Next on the menu – Expenses Records
Running your business is not all about generating income, you need to keep a sharp eye on the expenses lest you bleed out.
Expenses for a business is basically the cash which the business pays out to anyone, in respect of generating goods and services for sale. A shrewd business owner will have their eye focused on the “bottom line”, as they are able to exert direct influence or budget accurately how much cash is flowing out of the business.
So if you are a doctor/medical practitioner…
Expenses would be subscription fees to your respective accreditation associations - SMA, SDA etc, purchase of medical consumables like bandages, swabs etc
If you are a service provider to your clients…
Expenses would be the rental charges for your workspace, transportation costs in respect of your work, telecommunication charges, salaries to staff etc
Remember to record expenses as and when they are incurred and not when payment is made. This is the frequently mentioned “Accrual” method of accounting (which gives you a better indication of your liabilities at any given point in time).
Are my expenses the company's expenses?
When recording expenses for your business, most entrepreneurs tend to muddle the difference between company expenses and personal expenses.
Personal expenses like meals (if you cannot justify it as an entertainment expense incurred for a client), transportation (if not incurred in the course of business operations), accommodation (if not incurred in the course of business operations) should not be recorded as business expenses.
This usually creates a sort of “timebomb” for the business, as the company is being deemed to be the “personal bank” of the entrepreneur. The explosion is most likely to occur when filing corporate income tax.
As allowable business expenses are deducted against the revenue to obtain your taxable income, should expenses be too excessive (due to personal expenses), IRAS might “shine a light” on your accounts!
I hope you found the above useful and if you have any questions, feel free to get in touch!
Download your FREE EXPENSES RECORDS TEMPLATE
Expenses are the payments made out by the company for business purposes
Personal expenses of the business owner IS NOT the expenses of the business
If you need professional assistance, feel free to contact us for a non-obligatory and complimentary consultation at vincentkoh[at]cypresspines.asia.