Essential Business Tips to Overcome a Slow Economy

Essential Tips to Overcome

a Slow Economy

Programme

14:00 - Registration

14:20 - Sharing Available Government Assist

14.40 - How to Manage Late Payment

15.00 - Managing Your Tax Computation

15.20 - Questions and Answers Session

15.40 - Tea & Coffee, Networking Time

How to Formulate Strategies and Actions Plans for Financial Stability

By Choy Mun KitBusiness AdvisorSME Centre @ Northwest

Empowering SMEs – Partner in Capacity & Capability Development

1. Introduction of SME Centre@Northwest

2. About Financial Statements

3. Formulate Strategies and Actions Plans for

Financial Stability

4. Government Assistance Schemes

For Today

Introduction

Responsible for helping Singapore enterprises grow and building trust in Singapore products and services

Founded in 1932 as a national body representing manufacturing companies

Provides SME with easy access to Business Advisory

Introduction

About Financial Statements

� The Power of Financial Statements

� What are Financial Statements?

� How to Analyse and Interpret Financial Statements

The Power of Financial Statements

Source: http://www.accounting-degree.org/scandals/

What are the Financial Statements?

3 Basic Financial Statements

� Balance Sheet

� Income Statement

� Cash Flow Statement

Financial Statements – Balance Sheet

Balance Sheet (Statement of Financial Position)� Track Spending and Earnings.

� Shows what your company owns and what it owes.

– Assets are any items your business owns.– Liabilities are payments your business needs to make.– Equity is the amount your business's shareholders own.

� Assets are ideally equal to, or balance out, the Liabilities and theEquity.


Balance Sheet (Statement of Financial Position)� Keep business owners informed about Company's Financial

Standing.

� If the ratio of your business's assets to liabilities is less than 1 to 1,your company is in danger of going bankrupt, and you'll have to makesome strategic moves to improve its financial health.

� Many business owners fail to recognize their companies are introuble until it's too late. This is because some business ownersaren't examining their balance sheets.


Balance Sheet (Statement of Financial Position)� Let banks know if the business qualifies for additional Loans or

Credit.

� Current and Potential Investors better understand where their fundingwill go and what they can expect to receive in the future.

� Investors appreciate businesses with high cash assets, as thisinsinuates a company will grow and prosper.


Sample of Balance Sheet

Financial Statements – Income Statement

Income Statement (Profit & Loss Statement)� Shows the profitability of a company during the time interval specified

in its heading.

� Income statement shows revenues, expenses, gains, and losses; itdoes not show cash receipts (money you receive) nor cashdisbursements (money you pay out).


Income Statement (Profit & Loss Statement)� If a company was not able to operate profitably—the bottom line of

the income statement indicates a net loss—a banker/lender/creditormay be hesitant to extend additional credit to the company.

� On the other hand, a company that has operated profitably—thebottom line of the income statement indicates a net income—demonstrated its ability to use borrowed and invested funds in asuccessful manner.

� A company's ability to operate profitably is important to currentlenders and investors, potential lenders and investors, companymanagement, competitors, government agencies, labour unions, andothers

http://www.accountingcoach.com/terms/N/net-loss

http://www.accountingcoach.com/terms/N/net-income


Sample of Income Statement

Financial Statements – Cash Flow Statement

Cash Flow Statement � Cash Flow indicates the Health of the Company.

� Sources : Payments from customers, Receipt of a loan, Monetaryinfusion from an investor, or Interest on savings or investments.

� Make your business run: Expenses like stock or raw materials,employees, rent and other operating expenses.

� Positive cash flow means your business is running smoothly. Highpositive cash flow is even better and will allow you to make newinvestments (hire employees, open another location) and furthergrow your business.


Cash Flow Statement � Positive cash flow is driven by two things:

Organization and Planning� Begin by looking at the cash you have in hand.

This could be money you’ve invested in the business, cash in the business bank account, loans that you’ve received, or an investment from a partner.


Cash Flow Statement � Make a list of all the one-time start-up expenses that you have paid

or expect to pay.

