Any business can find accounting and bookkeeping tiresome, but if your independent or small and medium (SME) business does not keep accurate records, filing your taxes could become strenuous. Without a structure in place for your company’s finances, a lot of things may leak through the gaps and ultimately cost you money. 

Here are some refreshers on how to streamline bookkeeping better so that your accounting and tax filing records are well-kept. 

What is Bookkeeping & Who is a Bookkeeper? 

The regular recording of a business’s financial activities is known as bookkeeping. Companies can track and refer to vital business information to make important operating, investment, and financing choices with the help of effective bookkeeping.

People who manage all of a company’s financial data are called bookkeepers. Without bookkeepers, businesses would be hard-pressed to know both their internal activities and present financial situation accurately.

Read more: 4 New Norms All Accountants and Finance Personnels Should be Ready For

Practical Tips to Improve Your Bookkeeping

1. Find the right bookkeeping software

There are many choices for bookkeeping and accounting software today, all within a click of a button. Some packages are free to use while premium ones are paid, which spells more overhead costs for profit-oriented businesses. 

Therefore, before investing in pricey software, identify what your financial information needs are. Would you need the multi-currency capability, or one or multiple concurrent users’ access? Can the software be integrated with other systems via Application Programming Interface (API) so you do not have to import data all the time? It will be advantageous if you can choose an accounting platform which minimises manual data capture activities although the higher the integration usually means the more expensive will be the system cost. Thus, take the time to find the right balance and give it a test run. 

2. Set a budget for taxes, commitments, and big expenses

Budgeting is critical to any business to ensure that there are enough resources to go around. For bookkeeping best practices, plan out your annual or monthly budget for taxes, operational commitments (OPEX) such as payroll, rentals or loans, and other large capital expenses (CAPEX) such as vehicle purchases, renovations or more. 

Forecasting and budgeting for a company’s tax liability are especially important to keep in mind. This will ensure you can file and settle your tax obligations in a timely manner and reduce the risk of paying avoidable Inland Revenue penalties. Businesses may incur more costs (eg. higher bank interest or other temporary loan facilities) to pay late submission penalties due to a lack of cash flow planning or budgeting. 

Read more: 6 Ways How Professional Tax Compliance Benefits Your Organisation

3. Separate personal finances from business finances

It is quite a simple and very well-known fact that your personal finances should be kept separated from business finances. This is the Golden Rule of bookkeeping to ensure proper finances are managed and your books are clean and accurate.  

How do you separate personal and business finances? You should have a business banking account for starters. Then, ensure that you pay yourself a salary instead of transferring money to your personal bank account. Other ways include separating and categorising receipts, identifying if an expense is for business or personal, and informing everyone else in your team to follow the same distinction. 

4. File and categorise receipts

For a business to have auditor-approved bookkeeping, it is important that it keeps and file invoices and receipts accurately. It is one thing to ensure all expenses are accounted for, but it is also equally important that they are categorised properly. This will ensure accurate financial reporting that will assist you to make better decisions later on. Proper bookkeeping can also help you make more informed decisions whether they pertain to forecasting future financial positions for banking facilities applications or more on a day-to-day operational level such as deciding credit terms for new trade customers.

5. Stay alert to your cash flow 

Many independent SMEs face detrimental financial troubles due to cash flow. This can happen when the money spent is greater than your receipts. Thus, it is very important to monitor your monthly cash flow to ensure your books show good bank balances. 

Always chase your receivables and set a fixed-term deadline for your clients to pay. Some businesses set clear payment terms that include late payment fees, upfront deposits and proper invoicing to ensure that there is adequate cash at the end of the month after settling all of your own expenditure commitments.   

6. Work with an advisor and outsource for better efficiency 

As business owners or key team players of your business, there are a lot of moving parts that you need to keep track of every day. To streamline bookkeeping and accounting, you can consider working with a professional firm and outsourcing these functions.

Why outsource your bookkeeping & accounting? 

