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In the modern business landscape, the importance of meticulous record-keeping cannot be overstated. It is the backbone of financial health, legal compliance, and strategic decision-making.
Effective business record management safeguards against potential audits or legal issues and provides invaluable insights into your company’s operations, helping to streamline processes and improve overall efficiency.
From tracking expenses and managing invoices to the practices you put in place for handling your business records, the practices you put in place for handling your business records can significantly impact your organisation’s success.
What is Record Keeping?
Record keeping is the systematic process of collecting, organising, storing, and maintaining accurate financial documents that reflect a company’s transactions, activities, and operations. These business records include invoices, receipts, vouchers, bank statements, and other supporting documents essential for legal compliance and tax reporting.
What Are the Benefits of Record Keeping?
There are several prominent advantages of maintaining accurate and thorough records for a business in Singapore. We explore them below:
### Make Better Business Decisions
Accurate and reliable record-keeping provides a clear overview of the financial health of your business. With updated company records, you can easily track your income, expenses, and cash flow. This information is crucial in making informed decisions about budgeting, investing, and managing resources effectively.
### Awareness of Company’s Financial Status
By regularly keeping track of your company’s financial records, you can have a clear understanding of its current financial status. This includes your profits, losses, expenses, and cash flow.
With this information, you can identify areas where you may need to cut costs or increase revenue. Additionally, having a thorough understanding of your finances can help you make more informed decisions when it comes to budgeting and resource allocation.
### Stay Compliant and Avoid Penalties
Companies that maintain proper record-keeping in accordance with local legislation can avoid incurring penalties such as a fine or jail term.
### Facilitate Tax Reporting and Audits
Accurate record-keeping also makes it easier for businesses to report their taxes and undergo audits by tax authorities. By having all financial documents properly organised and stored, companies can easily provide the necessary information and evidence to support their tax filings. This reduces the risk of facing penalties or additional taxes due to incorrect reporting.
What Are the IRAS Record-Keeping Requirements?
The Inland Revenue Authority of Singapore (IRAS) mandates that companies must keep records for a minimum of 5 years from the relevant Year of Assessment (YA). It must retain records such as bank statements and source documents to explain transactions related to its income, purchases, and business expenses. Accounting records and schedules summarising business transactions must also be kept systematically.
Note that GST-registered businesses must also maintain proper business and accounting records for at least 5 years to support their GST declarations. Companies that are unable to provide sufficient documents to support their input tax claim will have their claims disallowed. Penalties may also be imposed.
Record Keeping Checklist:
| Record Type | Documents Required | GST-Registered Business | Non-GST Registered Business |
| — | — | — | — |
| Income Records | Credit notes for returned goods | Required | Required |
| Income Records | Issued tax invoice | Required | Not Required |
| Income Records | Exports-related documents | Required | Required |
| Income Records | Evidence of payment receipt | Required | Not Required |
| Income Records | Cash register tapes or invoices issued or serially numbered receipts issued | Required | Not Required |
| Income Records | Rental agreement signed by landlord and tenant | Required | Required |
| Business Expense Records | Invoice or receipt received | Required | Required |
| Business Expense Records | Employer’s CPF contributions | Required | Required |
| Business Expense Records | Payment evidence | Required | Not Required |
| Business Expense Records | Payment vouchers for employee remuneration | Required | Required |
| Business Expense Records | Payment made to individuals or companies for services provided and the relevant contracts or agreements on the provision of services | Required | Required |
| Purchase Records | Documents related to imports | Required | Required |
| Purchase Records | Payment evidence | Required | Not Required |
| Purchase Records | Tax invoices, receipts, or invoices received | Required | Required |
| Other Records (For GST) | Removal of goods from customs-licensed warehouse | Required | Not Required |
| Other Records (For GST) | Disposal of business goods | Required | Not Required |
| Other Records (For GST) | Business goods put to non-business use | Required | Not Required |
| Accounting Records and Schedules | Stock list | Required | Required |
| Accounting Records and Schedules | General ledgers | Required | Required |
| Accounting Records and Schedules | Balance Sheet, Profit and Loss statement | Required | Required |
| Accounting Records and Schedules | Purchase record book or listing | Required | Required |
| Accounting Records and Schedules | Sales record book or listing | Required | Required |
| Accounting Records and Schedules | GST account summary of input and output tax, including GST refunded to tourists | Required | Not Required |
| Accounting Records and Schedules | Bank Statement | Bank statements with separate bank accounts for personal and business purposes | Not Required | Not Required |
Record-Keeping for Struck-Off Companies
Companies that have been struck off and dissolved must ensure that an individual who was once an officer of the company right before its dissolution retains all of its books and papers for at least 5 years after the date on which it was dissolved.
Record-Keeping for Wound-Up Companies
A company that is being wound up must see that its liquidator ensures all of its books and papers are retained for at least 5 years after the date of dissolution.
Non-Compliance With Record Keeping Requirements
A company that fails to comply with record-keeping requirements is considered offending under the Singapore Income Tax Act 1947 and the Goods and Services Tax Act 1993. IRAS may proceed to:
1. Use its best judgment to determine the revenue earned
2. Disallow expense claims, capital allowances of GST input tax claims, where applicable, and/or
3. Impose financial penalties of up to S$5,500, and if payment is defaulted upon, imprisonment of up to 6 months
How to Achieve Good Record Keeping Practices
There are a few methods that companies in Singapore can adopt to maintain proper record-keeping successfully. They are:
### Use the Right Accounting Software
It is crucial to use accounting software that supports proper record keeping. Companies are encouraged to use software listed on IRAS’ Accounting Software Register Plus (ASR+). The software enables companies to handle daily business operations and transactions digitally and meet their tax compliance obligations easily.
### Outsource to a 3rd-Party Provider
Alternatively, companies lacking the in-house support to manage their record-keeping needs should consider outsourcing the process to a 3rd-party provider like InCorp. Our team uses robust accounting software with the expertise of our professionals to help clients from various industries handle their record-keeping with ease.
Meet Your Record-Keeping Compliance Obligations With InCorp
At InCorp, our team has helped many companies in Singapore and beyond manage their record-keeping needs seamlessly. We use a compliant record-keeping system that combines human expertise and software technology. Now, you can keep proper records while focusing on your company’s core revenue-generating activities!
FAQs about Record Keeping in Singapore
Q: What is record keeping in business?
A: Record keeping is the systematic process of collecting, organising, storing, and maintaining accurate financial documents that reflect a company’s transactions, activities, and operations.
Q: Why is record keeping important?
A: Record keeping is vital for businesses of all sizes, as it provides a structured way to track financial and operational information. It helps companies stay organised, comply with legal and regulatory requirements, and make informed business decisions.
Q: How long must records be kept in Singapore?
A: According to IRAS, businesses must maintain record keeping for 5 years at least.
