Whether you’re a venture-backed or self-funded entrepreneur, it’s easy to end up prioritising strategy and operations over financial management, but money management can make or break your business. Establishing sustainable financial practices early in your growth journey can safeguard your business against volatile economic times and be the difference between long-term success and failure.
A business is in good financial health when it generates a profit, pays its debts each month without needing to borrow funds, and manages its cash flows effectively. A financially healthy business also minimises financial risks by complying with local filing deadlines and having a solid, up-to-date bookkeeping system in lace.
This financial health checklist may seem straightforward enough, but it’s easy for business owners to take risks or make mistakes unknowingly. In the 8 years that Accela Finance has bopening a letter from ACRA (Accounting and Corporate Regulatory Authority) or IRAS (Inland Revenue Authority of Singapore) falls low on the priority list. Yet we’ve seen this cost companies time and time again.
To avoid this common pitfall, make sure you provide the regulatory bodies with a business e-mail address that you check regularly. You’ll receive letters and notices more quickly and will be more likely to log them on your 'to-do' list.
At Accela, we add a layer of certainty by receiving duplicate notifications for our clients. So if you happen to miss an alert, we’ll have you covered.
Leaving Compliance for Last
Unless you’re an accounting professional, filing deadlines aren’t generally top of mind. And yet even businesses with a dedicated bookkeeper on staff experience challenges when its often overloaded bookkeeper is inundated with financial administration and misses a critical filing deadline. These late submissions incur fees that hurt.
Poor Record Keeping
Many organizations underestimate the benefits of having a digital record management system from the outset. When files are not organized according to a clear labelling system and defined process, they become difficult to find, which creates massive time inefficiencies, security risks, compliance issues and most importantly, annoys employees.
Evading Suppliers
Payment culture in emerging markets can be less rigid than in the West (United States, United Kingdom and Western Europe). While there are tangible, enforceable legal consequences to breaching a supplier’s payment clause in these countries, it is not uncommon for small businesses in emerging markets to delay supplier payments past the contractual deadline as a means of managing cash flow, and getting away with it. Not only is this practice unfair to the financial health of the service provider, but it puts your business’ credit rating and reputation at risk, and has the potential to ripple through the entire supply chain, impacting the quality and timeliness of the supplier’s goods and service delivery.
To avoid these common mistakes, there are three small but mighty steps that you can take to safeguard your business’ financial well-being in the new year.
1. Outsource your Bookkeeping
It’s a common misconception that accounting and bookkeeping services should be managed internally and that outsourcing these services is expensive. Nowadays, it is increasingly difficult to recruit qualified candidates who are both experienced enough and affordable. While a small business does not need a full-time bookkeeper, it requires someone with more skills than an office manager, or receptionist can provide.
Add to this the required bookkeeping systems and keeping it in-house can become costly. When you enlist a company with extensive market experience and proven qualifications to “manage the books,” you invest in quality and efficiency. You also expel risk and bias from your financial management cycle by handing these core aspects off to an objective third party.
2. Automate Your Company Secretary Services
A company secretary helps a business manage and mitigate its corporate non-compliance risk by ensuring the company’s directors meet their regulatory obligations. In Singapore, a company must appoint a company secretary who is a resident within six months of incorporation.
Although companies with multiple directors can appoint one of their resident directors to serve as the Company Secretary, more business owners are opting to enlist Corporate Secretary (CoSec) service providers to “set it and forget it.” Outsourced CoSec service providers have access to databases and systems that make tracking and adjusting to legislative and regulatory changes a breeze, reducing the risk of penalties and fees. These services are incredibly affordable and are considered a must globally.
3. Start your Balance Sheets off on the Right Foot
An accurate, well-managed balance sheet is at the heart of a company’s cash flow management. Any balance sheet entries that impact cash (e.g. working capital, financing, etc.) are reflected in the cash flow statement. Therefore, it is almost impossible to produce accurate cash flow statements and, by default, properly manage your cash flow with an incomplete or inaccurate balance sheet.
Accela Finance has been providing outsourced bookkeeping, CoSec and financial services to Singapore’s most ambitious small businesses since 2014. If you need support managing your company’s finances, get in touch for an introductory chat: [email protected].