Cost-effectiveness: Compared to a full-time hire, you are paying an outsourced bookkeeper only for their professional work instead of recurring payroll and employee expenses. 

Accuracy: Outsourcing an accountant or a bookkeeper function ensures better accuracy with correct filing, receipt and invoice processing, and proper separation of business and personal finances. 

When working with a trained professional, you will be able to get helpful advice to further ensure that your bookkeeping complies with best practices.

Conclusion 

Knowledge and consistency are both necessary for successful bookkeeping. It is important to be equipped with the right foundation of sound bookkeeping and consistently put those ideas into practice. 

If you think outsourcing can help your business, reach out to us at Ledgen and learn more about the accounting and bookkeeping services we offer. The team at Ledgen is known for their value-added services and ability to help businesses with complex requirements grow. No matter what industry or company size, Ledgen is able to cater to a plethora of accounting needs. 

Get to know Ledgen today and start outsourcing.

Taxes are as old as time. The earliest known tax records go back thousands of years during the Sumerian civilisation. In simple terms, tax can be thought of as a government’s source of income that is imposed on taxpayers to finance various public expenditures. It is important that a good tax system should strike a balance between the interests of taxpayers and a government’s operating expenditure.

In Malaysia, the most common form of tax imposed on businesses is the Sales & Service Tax (SST). In 2018, SST was reapplied to replace the Goods & Services Tax (GST) with the intention of giving Malaysians, particularly those with lower to moderate disposable incomes (M40 – B40 categories), more purchasing power. The effectiveness and impact of a broader tax base GST are still being debated today in the country. However, this article will focus on Malaysian SST and what are the common questions asked about its implementation and structure. 

Read more: All You Need to Know about Malaysian Company Secretary & Incorporation

What is Sales & Service Tax (SST Malaysia)?

The Sales & Service Tax (SST) is made up of a combination of two different taxes; Sales Tax and Service Tax. Sales Tax is a single-stage tax imposed on locally produced and manufactured commodities as well as taxable imports into Malaysia. 

On the other hand, Service Tax is a consumption tax imposed on services rendered by registered service providers conducting business in Malaysia which are subjected to tax.

Who is taxable under the Malaysian SST?

Manufacturers and service providers must register for the Sales and Service Tax (SST). The complete list of taxable goods can be found in the Royal Malaysian Customs’ SST orders. However, there are a few types of goods that are exempted from the Sales Tax, such as essential food items, medicine, books and magazines etc. 

Your business is liable to register for Sales Tax if it meets a few criteria, the most important one being that your total sales value of taxable goods in the current month plus 11 preceding months exceeds the RM500,000 threshold.  

For taxable services, the SST is applied to nine categories of services including accommodation, entertainment, credit cards, and digital services. For your business to be liable for Service Tax registration, the total value of taxable services in the current month plus 11 preceding months exceed the registration threshold which is also set by default at RM500,000. For food and beverages services, the threshold is higher at RM1.5 million. Whereas for a credit card or charged card services and approved customs agents, there is no threshold of value to be liable for registration. 

Do note that both sales and services taxes are not applicable for goods and services providers under special areas in Malaysia, including the islands of Langkawi, Tioman and Labuan. Businesses that are excluded from Sales & Service Tax (SST) registration can voluntarily register themself with the Director-General of Customs. 

Are foreign companies required to register for SST in Malaysia? 

Foreign businesses are required to register for SST if their taxable goods and services are sold in Malaysia, including digital subscriptions such as Netflix and Spotify. They are subjected to the 6% tax for their respective online services. 

To register for SST as a foreign-owned company doing business in Malaysia, it is recommended to work with a professional corporate tax partner for a smooth tax registration process and accurate bi-monthly submissions subsequently. The specialists at Ledgen are capable of understanding your tax requirements with up-to-date information. 

Read more: 7 Reasons Why You Should Venture into Malaysia 

What are the advantages of Sales & Service Tax (SST) to Malaysian Businesses as opposed to GST? 

