Your business records should be maintained at your registered office or at a place deemed suitable by your company’s directors. You can also store your important data to cloud storage for easy synchronisation and robust security. These business records should be made available for inspection by your company directors at all times.

What Are The Consequences of Non-Compliance?

Non-compliance is a serious issue that can lead to severe consequences. Your business records can be considered improperly kept if:

• Your accounting and related records are not maintained and/or;
• Your accounting and related records are not kept for a minimum period of five years;
• Your accounting and related records are not kept in a proper manner or place.

In the event that your accounting records are not adequately maintained, your company and any related officer could possibly face a jail term of up to 12 months, or a fine of up to $5,000 – in addition to a default penalty under the Companies Act.

Moreover, improper record keeping is deemed an income tax offence that could lead to IRAS disallowing your company's capital allowances and expense claims. Under the Income Tax Act, those guilty of improper business recordkeeping could also face a jail term of up to six months in default of payment or a fine of up to $1,000.

What if My Company Has Already Been Struck Off?

In the event that your business has been struck off or dissolved, an officer of your company should ensure that all company books and papers are retained for at least five years after the date that the company was dissolved.

If your company is being wound up, your company’s liquidator should ensure that all company books and papers are kept for at least a minimum period of five years from the company’s date of dissolution.

How To Maintain Good Record-Keeping Habits in Your Company

Now that we have covered the importance of record-keeping in-depth, here are some ways that  startups and SMEs can instil a smooth and compliant record-keeping system:

1. Keep Records Organised

Establish a system that works for you and your company with foolproof instructions to ensure that everyone is on the same page as to how to file company records. For instance, expenses can be clearly labelled when submitted so that the total expenses across the entire company can be consolidated and filed under proper categories.

2. Start Using a Digitalised System

Using a digital system helps free up time and money for your employees. As a result, you can concentrate on core business tasks that would generate a higher rate of growth in your business instead of chasing a trail of paperwork. As a start, you can consider Including tools like Osome.

3. Acknowledge You Can't Do It Alone and Ask for Help

Many entrepreneurs tend to want to do everything on their own and are sceptical about seeking help. However, as a business owner, your priority is to grow your business. Focus your energy on higher-value work while leaving administrative work to other professionals. A corporate service company like Osome can be your round-the-clock accounting and corporate secretary assistant, getting work done professionally at a cost that is affordable.

Tips for Record Keeping of Your Books in Singapore

• Make it a habit to record your business transactions daily and keep them up-to-date. If you do not have a system established, you can simply do so in a simple Excel spreadsheet. The most important thing is not to leave record keeping till the end of the month, or even a financial year itself – otherwise, things can start to feel overwhelming and may not be accurate.
• Always ensure that your business transactions are entered in a precise and accurate manner.
• Create a corporate bank account to distinguish your business expenses from your personal ones, so you can effectively manage your company's finances.
• Establish a record-keeping system for your business. This system should be easily understood, even by a layman. A good system of recordkeeping should notify you to start following up when payments are due or when your company is owed a debt.

Start Practising Good Business Record Keeping

Record keeping can be a breeze, and good business record keeping starts with you. Remember to stay vigilant and make sure that your business records are always properly maintained.