7 Simple Tips to Increase Cash flows
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Chasing after and collecting on overdue accounts is a frustrating experience for every small business owner, particularly during today’s economic environment when every dollar of revenue counts.  It’s certainly not the most pleasant part of being a business owner, but not handling overdue accounts in a timely, efficient manner will almost certainly endanger your business’s cash flow and, more importantly, its long-term survival.

 

At Janusys Consultants Pte Ltd, we’ve come up with 7 simple tips that, if followed, will increase your cash flow by helping you establish a sound and rational policy for reducing bad debts and collecting payments.

 

 

Tip #1     Set the Tone to Prevent Late Payments

Set up a standard policy for payment and make your customers aware of it before starting work. Certain types of businesses may require all or a portion of the payment up front, while others allow terms such as payment within 30 days after receipt of invoice (i.e., Net 30). Your invoices should also clearly state any surcharges for late payments. 

 

Tip #2     Qualify Your Customers and Be Careful with Credit

If you provide goods or services on credit, develop qualification standards that are specific, yet fair (e.g., a good credit history from a credit bureau or good bank references).  Put your credit policy in writing and make sure all employees understand it.  You should also have the policy readily available for review in your place of business, posted on your website, or available as a handout.

 

 

Tip #3     Maintain the Right Attitude

Your collections policy will do no good unless you enforce it. Do not shy away from a potential confrontation, but avoid provoking one as well. If you’ve met your obligation and a customer has not, you’re entirely in the right. 

 

 

Tip #4     When in Doubt, Don’t Assume

Don’t assume the customer is entirely wrong. Contact the past due account and ask politely for an explanation. It may be that the invoice has been lost, misplaced or is awaiting approval. A customer with cash flow problems may request extra time. How you proceed may be very situational.  Based on your experience with the customer, you may feel confident enough to allow extra time or installment payments. Make sure you and the customer clearly understand any compromise. Be flexible, but firm; and don’t hesitate to follow up.

 

 

Tip #5     Don’t Be A Wimp, Take Stronger Action

If your collection attempts fail, it may be time to turn to a collections firm or take legal action.  Terms for these services vary; they may require a fee and/or a percentage of the invoice amount, or a retainer. Your course of action will depend on the situation. You may decide the amount of the overdue account does not justify the cost and effort to collect. If so, write it off as a bad debt and move on. 

 

 

Tip #6     Don’t Make the Same Mistake Twice

For the most part, everyone deserves a second chance.  If a customer with a poor payment history approaches you about working for them or restoring credit, don’t immediately refuse unless you are absolutely certain the customer remains bad risks. Ask them to explain how their situation has changed and decide whether it makes sense to restore the relationship. If so, be firm and insist on stricter terms such as advance payment or cash-only.

 

 

Tip #7     Don’t Do It All By Yourself

The experts at Janusys Consultants Pte Ltd can help you establish a payment and credit policy that makes sense for your business, as well as strategies for collecting on past due accounts. Contact us for accounts receivable management as well as other small business advice online at http://www.janusys.com.sg.

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Must a company appoint a company secretary?
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Section 171 of the Companies Act requires a company to appoint a company secretary. The office of secretary shall not be left vacant for more than 6 months at any one time. Private limited companies need not appoint a professionally qualified secretary. However a secretary must still be appointed. Only public companies must appoint a professionally qualified secretary. Examples of professionally qualified secretaries are lawyers, accountants and chartered secretaries.

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Must a company have professionally qualified secretary?
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It depends. While every company must have a secretary, only a public company is required to appoint a secretary (or each secretary if more than one is appointed) who has the prescribed professional qualifications as set out in section 171 of the Companies Act (examples of these are persons who are lawyers, public accountants etc.) For all other companies, the directors need only appoint a secretary who appears to them "to have the requisite knowledge and experience to discharge the functions of a company". For more information, please refer to section 171 of the Companies Act.

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What will happen if my accounting records are incomplete? 
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The auditors will usually qualify the audit report; this means that they will report to the shareholders that the accounting records are incomplete. If the impact of the missing records is material (most records cannot be found), the auditor will state that they cannot express an opinion on whether the accounts presents a true and fair view of the financial position of the company.

For tax purposes, the IRAS may query the company on why the accounting records are incomplete. In addition, IRAS may discretionary charge an estimated tax amount on the company in a manner that they see fit, under the circumstances.

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Must a Company appoint a Company Auditor?

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Yes. However, a company which is exempted from audit requirements under the Companies Act is exempted from the requirement to appoint an auditor of the company.

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What is the current audit exemption criteria for Companies?