As mentioned, the Sales Tax is a single-staged tax. Hence, the Sales & Service Tax (SST) is only applied once across the whole supply chain, either when an item is manufactured or imported into Malaysia. As a result, the tax would not be imposed at each value added stage of the production process until finally at the end consumers, therefore lowering the prices of goods and services if compared to GST. Many advocates of SST implementation would cite this argument being the primary reason to continue the SST regime.  

Other than that, there is a larger number of exempted commodities under the SST, including food, chemicals, medical supplies, steel, and machinery because its tax base is significantly smaller than GST. Therefore fewer companies will need to register SST with the Royal Malaysian Customs Department (RMCD). Small and medium-sized businesses participating in various industries such as tailoring, jewellery manufacturing, optical services, and more are also not subjected to the SST. This is seen as a great incentive for SMEs. 

Lastly, the Sales & Services Tax is argued to be effective in lowering business expenses. This happens when the tax is imposed only during manufacturing or importing, not progressively down the supply chain. Wholesalers and retailers do not need to pay sales tax nor do they need to submit and prepare quarterly tax submissions. 

What are the main SST disadvantages then?  

Since the SST tax base is not as broad as GST, the Malaysian government is unable to generate higher indirect tax revenue as clearly demonstrated during the years 2015 to 2018. GST also has the ability to tax the shadow economy which has an estimated turnover of up to RM300 billion a year which previously escapes paying any taxes. 

During its 3 years period, GST had caused the shadow economy to shrink from 25% to 10% of the normal economy and it was well known that SST caused a serious leakage before the implementation of GST.

What are the possible penalties charged under the SST? 

Businesses can be penalised for the following offences:  

• Failure to register for SST if found eligible  
• Late to register for SST if found eligible 
• Failure to file and submit SST returns 
• Failure to make SST payments
• Penalty due to late SST payment after the taxable period
• SST Tax Evasion, with heavy punishment that may include imprisonment 

How to register and file for Sales & Service Tax (SST) in Malaysia? 

Eligible businesses can register for SST online under the Royal Malaysian Customs web portal called MySST. Both the Sales Tax registration form and Service Tax registration form can be found and applied online. 

Upon successful application, a letter or an email will be sent out to applicants to confirm their eligibility and responsibility to file and make SST payments. 

SST tax filing must be submitted every 2 calendar months even if there is no tax to declare. All submissions can be done online through the MySST portal. 

 Read more: Checklist to Successfully Incorporate a Business in Malaysia

Conclusion 

Businesses in Malaysia are required to abide by the country’s tax regulations. A good tax record will ensure the trustworthiness of a business. Therefore, it is best to work with tax professionals, who are knowledgeable about the changes and can aid your company in the implementation and submission process. 

Ledgen Group has helped clients file and maintains their tax returns with reliability and accuracy. We have also assisted clients to solve a variety of tax-related issues that serve the best of their interests while also complying with local regulations.  

Contact Ledgen today to get started with your business SST the right way.

Companies must constantly reinvent and strengthen their current operations with fresh concepts to stay competitive in the ever-changing business climate. The Human Resources (HR) division is crucial for corporate success for both small and large firms. The said division is responsible for more than just processing payroll and managing the annual open enrollment period.

More importantly, HR manages the company’s employee-focused initiatives such as the Compensation & Benefits structure (ComBen) and mapping its Learning & Development (L&D) strategies. The success of an organisation highly depends on the capabilities of the HR team and its manpower management. And one of the best strategies to improve HR function is by outsourcing. So today, we will talk about how HR and payroll outsourcing can help improve your business. 

Read more: 5 Myths & Misconceptions about HR Outsourcing 

How HR & Payroll Outsourcing Helps Your Business 

• Better Management & Compliance  

Compliance is a key aspect for all firms. Non-compliance will be disastrous for firms because they can lead to penalties and reputational harm to the company’s brand. Hence, HR compliance requirements need to be handled proactively. However, it can be difficult for employers to keep up with constant development and more complex legislation. This is why working with an HR outsourcing service can give you the peace of mind of knowing your HR strategies are compliant to a variety of local regulations.  