Think incorporation fees, legal and accounting, licenses and permits,construction or remodeling, security deposit on a rental agreement orpurchasing property, marketing materials and signage, initial inventory orsupplies, fixtures like cash registers, office supplies, furniture, equipment,etc.


Cash Flow Statement � Next, determine your monthly expected cash sources.

These can be projected sales, loans that are coming in at a certain date,investments from partners or investments.

� If you’re a new business you might want to project salesconservatively (better to outperform and have a better inflow of cashthan you thought).

� If you’ve already started your business or are purchasing a businessfrom someone else, you have a distinct advantage: Sales history.

� History can’t predict the future, but it can paint a decent picture ofwhat the future looks like and what business changes you might needto make.


Cash Flow Statement� Finally, assess your monthly expenses.

This can be a bit tricky because it’s easy to overlook things and get asurprise you really don’t want. Monthly expenses to factor in can includerent or mortgage, insurance, advertising, marketing, website hosting,travel, utilities, payroll, inventory, taxes, loan payments, working capital,and last but not least paying yourself!


Cash Flow Statement � The most important thing about this process is being honest and

objective.

Do your homework and get accurate estimates of costs. If costs lookhigh, simply projecting more sales when you don't have the capacity toclose those sales won’t fill that proverbial water tank.

So perhaps you tighten the outflow. What can you reduce or cut? Forexample, if you're launching a boutique, maybe you rent that 500 squarefoot space instead of the open, airy 1,000 square foot one.


Sample of Cash Flow Statement

Financial Management

• What you cannot Measure, you cannot Manage.

• Unless you Measure, you cannot manage for Continual Improvements if you don't know what is getting better and what isn't.

• Hence, the need to Establish a tracking mechanism by incorporating safety markers on the business reporting system ensures the business stays on track.

(Source: https://smetoolkit.abs.org.sg/Public/ResourceLib.aspx)

SPRING Toolkits for Success

Financial Management Toolkit

Financial Management Toolkit

RSM in Singapore is a member of the RSM International network of independent public accounting firms providing assurance, tax and business advisory services. We serve internationally active businesses and companies aspiring to go global.

http://www.rsm.global/

Financial Management Toolkit – Financial Modeling

Financial Statements – Ratios

Formulate Strategies & Actions Plans for Financial Stability

4 Steps to a Stronger Balance Sheet1. Determine the Current Situation (Starting Point)

2. Determine the Target Situation

3. Examine the resources

4. Close the gap

4 Steps to a Stronger Balance Sheet

1. Determine the Current Situation (Starting Point). � What is the starting point?

� It is important you have your financial statements as a

starting point.

� For example: The latest available financial statement


2. Determine the Target Situation.� What do you want to achieve?

� It is important to know what you want. You can consider

preparing a business plan

� For example: Double the revenue while increasing the

expenses by 20%


3. Examine the Resources.� What resources do you have to achieve your target?

� It is important to consider all the resources at your

disposal. This includes credit facilities and people you

can collaborate with

� For example: Govt Funding, Self Funding, Motivated

Staff.


4. Close the Gap.� What are the steps you can take to achieve the target?

� It is important you develop steps to move towards your

target and a time frame that you want to work with.

� For example: Build up a sales plan on commission basis,

Boost marketing efforts. Enhance accounting capability to

be able to track progress

Government Assistance Schemes

Enhanced –Innovation & Capability Voucher (ICV)

ICV - Criteria

All local SMEs can apply for ICV if they meet the following criteria:

1. Registered and operating in Singapore

2. Have a minimum of 30% local shareholding

3. Have group annual turnover of not more than $100 million OR group employment size of not more than 200 employees

Innovation and Capability Voucher (ICV)

$5,000 Voucher

To encourage SMEs to take the first step towards capability upgradingEnhanced from 1 Mar

Consultancy Projects

Up to 2 vouchers for each capability area• Innovation• Productivity• Human Resources• Financial Management

Productivity Solutions

Up to 2 vouchers in total• Integrated Solutions

SME may apply for up to 8 vouchers

Paid to Participating Service Providers

Reimbursed directly to SME.