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New Audit Exemption Criteria (from 1 July 2015)

With the recent amendments to the Singapore Companies Act, a private company that used to require statutory audit may no longer need to do so. The revised audit exemption criteria introduces the concept of “small company” and “small group” classifications in determining if a company/group qualifies for audit exemption for a particular financial year (FY). The previous audit exemption criteria (before FY starting 1 July 2015) for EPCs no longer applies once the revised audit exemption criteria takes effect.

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The revised criterion stipulates that a company qualifies as a small company and is exempted from statutory audit if it is a private company and meets at least 2 out of the 3 following criteria:

Total revenue ≤ S$10 million;

Total assets ≤ S$10 million;

Number of employees is ≤ 50

 

A small group is one that meets at least 2 out of the 3 quantitative criteria mentioned above on a consolidated basis for the last two consecutive financial years.

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Does a Company need to prepare financial statements if it is exempted from audit? 

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If your company qualifies for audit exemption, it will still need to prepare unaudited financial statement in accordance to the Companies Act and Singapore Financial Reporting Standards for the purpose of IRAS  filing requirements to file your tax returns. The format is similar to an audited financial statement except that you do not need an auditor to sign off the report.

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We can help you to compile unaudited financial statements in accordance to IRAS filing requirements, and file your tax returns if desired. We are in constant and close touch with the latest changes and developments in accounting standards, statutory requirements, tax and GST matters impacting businesses’ compliance, which translates to the value-add we bring to our accounting assignments. 

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Why would small companies invest in voluntary audit?

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Smaller companies invest in audits for the same reasons as larger companies. Carrying an audit adds value and reliability to your financial affairs of the entity.   There are various advantages for smaller companies investing in an audit :

✓ The cost of the audit is often lower for small companies;

✓ Small companies who prepare their own accounts often need help in arriving at adjustments, such as those for obsolete stocks, bad debts and other provisions;

✓ As Small companies expand, and may find themselves subject to a statutory audit requirement – the first year and the subsequent years of an audit can be very trying if the accounts are not maintained in proper order;

✓ An audit is essential in financing negotiations, fund raising, take-over and buy-out

✓ The close involvement of the auditor provides companies with comfort when faced with tax and regulatory investigations.

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What are the compliance datelines for a Company to take note of?

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Auditor

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A company shall appoint an auditor within 3 months from the date of its incorporation, unless it is exempted from audit requirements under Section 205B, or 205C, of the Companies Act.

 

Taxation

 

Submission of Estimated Chargeable Income(ECI):                                                  within 3 months from financial year end

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Submission of Forms B, B1, P for current Year of Assessment:                                 by 15th April / current year

 

Submitting the Corporate Income Tax Return(Form C-S/C) for the current Year of Assessment is :                                                                                                                                                                             by 30th November / current year

 

Corporate Secretarial

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Section 175 – First Annual General Meeting (AGM): Within 6 months from date of incorporation.

 

Section 201 – Must lay the financial statements for the financial year at the AGM held within the timeframe for holding the AGM for that financial year i.e. within 4 months of the FYE(for listed company) or 6 months of the FYE(for any other company).

 

Section 197 – File annual returns within 5 months(if listed) or 7 months(if not listed) after FYE.

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Under what circumstances would a director be responsible for a Company's liabilities?

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For statutory obligations, the Companies Act in many cases provides that both the company as well as the officers in default (in most cases the directors) are responsible for carrying out the statutory obligations of the company under the Companies Act. This means the directors of the company may be prosecuted if these statutory obligations are not complied with. You need to look at the particular provision of the Companies Act for a more complete answer.

For civil liabilities,the officers of the company (including directors) are generally not liable for the civil liabilities of the company as each company has a separate corporate personality distinct from its members (or shareholders) and officers. However, there are certain exceptions.

 

Under the Companies Act, officers of the company (including directors) may be personally liable in the following circumstances

 

(a) signing, issuing or authorizing the signing or issuing of certain instruments in which the name of the company does not properly appear (see section 144(2)(c) of the Companies Act);

(b) where the officer contracted debts on behalf of the company where there is no reasonable or probable expectation of the debts being paid (see section 339(3), read with section 340, of the Companies Act);

(c) where the officer is guilty of fraudulent trading that is, being party to the carrying on of business by a company to defraud creditors or for a fraudulent purpose (see section 340 of the Companies Act); and

(d) where dividends are paid when there are no available profits out of which to pay them (see section 403(2) (b) of he Companies Act).

 

There may be other statutes under which a director may be liable for the civil liability of the company and you should seek professional advice for more information.

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If a Company has approved the directors' fees, when should the directors declare such directors' fees in their income tax return?

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Directors’ fees can only be approved at a general meeting. This means that the date of the general meeting determines when the directors have to report directors’ fees as their income. For example, if directors’ fees for year 2012 are approved at the general meeting in May 2013, then the directors have to report such income for the year 2013 (Year of Assessment 2014). This is regardless of whether the fees have been paid or not.

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