Singapore statutes require that companies comply with annual financial statement filing requirements. The primary purpose of these requirements is, of course, to report financial activity to the appropriate Singapore regulatory agencies and to give some level of protection to shareholders who have a right to view all company information. However, it doesn’t make sense to wait until annual filing deadlines approach to accumulate the information needed for reporting. Without monthly financial reports, the business is not getting the information it needs to make strategic business decisions as it operates throughout the year.
It may be tempting for smaller companies to bypass a monthly accounts review and financial statement preparation because of the time involved. However, it’s just as important for small companies, as it is for larger ones, to keep ledgers current and in order. By compiling financial transactions and preparing financial reports on a monthly basis, management has adequate time to review accounts and make necessary corrections.
Every Singapore company must maintain accounting records that comply with the Singapore Financial Reporting Standards and the Singapore Companies Act. Required annual financial statements include the Income Statement, the Balance Sheet and the Cash Flow Statement. In addition, Singapore companies must declare a revenue amount and report Estimated Chargeable Income (ECI) to the Inland Revenue Authority of Singapore within 3 months after the company’s financial year end.
Besides being ready for meeting annual reporting requirements, another excellent reason for completing monthly financial statements is that a company may be required to have its accounts audited if the business entity is a Singapore company that has shareholders or has annual revenue exceeding S$5 million. Audited accounts and financial statements are presented to Directors at the Annual General Meeting (AGM). The accounts must be updated within 6 months of the AGM, so keeping monthly statements ensures that timely account information is always available. The exception is that private companies are not required to hold an Annual General Meeting if shareholders with voting rights pass a resolution stating so.
Within one month of the AGM, the Singapore company must also file an Annual Return with the Accounting and Corporate Regulatory Authority (ACRA).
With the need to meet the annual filing requirements and the need for regular and updated financial information for effective and efficient decision making, routine monthly statement preparation always makes sense. Professional accounting services can prepare a full set of monthly accounts and management reports. These can be used to assess benchmarks developed to measure progress towards goals.
By keeping the monthly statements updated, managers can better track cash flow, make financial projections, identify account errors, manage Accounts Receivable and Accounts Payable and produce ad hoc management reports. Compiling monthly statement also provides assurance that financial transaction recording is not backlogged. When it’s time to prepare annual statements, they are simply a compilation of statements already prepared from complete accounts.
One of the common problems found in small to mid-sized companies that wait until the end of the year to prepare financial statements, is the need to catch up with transaction recording and then identify problems requiring further investigation. Problem resolution can be time consuming, when an auditor, accountant or bookkeeper must backtrack hundreds or thousands of transactions to ensure accounting record entries are correct.
By balancing and reviewing accounts each month, the end of the year reporting is much simpler and less time consuming because accounts are reconciled on a monthly basis.