ICV – Consultancy Projects

Consultancy Projects - Supportable Services

Innovation• Technology Feasibility Study• IP Business Diagnostic• IP Legal Diagnostic • Customer Insights

Human Resources• Recruitment & Selection• Compensation & Benefits• Performance Management• Learning & Development

Productivity• Quality Management (ISO 9001: 2015)• Environmental Management

(ISO 14001: 2015)• Occupational Health & Safety Management

(OHSAS 18001)• Business Diagnosis• Service Improvement

Financial Management• Planning & Budgeting• Cash-flow & Working Capital Management• Financial Assessment and Planning for

Growth

ICV – Consultancy Projects

ICV – Productivity Solutions

Supportable Categories Examples of Supportable Items

Integrated Solutions(1st April 2016)

1. Appointment Scheduling and Booking System2. Asset / Personnel Tracking and Identification System3. Clinic Management System4. Customer Relationship Management System5. Document Management and Mobile Access System6. Enhanced POS System7. E-Procurement Management System8. Fleet Management System9. HR E-scheduling System10.Inventory Management System11.Mobile Ordering and Payment System12.Queue Management System13.School Management System14.Wireless Paging System

How to apply

Step 1Apply online via the ICV Online Portal.

Documents Required for Productivity Solutions Applications

1. ACRA Business Profile dated within 6 months from the date of ICV application.

2. Quotation of the listed solution

All applications will be processed within 6 to 8 weeks upon submission of all required documentations.

Successful applicants will be notified via email.

https://apps2.spring.gov.sg/ICV/icvmainpage.aspx

Capability Development Grant (CDG)


Criteria

� Registered and operating in Singapore� 30% Local shareholding� Have group annual sales turnover of not more than $100

million OR� Group employee size of not more than 200 employees

Benefits

� Up to 70% grant for the qualifying cost


*Includes Manpower related costs, Consultancy, Training, Equipment, Software, Intellectual Property Rights

Online Portal ApplicationFrom 1 April 2015Simplified application process for projects with CDG support of $30,000 or less:- 5 easy to answer guiding questions

CDG – Financial Management

Enable SMEs to manage and leverage their financial resources to address their business and growth needs by improving financial performance and financial growth

Develop strong financial resiliency

Improve financial management capabilities

Supportable Activities

• Develop financial framework and strategy to validate and enhance expansion plans

• Develop measures and controls and implement corporate financial systems to meet financial challenges and enhance financial resilience

• Develop framework to support inorganic growth, through mergers and acquisitions, and fundraising

Deliverables

• Detailed final report• Implementation roadmap with

actionable steps for SME


Hai’s Pte LtdSpecializes in the production and distribution of well-known instant pastes such as curry mix, chili and othersauces to hotels, restaurants and food caterers

Tapped on CDG support to develop financial strategies and action plans to establish financial and business plans

for expansion

Financial performance review and

analysis

Revamp of internal

operations and systems

Better manage fluctuation in raw material costs

Created a more robust pricing model for products

Revenue growth by more than 10%

Project Outcomes


Project Details – Please elaborate on the following in 150 – 200 words each.

1. Please provide information about your company.

2. Please describe your company’s plans in the next 1-3 years.

3. Please elaborate on the reasons for embarking on the project.

4. Please describe the scope and deliverables of the project.

5. Please describe the expected outcomes of the project

Contact Us

Woodlands Civic Centre900 South Woodlands Drive, #06-01,Singapore 730900

Tel (号码) : 6248 5518Email (电邮): [email protected]

西北中小企业中心

• Strictly by appointment

mailto:[email protected]

MANAGING

LATEPAYMENTS

1. Status of payments in APAC and Singapore

2. Why la te payments?

3. How does la te payment affect your business?

4. Learn best pract ices in get t ing paid on - t ime (or ear l ier ! )

5. F inancing opt ions

98% experienced late payment from their customers

33daysAverage domestic payment terms

47% of the total value of invoices being paid late

88%

32days

43%

APAC SG

46days Average DSO41days

3431 44.2% 40

42

41.7%30

46.8% 40

Payment Term(days)

Late Payment DSO(days)

ManufacturingWholesale / Retail Distribution Services

47%Customer’s liquidity issues, due to challenging business conditions

35%Customers’ intentional delay of invoice payment for the

purpose of financing their businesses

27%Dispute over quality of goods delivered or service provided

23%Complex payment procedure

17%Incorrect information on invoice

LATE PAYMENT IS THE SILENT KILLER of MODERN BUSINESS

1. Unable to pay your operational expenses

2. Insufficient cash flow to grow business (even

when opportunity ar ises)

3. Valuable time is spent chasing payments

4. Affects your personal finance

5. Unable to keep the lights on

HOW TO MANAGE

LATEPAYMENTS?

