Start-ups & SMEs in Singapore: Why Accounting Services is Vital for their Survival

Start-Ups & SMEs In Singapore: Why Accounting Services Is Vital For Their Survival

Do you know that 90% of startups and SMEs in Singapore fail in their first 5 years of operation? To put this into perspective, poor accounting services and ineffective financial management stands out as some of the top reasons for the failure.

Singapore is known to have a highly competitive business environment, and for your start-up or SME to survive, you need a stellar plan to manage your money properly. Monitoring your cash inflow and outflow is very important, and one of the best ways to do so is hiring an accounting services provider to manage your funds properly.

Below are 5 key reasons why accounting services is vital for the survival of start-ups and SMEs in Singapore.

1. Helps You Prepare Financial Statements

There are different financial statements that every business should arm itself with. The top 3 that startups and SMEs must prepare to assess their financial position and make financial projections include:

a. Balance Sheet
A balance sheet provides an overview of the assets (what you own) and liabilities (what you owe) of your business as of a particular date. It plays a key role in making accurate computations of various rates of return and for assessing the capital structure of your business.

b. Profit and Loss Statement (P&L)
Also known as an income statement, a P&L provides a summary of the costs of sales, expenses, revenue, and gross margin incurred by your company over the course of a specified accounting period, usually monthly, quarterly, half-yearly, or annually. It is the most common financial statement for all businesses and a go-to report by potential investors.

c. Cash Flow Statement
A cash flow statement sums up the amount of cash inflow and outflow in your business in a detailed manner compared to a P&L statement. It demonstrates the extent to which a startup generates cash to fund its operating expenses and pay its debts.

Without the abovementioned financial statements, you’ll will likely be operating your business without knowing key information about debt, expenses, profitability, and revenue. This puts your start-up at a high risk of failing.

2. Provides an Accurate Portrayal of Your Financial Position

Do you want to know exactly how your start-up or SME performed monthly, quarterly, half-yearly, yearly or over a specified period of time? Accounting services is the most effective way to get an accurate picture of the currently financial position of your business. All you need to do is to carry out an in-depth assessment of your financial records and statements since they reflect your current standing as reflected by your periodic financial discussions and resulting operations.

You need accounting services because it helps you update your financial statements accurately and promptly. For instance, when you procure goods from a supplier but you miscalculate the amount paid for them, this could affect the actual value of your profits. However, a professional accountant can promptly help you identify such anomalies and guide your decisions when updating your financial statements. Therefore, without accounting services, it can be a daunting task for startups and SME owners to understand their business performance.

3. Supports Financial Planning for Growth

Once your start-up or SME kick starts its operations in Singapore, the obvious ultimate goal is to progressively grow and scale it in order to have a level playing field with other competitors in your sector and beyond.

The biggest question is: how do I grow my business?

The simplest answer is: You need capital!

To raise capital, you’ll need external funding. To effortlessly secure funding from external sources, you’ll need to present skillfully prepared financial records rigged with precise cash flow projections. This makes it easier for you to convince any lender or investor that your business will be profitable in the short-term or long-term.

That being said, having your accounting records in order is one of the most important things to do when you are seeking capital to grow your small business. Whether you want to secure a business loan from an investor or a line of credit from a local bank in Singapore, you’ll have to ensure that your financial documents have detailed information about your company’s financial health.

4. Reduces Tax Liability

Let’s face it! However much you’ll try, avoiding taxes in Singapore is something you can’t avoid, at least, legally. As such, it is important to streamline your accounting records in such a way that you can accurately project the amount of tax that your startup business should pay over a specific period. This not only keeps you informed about the right figures, but also financially prepares you for the subsequent tax period.

Any computation errors in your financial statements may lead to higher or lower amounts of tax payments. Either way, you are likely to lose money. On one hand, paying a tax amount that is lower than what you are legally obliged to may lead to grave legal consequences, such as hefty fines. On the other hand, paying a tax amount that is higher due to computation errors in your financial statements may cut down your profits.

5. Provides Reliable Information about Your Business Drivers

As an owner of a start-up or SME, you need to identify areas or factors that potentially facilitate the growth of your business. With a robust accounting system, you’ll will not find it challenging to sift key information on a number of business drivers that would help you answer key questions, such as:

  • Which categories of products are the most profitable?
  • Which categories of products are the least profitable?
  • How many daily, weekly, monthly or annual orders are you receiving?
  • How much capital do you need to venture into a new line of products/service?
  • Which target market produces the most customers to bring in sales?

Once you answer the above questions, you can set them against your current and projected financial position, which goes a long way in ascertaining whether or not your objectives are being fulfilled. If your startup objectives does not match your projections, the information will be instrumental in restructuring your accounting system.

Key Takeaways

  • A balance sheet, P&L statement, and cash flow statement provide key information about debt, expenses, profitability, and revenue of your business
  • Accounting services help you assess how your start-up or SME performed over a specified period of time (monthly, quarterly, half-yearly, and yearly).
  • Accounting services provide detailed information about your company’s financial health, which helps you raise capital.
  • Accounting services keeps you informed about the right tax figures, and financially prepares you for the subsequent tax period.
  • Accounting services matches your startup objectives with your financial projections

Looking for a dedicated accounting firm for your start-up or SME in Singapore? Choose Tianlong Services. Our expert accountants can provide you with the best service possible, while minimizing your accounting problems and maximizing your profits.


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