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BY NAVISTEPS PUBLISHED JANUARY 29, 2021 EXPENSE MANAGEMENT | ACCOUNTING | PARTNERSHIP

7 reasons why good record keeping is

important for startups and SMEs

7 reasons why record keeping is important for startups and small businesses

Record keeping is a process that most organisations cannot ignore - be it in the

private or public sector. But what is record keeping and why is it important?

What is Record Keeping

Record keeping is the process of recording transactions and events in an
accounting system. Since the principles of accounting rely on accurate and
thorough records, record keeping is one of the basic foundations of
accounting.

Importance of Record Keeping

So why is record keeping important and why should I care about it as a
business owner?

1. Prevent fraud or the!

Having a fraud prevention process by keeping detailed records of your

business expenses and transactions is essential for your company - be it as a
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 startup, small and medium enterprise (SME) or large enterprise. Having an
overview of your business cash flow can allow you to understand how much
cash is coming in and out of your business and produce an accurate financial
statement for accounting and auditing purposes.

2. Pay your taxes

With documentation and good record keeping practices, you can pay your
taxes accurately, on time, and save on penalties!

In Singapore, if a tax payment is not received before the due date, a 5% late
payment penalty will be imposed. Additional penalties of 1% per month may
be imposed if the tax remains unpaid 60 days a!er the imposition of the 5%
penalty. The 1% additional penalty will be imposed for each completed month
that the tax remains unpaid, up to a maximum of 12% of the unpaid tax.

As a startup or SME business owner, every dollar counts and it is important to

stay prudent on such financial matters.

3. Comply with laws

Good record-keeping practices are essential because it helps companies

comply with various laws in various countries. Companies should establish
good accounting and expense management systems to drive good record
keeping practices and retrieve or file records easily.

Increasingly, accounting and expense management systems have partnered or

integrated with each other to ensure seamless data synchronization and
provide accounting-friendly solutions that are a"ordable and user-friendly for
startups and SMEs.

4. Manage your cash flow

Cash is king when it comes to the financial management of a growing

company. As evidently portrayed through COVID-19, maintaining a healthy
cash flow that can sustain against pandemics and other unforeseen
circumstances is very important if you want your company to survive in the
long run.

This is where record keeping comes in. It helps you to identify and understand
where your dollars are coming in and going out from and have an accurate
projection of the health of your company’s finances.

5. Make business decisions

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 Every dollar within a startup and SME is very precious and should be well-
spent. Understanding where your dollars are coming from and headed to is
crucial in helping you better understand and make data-driven business
decisions.

Expense management software is a digital cloud solution that can help you
breakdown your business expenses and retrieve insights on your business
spending. As a startup or SME owner, you would want to save as much time
and money as possible and focus on other important business tasks to drive
profitability and growth.

6. Save time and costs

When you need to file reports and conduct financial year end closing, a good
record keeping system can allow you to save time and money as you do not
have to panic and go through a last-minute rush to meet deadlines or hire
someone last minute to handle it.

Digitising your documents can reduce the hassle and ensure you stay
compliant with regulations and deadlines. By putting your documents and
records online, you can increase operational e"iciency, reduce transportation
and storage costs, search records faster and easily access records from multiple
digital devices.

Otherwise, you can also consider hiring a corporate secretary. It is possible for
startups and SMEs to do so as there are a"ordable corporate secretary services
available in the market that can be less expensive than hiring an additional
headcount!

7. Prevent loopholes and oversight

Record keeping can help to justify and explain why the company management
made certain decisions. Cash flow problems are also found to be one of the
leading causes of failure for businesses and having consolidating records will
enable businesses to make better decisions. With your business survival at
stake, the possibility of having loopholes and oversight cannot be ignored by
business owners and precautions should be taken.

Record Keeping Requirements

Di"erent countries have di"erent regulations depending on the local laws
stipulated by the government. It is important for you to do substantive
research and ensure that your company’s current record keeping system is
compliant with the country regulatory requirements.
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 In Singapore, the Inland Revenue Authority of Singapore (IRAS) has stated a set
of requirements on the proper records that companies must maintain and
duration which companies should retain their records on their website. Certain
documents are also required for tax deductions and tax record purposes.

Ways to Maintain Good Record Keeping

Now that we have understood the importance of record keeping, how can
startups and SMEs instil a smooth and compliant record keeping system?

1. Organise your records

Records should be well-organised and segmented and clear instructions should

be given such that employees have a clear idea on how they can input
company records. For example, expenses can be labelled upon submission
such that the total expenses across the entire company can be consolidated
and filed into individual categories.

2. Creating a digitalised system

Digitalisation is something that should be familiar to most as talks of Industry

4.0 (the adoption of computers and automation and enhance it with smart and
autonomous systems fueled by data and machine learning) had begun since
2015 and we have been moving towards Industry 5.0 (where humans will work
alongside robots and machines) since 2018.

With the rapid advancement in technology and systems, many companies out
there are o"ering new ways to move traditional processes to digitalised online
systems in which it includes expense management.

Simply go online, search and compare for what you need, and you can start
digitalising your processes almost immediately!

3. Outsource the work

Startups and SMEs have a small headcount and the existing sta" may not have
the knowledge, expertise or capacity to perform record keeping tasks timely
and accurately. Outsourcing is a good way to get work done professionally and
at an a"ordable cost.

Focus on what you are good at and outsource the rest. Not good at accounting
and record keeping? Get someone to do it instead. Use your time and energy
wisely by concentrating on business activities that can help you drive
productivity and profitability better.
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 No use spending hours trying to figure out how to process your records when
you can easily hire someone to do it professionally at a fraction of the cost.

Start Having Good Record Keeping Practices

Now that we have gone through the importance of record keeping and
provided you with recommendations on how to do so, we hope that you will
remember to stay vigilant and ensure that your records are properly
maintained and retained!

If you are a startup or SME owner and have any tips and advice on how
companies can maintain good record keeping, let us know and we will update
the article accordingly. Let’s grow and build a holistic business ecosystem
together.

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