1. BEFORE A SALE IS MADE

2. DELIVERY

3. INVOICE

4. COLLECTION

5. MANAGEMENT PLAN

KYC –Credit assess

potential buyer

1. BEFORE A SALE IS MADE

Agree payment schedule & term

in advance

Minimise potential dispute

Payment process is fully

understood

Avoid concentration

risk

Goods / services are delivered early or on time and according

to the agreed requirements

2. DELIVERY

Obtain an official document confirmation of delivery

acceptance

3. INVOICE

Submit invoice promptly

to the correct personnel / department

Invoice contains complete and correct information

Offer a discount for early payment

Regular contact with your customer

Identify any problem early

4. COLLECTION

Data is easily accessible

to be alerted of any upcoming payment or late payments

Do not threaten the client or get

angry

Collection process is in place

Regularly forecast your cash flow

5. MANAGEMENT PLAN

Financing facility to support when needed

Delay a non-critical payment

Consider credit insurance

FINANCING OPTIONS

Limited

PROs CONs

Large amount

Expensive; Make sure you pay on time as it can affect your credit

Bank loans Loan lead time, high rejection rate, require collateral

Grants Free money Long turn around, up to 6-12 months

Bank overdraft Quick access to funds

Credit card Quick access to funds

Friends & Family May affect personal relationshipQuick access to funds

No Access

Bank Bank Investors

SME SME SME SME

Traditional Finance

VS.

New Model

Alternative finance is emerging

Invoice TradingEquity Crowdfunding

%

Debt–based transactions between individuals and existing businesses with many individual lenders contributing to

any one loan

Firms sell their invoices at a discount to investors in order to receive funds immediately rather than waiting for

invoices to be paid

Peer-to-peer LendingSale of a stake in a business to a number of investors in return for

investment

INVOICE

TRADINGCASH FLOW

SOLUTION

3. Get paid upfront2. Trade goes live1. Upload invoice 4. Get paid the rest

1 day 60 days

$7,90080% (less fees)

$1,90020% (less fees)

$10,000

0 day

TransparentNo lock ins, no hidden fees, real-time pricing

FlexibleSell invoices only as and

when needed

FastDrawdown funds in 24

hours

PAYG24 hrs

Scalable funding

Size of funding can scale with business growth

Digital ecosystem

between buyers, suppliers and funders

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While utmost care has been taken to ensure content accuracy at the time of writing, no person should rely on the contents in this presentation without first obtaining advice from a qualified professional. These presentation slides are issued on the terms and understanding that (1) the author is not responsible for the results of any actions taken on the basis of information in these slides, nor for any error in or omission from these slides; and (2) the author expressly disclaims all and any liability and responsibility to any person, whether a reader of these slides or not, in respect of anything, and of the consequences of anything, done, or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of these slides. Information contained herein is proprietary to AccountServe and no part should be reproduced without prior permission and due acknowledgement.

Disclaimer

Managing Your Tax Computation

Anuradha Rai, Tax Manager

23 Feb 2017

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Outline

Taxation of Income

Deductibility of expenses

Capital Allowances & PIC

Tax Exemptions & Rebates

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Capital vs Revenue Receipts §  In Singapore, tax is imposed on income and there is no capital gains tax. Hence, it

is important to distinguish between revenue and capital receipts. Examples of capital gains are:

–  gains on sale of fixed assets; and –  gains on foreign exchange on capital transactions.

§  Distinction is sometimes unclear; recurring items = revenue receipts. §  IRAS generally takes an aggressive position. §  It is important to determine if a trade exists as different charging section and tax

treatment applies.