Besides compliance matters, other HR-related issues are equally crucial. A good talent management can help the company retain its best employees and attract new ones. Fair recruitment practices can also be ensured when working with the right recruiters.  

Numerous parts of HR, such as handling complaints, reprimands, and terminations, can be extremely delicate and complicated. Having expert help for these high-risk tasks makes good commercial sense and HR outsourcing may be the answer. Experienced HR specialists may help businesses reduce these risks and set industry based benchmark good practices which will indirectly promote the companies as employer of choice among ever discerning jobseekers in the 21st century.

• Cost Effectiveness 

For many firms, HR costs can be a significant financial strain when done in-house. Some businesses discover that they do not necessarily need to maintain a whole team of specialised HR staff when the human capital budget can be used for core revenue-generating activities. 

They need to think about offering competitive employee benefits, options for learning and development, and crafting a job description for the best suited position. In addition to these, compliance problems might result in significant fines if a risk management approach is ineffective. 

Outsourcing may also help you save resources and materials by reducing the need to purchase, implement, and maintain pricey software and/or equipment. Some HR outsourcing partners can help clients with their recruiting strategy and execution by taking on a portion of the work, time, and expenses involved in hiring new employees. 

• Increasing Versatility

Most of the time, a one-size-fits-all approach to HR is the only option available to many companies due to budget restrictions. This can result in HR staff being overstretched and forced to wear too many hats, leading to burnout and dissatisfaction.  

In contrast, HR outsourcing partners offer a variety of tailored HR services to businesses based on each company’s market, industry specialisation, and workforce.

You will be able to make adjustments as and when you need to by taking advantage of HR outsourcing, which will provide you instant access to the resources you require. Working with a partner who can provide the same flexibility is the greatest approach to stay adaptable. 

• Enhance data security protection 

Due to the sensitive nature of many HR and payroll information, including employee personal information and compensation information, payroll processing requires adequate data protection. For example, HR divisions in Malaysia are required to abide by regional rules including the Personal Data Protection Act 2010 (PDPA).

Maintaining an adequate level of data security and protection internally might be tough if your business has limited time and financial resources. Internal HR teams must keep up with the changing nature of cybersecurity threats. Internal teams might also not be well-equipped to have the right procedures in place to guarantee that HR data is secure and consistently backed up due to its relatively smaller scale.

By outsourcing, your HR data can be better protected because of the larger economies of scale where the service providers share the IT securities and compliance measures’ best practices among their clients. This will ensure higher assurance of sensitive personal information to the respective employers. 

• Boost Productivity & Core Strength  

Payroll outsourcing is a simple way to boost business productivity while reducing in-house HR stress. Your HR staff can concentrate on achieving more value-added strategic goals such raising employee engagement to increase organisational efficiency rather than spending hours per pay cycle on the administratively taxing work of processing payroll.

Some payroll outsource service providers offer a web-based employee self service portal where the company’s staff is allowed to update their personal information (eg. change of marital status or home address, newborn child etc.) thus minimising the HR team’s workload and paper handling. Furthermore, a company’s crucial payroll continuity can be better assured by outsourcing to a reputational partner so that your employees are paid on time without any worry of a catastrophic HR staff attrition.

 

Conclusion 

Human resources have always been at the heart of the workplace, and the HR function has progressively become more strategic. The pandemic recently has caused a shift in priorities for business owners, primarily due to manpower mobility caused by the Great Resignation. Many have now looked to payroll outsourcing to facilitate the HR division in maintaining and nurturing the businesses’ most important resource; its employees instead of being bogged down by monthly administrative payroll processing.

At Ledgen, our team consists of multiple professionals that can help you assist your business payroll management and some complex HR functions. Our background and experience have put us up to par with current on-going business needs in the HR functions. 

Contact Ledgen today to get started with outsourcing your HR & payroll needs. 

