Keeping a record of credit card statements or any business transactions is key to making sound financial decisions especially for business owners. Receipts are proofs of documenting all expenses incurred to facilitate daily operations. Without a properly filed receipt of your business expense, you have lower chances of reducing your tax obligations.
Maintaining a routine in recording transactions can be taxing and complicated but can be very advantageous in more ways than we all can ever imagine. That is if you are still keeping a bunch of file folders or using a traditional filing system.
The Inland Revenue Authority of Singapore (IRAS) requires all self-employed individuals and business owners to keep records of all accounts including income and expenses. The agency also reiterates that assumptions or estimates will not be accepted as a substitute to invoices, vouchers, and receipts.
Read on to learn more on how to keep your receipts organized to better handle your finances, manage your tax obligations and secure your business’ health.
Companies in Singapore are required to keep proper records and accounts of all business transactions. Proper record-keeping reflects how the company is organizing receipts and is responsibly complying with the city-state's policies on Goods and Services Tax (GST) and corporate tax. Before cramming to prepare for tax time, Check out this video released by the IRAS to guide small and medium businesses in record-keeping journeys and find the best way to compile their expense reports.
In general, receipts can represent all types of transactions; however, in Singapore, there are a few types of documents you need to understand and keep as per IRAS requirements. Knowing how to categorize receipts can help you save time and resources.
A credit note is a document that represents the credit granted to a customer or a correction of any mistake incurred during the transaction. A credit note is issued if goods are not supplied or services are not rendered. It also represents instances when charges are waived in part or in full, discounts are provided and services or goods were accepted but the terms of the contract were not completely met.
The credit note should have the following details:
- Name of business registered business address, and GST registration number
- Date of issue
- Identification number or invoice number
- Purpose of issuing the credit
- A detailed description of the rendered services or delivered goods
- Itemized goods and services with quantity and amount
- Amount and rate of tax to be credited
- The total amount of credits excluding and including tax
Before learning how to keep your business receipts, you must know what receipts are and how important are these documents when filing for taxes. Receipts are issued to non-GST customers which usually serve as proof of income transactions.
- Qualified receipts should always have the following details:
- The name of the business and its GST registration number
- The date of issue
- The total amount payable includes the GSTindicated in words and figures.
Businesses need to issue a tax invoice if their customers are GST registered. The tax invoice should be issued within 30 days after the rendering of services of delivery of products. GST registered customers need this document to claim input tax on standard-rated purchases.
- The following information should be indicated in the tax invoice:
- The words “TAX INVOICE” at the top of the document
- The name and address of the supplier
- The GST registration number
- The name and address of the customer
- The date when the invoice was issued
- The Identification number
- The detailed description of the services rendered or the goods delivered
- The GST rate, the amount payable excluding GST, and the amount payable including GST.
There are times when invoices are not required for transactions that do not charge GST. In these times, a debit note is appropriately issued to represent the current debts or obligations of a buyer. Debit notes may seem like invoices, however, the difference is that debit notes are usually formatted like letters and may not require immediate payment from the buyer. In essence, debit notes represent the incoming payables of the customer.
Whether you sell something or make a purchase, you need a receipt to record the activity and to potentially lower your tax cost for the year. Moreover, keeping these records will help ease out the times for tax preparation. The IRAS has certain requirements for acceptable receipts and we’ve summarized them in a table below:
|TYPE OF BUSINESS DOCUMENT||REQUIREMENT||TAXPAYER CATEGORY|
|INCOME RECORDS (Records of each sales transaction)||Receipts with serial number or cash register tapes or invoices issued||GST-Registered Business and Non-GST Registered Business|
|Issued tax invoice or simplified tax invoice|
|Duly-signed rental agreement (by the tenant and the landlord|
|Books to record goods taken for private usage|
|Credit notes documenting returned goods|
|Documents relating to exports|
|Documents to prove payments were received such as bank statements|
|BUSINESS EXPENSE RECORDS (Records of each business expense transaction)||Invoice or receipt received||GST-Registered Business and Non-GST Registered Business|
|Payments made or contracts/agreements relevant to the purchases of services or products|
|Payment vouchers for staff remuneration|
|Employer’s CPF contributions|
|Payment evidence (e.g. bank statement)|
|PURCHASE RECORDS (Records of each purchase transaction)||Tax invoices received, Invoices received or Receipt received||GST-Registered Business and Non-GST Registered Business|
|Documents relating to exports|
|Proofs of payments including bank statements||GST-Registered Business|
There are four possible ways of organizing these government-mandated documents like receipts in preparation for the tax season:
The process of recording all business transactions in physical form or manually is commonly used by small businesses. DIY bookkeeping is very common among start-ups that may not be using excel or any other electronic way of keeping documents. For instance, you can have a record book from amazon or a compilation of receipts issued and received, as well as physical invoices, stored in a filing cabinet. These are accepted supporting documents when claiming for tax reduction however, you may need to remember the following:
- Make sure that all physical documents are well-organized and legible
- Keep photocopies of original receipts as a backup for those that may fade over time
- Input all transactions manually in a record book that coincides with the physical receipts and invoices.
Advantages of manual record-keeping:
Although this procedure may sound obsolete in an advanced country like Singapore, manual record-keeping has some advantages which could not be equaled:
- Accessibility - all records can be accessed without the need for a gadget, internet, or any other tool.
