Financial year end checklist for small business owners

Most business owners follow the calendar year and choose 31 December as their financial year end (“FYE”) for simplicity and convenience. Larger corporations with parent companies often adopt the same FYE as their parent company for ease of group reporting. Regardless of the FYE, business owners are keen to know how well the company has done during the last FYE and to ensure that the relevant statutory filings are made.

Our checklist helps business owners keep track of what needs to be done at the year-end, so that they may focus on revenue generating activities. 

At the end of the financial year, it is time to take stock of the company’s current financial situation, as compared to previous years.

1. Finalise your company’s accounts

Generating the appropriate ledgers, reports and schedules to finalise your company’s accounts can be a time-consuming process. A growing number of small business owners are opting to record their business transactions in-house instead of outsourcing this work.

As more businesses embrace digital solutions, cloud based accounting systems are popular as it can provide a seamless and streamlined business process across varying platforms, achieving scalability, flexibility and cost savings.

To ensure the timely finalisation of year-end accounts and accurate filing, businesses can turn to accounting advisors at the end of their financial year to ensure completeness of accounting entries for the FYE.

Taking stock on receivables from customers, collecting payment on a timely basis should also be a priority of businesses. A higher accounts receivable turnover ratio indicates that the company is getting paid quickly for work that has already been completed.

2. Prepare financial statements 

To interpret the accounting records, companies prepare a set of financial statements that meet the local statutory standards, such as the Singapore Financial Reporting Standards (SFRS). The financial statements show a snapshot of the company’s financial health and performance at the FYE. The report comprises key statements such as Financial Position, Comprehensive Income (commonly known as the profit and loss statement), Cash Flow, and Changes in Equity, with accompanying disclosures detailing relevant key accounts.

Companies are typically required to have their financial statements audited unless they qualify as a small company or group, by meeting two out of the following three criteria:

• Total revenue ≤ S$10 million
• Total assets ≤ S$10 million
• Number of employees is ≤ 50

Given the complexity of the task, companies may seek expert help to draft the financial statements, as professional accountants are kept abreast of the latest financial reporting standards, ensuring accuracy in the financial statements.

Cash flow is always a top concern for every business, as business owners look to generate more cash inflows rather than outflows. It is a good measure of a company’s profitability and longevity

3. Estimate Chargeable Income (ECI) 

Within three months of the company’s financial year end, the estimated taxable profits for the Year of Assessment (YA) are required to be reported to the Inland Revenue Authority of Singapore (“IRAS”).

Filing the ECI allows the company to be aware of the final tax payable, plan its cash flow resources ahead, and some companies may choose to apply for an installment plan before the final tax assessment.

IRAS encourages companies to file their ECI as early as possible, offering the incentive of obtaining a greater number of instalment plans.

Based on the management accounts, the provisional income tax is calculated after deducting tax-allowable expenses for the YA. A tax expert would be able to identify the relevant tax-allowable expenses and introduce any new grants and rebates as announced by the Budget for the year.

Some companies may require more time to complete the preparation of their financial statements and hold their AGM. They may seek help from their secretarial agents to file an extension of time with ACRA to avoid penalties that may be imposed for late filing.

4. Holding Annual General Meeting (AGM) & Filing of Annual Returns (AR) 

After the completion of the unaudited or audited financial statements, these report are approved by the Board of Directors before being circulated to the shareholders of the company for their review. After the notice period, the AGM is held for the shareholders to vote on matters and approve the financial performance of the company.

The relevant deadlines to hold the company’s AGM and file its AR with the Accounting and Corporate Regulatory Authority (“ACRA”) are as follows:

Some exemptions that smaller companies can consider include dispensing with holding an AGM or applying for an exemption from preparing financial statements for dormant relevant companies. Such exemptions are subject to criteria as per the Companies Act.

Engaging a corporate secretarial service provider not only ensures that the company is in compliance with the latest statutory requirements but also allows them to guide the Board on best practices in accounting, finance and compliance. This helps the business stay agile and make decisions efficiently.

Having a better understanding of deductible and non-deductible expenses ahead of the year helps companies plan their budget for the year, especially for big ticket items such as renovations, furniture and fittings.

5. Compute and file tax returns to IRAS

November is the corporate tax season when companies are required to file their statutory corporate tax computations for the preceding YA. A qualified tax advisor  can help compute the tax payable and identify eligible tax deductions, exemptions and grants that will help lower your tax liabilities.

If you own a sole-proprietorship or partnership, the business tax follows the individual tax filing deadline of 15 April of the preceding YA. It’s important to identify allowable business expenses for tax deductions to avoid errors in your personal tax filing.

Overall, there are two main requisites that companies need to fulfil before business owners can meet the annual compulsory filing requirements of ACRA and IRAS: completing and finalising the accounts for the year, and computing and filing tax returns to IRAS.

For many business owners, their expertise lies in revenue-generating activities, and they may not have the bandwidth to work on tedious accounting records. As a result, many businesses choose to outsource their accounting needs to professional accountants.

At RSM Stone Forest, our Accounting Services Division, AccountServe, offers more than traditional accounting. We provide expertise as accountants, finance managers, and business advisors. In addition to handling routine accounting tasks, we are strategically positioned to support the financial management and compliance needs of businesses of all sizes in Singapore.

If you would like to learn more about how AccountServe can help, please contact us.