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Let’s consider… Ø  Sale of tables and chairs in trading company vs sales in a furniture dealing

company; Ø  Sale of property. Is the gain taxable? Ø  My company received a Government grant. Is the grant taxable?

Capital vs Revenue Receipts

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Capital vs Revenue Expenses §  Capital gains not taxable è Capital expenditure not deductible §  No statutory definition of capital & revenue expenses

Ø  Depends on facts of each case

§  Capital expense Ø  Once and for all, non-recurring Ø  Acquiring an enduring benefit

§  Revenue expense Ø  Operational Ø  Recurring

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Capital vs Revenue Expenses Examples of capital expenses: §  Depreciation of fixed assets à Claim CA?

§  Legal fees and stamp duty on new lease agreement

§  Purchase of fixed assets à Claim CA?

§  Renovation costs à S14Q deductions?

§  Start-up expenses such as licence fee, registration fee, signboard fee

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Capital Allowances

What are capital allowances (CA)? §  Deductions claimable on the wear and tear of fixed assets bought and used by a

taxpayer in his trade, profession or business. §  Expenditure incurred for purchase of fixed assets including the accounting

depreciation Not deductible for tax purposes. §  In recognition that wear & tear of fixed assets represents a real business cost, the

SITA provides CA on capital expenditure incurred, subject to conditions.

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Capital Allowances Examples of qualifying plant and machinery: §  Containers used for carriage of goods §  Security / alarm system, sprinkler system §  Blinds, curtains, carpets §  Furniture §  Movable partitions §  Escalators Examples of non-qualifying plant and machinery: §  Mirrors installed in an accounting firm §  Fixed partitions §  False ceilings, cornices, flooring, tiles §  Doors, windows §  Container office

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Productivity & Innovation Credit + scheme §  PIC is available from YA2011 to YA2018 §  As announced in Budget 2016, PIC scheme will lapse after YA2018 §  The PIC scheme provides for 400% tax deductions or allowances of qualifying

expenditure on each of the following activities: Ø  Investments in IT and automation equipment Ø  Training Ø  R&D expenditure Ø  Acquisition / in-licensing of IP Ø  Registration of IP Ø  Investments in design

§  For expenditure incurred from 1 Aug 2016, PIC cash payout will be 40% from current 60%

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Productivity & Innovation Credit + scheme

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Tax Exemption Scheme for New Start-up Companies •  Granted to qualifying new company for its first 3 consecutive YAs

•  Exemption granted on chargeable income taxed at 17%:

YA Exempt Income 2008 onwards

First $100,000 @ 100% = $100,000 Next $200,000 @ 50% = $100,000 $300,000 $200,000

•  Maximum Exempt Amount is $200,000 for each YA

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Corporate Tax Rebate

YA2017 Corporate tax rebate % 50% Yearly cap $25,000

YA2018 Corporate tax rebate % 20% Yearly cap $10,000

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Personal Tax Rebate and Rates

YA2017 Personal tax rebate % 20% Yearly cap $500

Chargeable Income Income Tax Rate (%) Gross Tax Payable ($) First $240,000 - 28,750

Next $40,000 19.5 7,800

First $280,000 - 36,550

Next $40,000 20 8,000

First $320,000 - 44,550

In excess of $320,000 22

Tax Rebate

Tax Rates from YA2017

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Personal Tax Rebate and Rates

Tax Change Summary

Taxes on Director's fee, Consultation fees and All Other Income

From YA 2017, the tax rates for non-resident individuals has been raised from 20% to 22%

Introducing a cap of $80,000 on personal income tax reliefs

From YA2018, the total amount of personal income tax reliefs that an individual can claim will be capped at $80,000 per YA

Removing the tax concession on home leave passages for expatriate employees

From YA2018, the tax concession of taxing only 20% of the value of home leave passages for expatriate employees will be removed.

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Thank you Anuradha Rai Tax Manager [email protected]

Resources: IRAS website

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Q&A

Essential Business Tips to Overcome a Slow Economy

Small Business & Entrepreneurship

Transcript of Essential Business Tips to Overcome a Slow Economy