Tips for Best Business Practices

Implementing best business practices can offer numerous advantages to enable a company make sound business decisions. 

Apart from keeping accurate records of income and expenses which is a fundamental aspect of business accounting, best business practices focus on optimizing processes and workflows. As team members embrace this as a company culture, it would lead to increased efficiency. Furthermore, this can result in time and cost savings for the company.   

Here are some of the best business practices that can help you make smarter decisions on a daily basis for your business.  

1. Efficient Time Management 

Efficient time management stands out as a pivotal factor in ensuring the seamless operation of a business. By strategically organizing workloads, meeting deadlines, and making judicious use of time, businesses can maximize productivity and alleviate stress. 

2. Two-way Communication 

Clear and open communication plays a vital role in the triumph of any business. This extends to communication within the company and with external stakeholders such as customers and suppliers. Prioritizing effective communication establishes the groundwork for smooth processes across the entire business. 

3. Strategic Competition 

Embracing strategic competitive intelligence practices and closely monitoring competitors isn’t just a suggestion. It stands out as one of the most effective methods to secure a competitive advantage. Through this approach, businesses can discern industry trends and other influential factors. This would then ensure that they be well-positioned to respond to challenges and seize potential opportunities. 

4. Business Plan or Budget Preparation  

When starting a business, it’s crucial to develop a comprehensive business plan. This can help you estimate future expenses and determine the revenue or income required for your business’s survival. The plan should be revisited periodically as your business expands in subsequent years.  

A well-crafted business plan is especially vital when seeking external funding to increase your capital investment or when bringing in new business partners. It not only outlines your future financial needs but also lays out an effective growth strategy for your business. Additionally, your business plan can be instrumental in convincing key individuals to collaborate with you on specific projects.  

5. Opening a Business Bank Account  

Prioritizing the opening of a business bank account is an essential practice for business owners. Business bank accounts offer numerous benefits, including but not limited to:  

• Effortlessly monitors and validates business transactions  
• Distinguishes between personal and business transactions  
• Offers the option of a credit line that can address cash shortages  

Business owners can also choose to open various types of business accounts, including checking, credit card, savings, and merchant services accounts.  

6. Identifying Accounting Period and Accounting Method  

Identifying your accounting period is crucial in maintaining financial records for a specific duration. Businesses need to generate three important financial reports, including a Balance Sheet, a Profit and Loss Account, and a Cash Flow Statement for a comprehensive and accurate overview of the company’s financial performance and position.  

The P&L and cash flow statements are utilized to document financial records over a specified period, whether quarterly, semi-annually, or annually. However, the former only covers transactions that occur within the stated duration, ensuring accurate performance comparison across different accounting periods. On the other hand, a balance sheet provides an overview of your business’s assets (what you own) and liabilities (what you owe) on a specific date.  

Depending on your business’s nature, you can opt for two primary accounting methods:  

• Cash accounting – The cash accounting method is the most straightforward approach, enabling you to recognize and document revenue or income as soon as your small business receives the cash. Similarly, you can record expenses as soon as you settle your bills, which occurs when your invoices are paid.  In Singapore, cash accounting is available to small businesses whose annual sales do not exceed S$1 million. 
• Accrual accounting – Under the accrual accounting method, you only record revenues or income when they are earned and expenses as soon as you receive the invoice. It’s worth noting that you can record revenues in your books regardless of when they are actually paid, as long as they match the periods in which they were earned.   

Accrual accounting promotes better accuracy and a better picture of a company’s true financial status. This method is based on the matching principle, which matches the timing of recognizing revenue and expense. Generally Accepted Accounting Principles (GAAP) require accrual basis accounting.  

7. Best Accounting Software to Monitor Expenses  

Small or large, every business incurs expenses that are crucial to its operations. As a business owner, it is not advisable to rely on mental calculations of expenses as they may not be accurate in the long term. Instead, it is recommended to use suitable accounting software that can help you keep an updated record of all business expenses, which can be easily accessed when required. This can be done by saving and recording expenses on a daily or weekly basis.  

As your business grows, daily accounting and bookkeeping tasks may become more challenging if you do not implement the use of cloud-based expense technologies or a solid accounting software system, such as Xero. To determine the most efficient accounting software that can scale with your business in the long term, it is important to assess a number of leading software systems and technologies available in Singapore.  

8. Automation of Payments and Invoicing  

Small businesses that thrive on automated payments achieve success by leveraging accounting technology to the fullest. It’s crucial to prioritize the use of accounting software to automate invoicing processes. This includes sending out bills and follow-up reminders on a routine basis to prevent a buildup of outstanding invoices. One effective strategy is to adopt e-Payments and e-Invoicing to enroll recurring bills from regular customers, thus reducing past due bills and unaccounted revenue.  

Moreover, creating a feasible schedule for paying bills can boost your cash flow by enabling you to pay your vendors early. To maintain a steady cash flow, you can consider offering discounts to customers who pay early while revoking credit terms for those with bad credit.  

9. Outsourcing of Tax Filing Services   

For businesses in Singapore, fulfilling tax obligations is a complex accounting task. Annually, you must submit the necessary financial statements alongside your tax returns. Failure to do so can lead to legal consequences. To gain a better understanding of tax filing requirements and prevent any legal issues, consider engaging an experienced business accountant’s tax services. He can guide you in proper tax planning. Additionally, setting up a separate account to manage your tax liabilities will aid in prompt and seamless tax payments.  

In a nutshell:  

• A business plan projects the anticipated costs and income that must be generated in the future.  
• Having a dedicated business bank account facilitates easy tracking and verification of all business transactions.  
• The accounting period enables you to keep financial records for a designated duration.  
• Using appropriate accounting software such as Xero maintains an up-to-date record of your business expenditures. It automates invoicing procedures by sending bills and follow-up reminders on a regular basis.  
• To prevent legal consequences resulting from tax filing failures, engage the tax services of a qualified business accountant to handle your tax filings.  

Looking to outsource accounting, bookkeeping services and payroll services? Please free to contact us at +65 81135989.