- Easier modification - when errors happen, it will be easier to make modifications to physical records
- Security - all your physical records will not be subject to electronic data corruption or system errors
Disadvantages of manual record-keeping:
- Copies may no longer be retrievable once damaged or lost.
- May require an accounting or a bookkeeping expert to reconcile and analyze business transactions
- The laborious process might take too much time and effort to accomplish.
- Paper clutter inside the office can be daunting especially if employees need to work in a fast-paced organization
Electronic record-keeping and management is an easier way of keeping your receipts and other financial documents. Business owners usually do not hire a third party or a staff to take charge of the procedure because they can do the task through their computer system. With the goal to declutter and keep secure their financial records, business owners consider owning a huge hard drive for their documents.
Advantages of electronic record-keeping:
- Physical copies of store receipts may be eliminated but business owners should have electronic copies or digital receipts in scanned pdf or jpg or png formats. You may need a receipt scanner to manually copy your invoices and even credit card statements.
- Businesses no longer need the approval of the IRAS to record their transactions electronically.
- Saving up physical space as documents can no longer be kept to occupy a huge portion of the office or store. Paperless filing can provide peace of mind knowing that documents could no longer be subject to tarnishing and fading.
The disadvantage of electronic record-keeping:
- Needs proper internal control and management for the security of digital files.
- It may take time and effort to scan and store soft copies of physical receipts, ticket items, and other documents. Not to mention chasing after employees to submit their receipts on time.
- It may take up a huge digital storage space to store files. You may want to buy online storage solutions to secure your data.
Good help is hard to find and the amount of ease and comfort provided by third-party online accounting and payment services is unimaginable. Some of these service providers only require you to send the email and they will take care of the entire process of doing the payment and keeping records of all the transactions.
Advantages of third-party payment processors
Having a legitimate company to take care of your transactions is way more convenient than doing the task of physically updating your records and filing the documents in a storage cabinet using dividers and other office supplies.
Disadvantages of third-party payment processors
Having another company to make the payments and keep the receipts for you may seem new to many but this is already happening in the global digital space. Most companies that hire a third-party payment processor may need to pay more than what the transaction would cost.
As a business owner, you would not want to waste time and energy managing complex hardware and software. You would rather opt for cloud-based platforms that allow you and your staff to upload, record, and file receipts to an app for tax purposes. Moreover, several SaaS providers have functions similar to what electronic bookkeeping and third-party payment processors can do. With the use of any device, you can easily customize files through a point-and-click system.
Advantages of Software as a Service
- No need to buy, install, maintain or update hardware or software. You can easily access your organization’s account with an internet connection and a device.
- Hassle-free record-keeping. Employees don’t need to manually reconcile reimbursements or paper receipts. According to SaaS provider Spenmo, the process can help save up to two hours of employee time per month.
- Real-time analytics and visibility. All payments across the company can be accessed by any staff from a single dashboard. The data can then be integrated with an accounting software.
- No IT infrastructure required. Opting for a SaaS provider to manage your business records will save you from spending for any computer or IT related infrastructure. The SaaS vendor will handle the hardware, upgrade and storage.
- Easy onboarding. With the support of your SaaS provider, adapting to a new and organized record-keeping system is much easier so you can focus on running your business.
Disadvantage of SaaS
- Businesses need to comply with the limits between them and the platform publisher. One subscription having too many businesses may not be allowed.
- Needs proper software management. Using SaaS may require a knowledgeable and skilled team of IT experts.
- Business owners or staff who may not be skilled in computer navigation may have difficulty exploring the platform.
Since most business owners need to file their financial documents in preparation for the tax season, it is necessary to comply with the IRAS guidelines when filing your tax returns. Here is a checklist to help you in preparing your business documents:
- You can issue a receipt instead of a tax invoice to your non-GST registered customer.
- You should keep financial documents and accounting records for five years
- GST-registered businesses must continue to issue tax invoices
- A printed receipt from a cash register can suffice but should indicate the description of goods and services.
- Credit card statements may not be enough to prove your expense claims. You may need to source other documents like entertainment, travel, or taxi receipts.
- Late payment or nonpayment of taxes is punishable through paying a 5% late payment penalty, GIRO termination or cancellation, and other legal actions from the IRAS.
No one would want to pay penalties or even to have their business permits canceled. An efficient way of record-keeping is necessary to be able to prepare your documents early on. Whether yours is a young startup or a flourishing business in Singapore, Finding the best way to document your transactions can help you succeed.
Set up a record system as soon as your business starts operating. Whether you want to file manually or you are looking to get a reliable SaaS, starting as soon as possible will help organize your operations. Choose a system that will help you manage your finances while also providing seamless updating of your financial records.
See to it that every transaction is recorded regularly. Never allow a day or two to pass by without listing or filing your transactions. This should be easily done when you have an accessible filing system to help you enter the data and make cross-references of the details across your organization.
Save more time and money by choosing the best way to organize your financial documents. Plan out how your documents should be stored. Should you decide to choose a SaaS provider, think not only of your current state but consider your plans for the business, as well. Assess the SaaS provider’s support, mobility, functionality, and reliability when it comes to managing your financial records.
Properly storing your business records will help you keep track of your business status. Your invoices and receipts will serve as reminders of what needs to be paid or collected, and what needs to be done to better manage your cash flow. By properly organizing your business receipts, you can legally support your expense claims, lower your tax obligations and avoid penalties and other government-imposed sanctions.