A financial shared service centre (SSC) is often established to streamline and consolidate business operations within one parent company. It can help the business in many ways such as scaling up, decreasing costs, and centralising control. It is estimated that over 80% of Fortune 500 companies have implemented some form of shared service concept, expanding more and more to Asia and South America.  

Read more: Getting Started with Financial SSCs

However, as with numerous business ventures, setting up an SSC presents its own unique set of challenges. Here, we will uncover several common obstacles while also adding what you can do about it to set your sails and stay cautious. This is so that you will know what to expect and what needs to be prepared when getting started with a financial SSC of your own. 

Challenge No.1 : Task Redundancy

With the growth of multiple business operations and locations, naturally there will be more data collected that needs to be analyzed and recorded accordingly. The main challenge of a young SSC is sorting out clear-cut instructions and procedures over task assignments. As a result of unclear communication and/or structure, task duplicity may happen where different people are doing the same task or having to go through unnecessary steps to get one thing done. Tasks such as invoicing, bank reconciliation and more could end up being messy without any coherent structure. 

Solution

Documentation is therefore essential when building a new financial shared service centre (SSC). Setting up a workflow, processes, and procedures will reduce redundancy and unnecessary steps. It should be standard operating procedure to have a tight documentation and clarification of employee responsibilities for any new SSC.  

Challenge No.2: Supervision & Leadership 

Every business unit needs strong leadership and supervision. The leader not only needs to supervise and help the team, but he or she also needs to manage customers, suppliers, and other stakeholders as well. This key employee must have strategic skills to drive the SSC forward while showing resilience and approachability. Hiring the wrong person can damage the efficacy and morale of the whole SSC. 

Solution 

A general manager fits the role, but having someone with expertise and up-to-par of the operating knowledge of a financial SSC is much more efficient. Hiring one full-time will ensure complete focus and responsibility towards the SSC. Ultimately, you would want a good leader who can look beyond short-term success and how they can impact the business on a wider scale. In order to heighten the chances of success, some companies may also engage an experienced professional firm to advise and guide the initial  implementation of an SSC.

Challenges No.3: People & Training

There are a few areas that SSCs normally face when it comes to human resources. First, the challenge of retrenchment due to outsourced or relocated departments. Second, finding and hiring talent in the new location of the SSC and most importantly, clarifying the transition with the existing staff and key stakeholders. 

Solution

Before considering retrenchment of current employees, perhaps look at retraining on new tasks to adapt to the change. Since the SSC will be handling the bulk of the financial services, it could be an opportunity to upskill your current workforce to do something bigger for the company. As for new talents, always study the viability of the new location and how big of the talent pool it has. Malaysia, for example, is a great country for many multinational SSCs due to its well-trained and accredited workforce. Finally, provide a period of transition for the change to happen. When done right, the transition will reduce loss of financial resources and ensure satisfaction from not just the staff, but all your stakeholders. 

Challenge No.4: Key Planning 

Of course, strategy and planning remains one of the key challenges for many businesses looking to start a financial SSC. Apart from location, there is also the question of system integrations, technology used, service level measurements, local regulations, and so much more. Then there are short and long term strategies to consider as you look to expand or consolidate different business units or regions into the SSC. 

Solution

Planning how your financial SSC will work should be top priority, listing out all operational concerns and needs and obtaining information from all moving parts of the business. Define KPIs and SLAs early on to maintain client satisfaction so the transition goes without a hitch. 

There is also an option to get someone in and help you plan and set up your SSC successfully. You can start with Ledgen for professional advice and consultation to ensure your local financial SSC complies to regulations while ticking off the checklist to an efficient shared service centre.  

Conclusion 

Success is not a matter of intensity but it is of balance, order, rhythm and harmony. In order to reap the benefits of an effective shared service centre, all possible roadblocks must be anticipated and countered.   

At Ledgen, we can help share our best practices when it comes to incorporating a financial SSC. We are a strong team of professionals with vast experience in the industry to help you the best out of your transitioning and adapting period. 

Contact Ledgen today to get started 

Hong Kong and Singapore are undoubtedly one of the best countries to set up a business in. The fact that they have good tax benefits, strategic locations and good governing strategies make them leading countries for businesses that are looking to expand. This article will share what you need to know about starting a holding company in Singapore or Hong Kong. 

What is a holding company?

A holding company usually takes the form of a private company limited by shares. In most cases, it does not manufacture anything, offer any products or services, or engage in any other business activities. Holding companies usually own the majority if not  all of the stock in other corporations. 

Despite the fact that a holding company controls the assets of other companies, it usually just holds monitoring responsibilities. As a result, while it may monitor the management decisions, holding companies are usually not involved in the day-to-day operations. 

Why set up a holding company?

• Liability protection

Creating separate corporations for operational enterprises and the assets they employ gives a liability shield. Each subsidiary is responsible for its own debts. The assets of the controlling company or another subsidiary are inaccessible to a subsidiary’s creditor.

• Lower debt financing costs

When a holding company has financial strength, it may typically be able to obtain loans at a lower interest rate than its operational companies, especially if the company in need of cash is a startup or undertakes risky business ventures. The holding company may secure a loan and extend the loan to its subsidiary. 

• Centralise internal functions

Certain internal functions such as internal finance, human resource, technology, marketing and more can be centralised at a holding company to provide seamless services across the subsidiaries more efficiently and effectively.  

3  Benefits of Setting Up a Holding Company in Hong Kong

• Easy process for setting up a company 

The process of forming a holding company and registering the firm in Hong Kong is similar to that of forming a regular company. Because there is no minimum capital requirement for forming a holding company in Hong Kong, businesses of any size can use the territory as a foundation.   

The general norm for companies incorporated in Hong Kong is to have at least one shareholder with one ordinary share issued on their formation. Forming an investment holding company in Hong Kong takes between 3 to 5 days. However, one has to make sure to have all of the necessary company documentation to make the incorporation process go smoothly.

• Location advantage 

Entrepreneurs will get the best of both worlds when establishing an investment holding company in Hong Kong. Investors can do business with Mainland China easily after forming a holding company in Hong Kong. It is easier to establish a subsidiary or trade with China, and Hong Kong-based enterprises are given priority over others. Particularly if you are a foreign corporation. If you want to get into the Chinese market in the long run, building a Hong Kong investment holding company is a common approach. 

• Tax Benefits 

Hong Kong imposes no VAT, Capital Gains, Sales Tax and no withholding tax on dividends and interest. 

Hong Kong has also reached agreements on double taxation with a number of the world’s strongest trading nations. Hong Kong has double tax treaties with the United Kingdom, Vietnam, Austria, Belgium, Brunei, Czech Republic, France, Hungary, Indonesia, Ireland, Japan, Liechtenstein, Luxembourg, Malaysia, Malta, Netherlands, New Zealand, Portugal, Switzerland, Spain, Thailand, and Mainland China, etc. The primary goal is to alleviate concerns of double taxation caused by overlapping tax jurisdictions. As a result, when it comes to double taxation, Hong Kong holding companies would have little concerns.

3 Benefits of Setting Up a Holding Company in Singapore

• Attractive Tax System 

Singapore has a favourable tax framework for businesses, so establishing your holding company here may enable you to leverage on the various tax advantages. For instance, Singapore has a single-tier corporate tax structure, where the corporate tax paid by a company on its profits is final. 

Dividends paid by Singapore resident companies are tax exempted in the hands of the shareholders. Additionally, Singapore does not impose withholding tax on dividends paid to non-resident shareholders.

The country offers a low corporate and individual income tax rate. It also does not impose a capital gains tax. Therefore, the sale proceeds from the disposal of assets or shares (deemed as capital gain in nature) will not be taxable. Although Singapore does not have capital gains tax, the Inland Revenue Authority of Singapore (IRAS) will apply the “badges of trade” to determine if the gain on disposal of investments is revenue or capital in nature. 

• Ease of Compliance 

The rules for establishing a holding company in Singapore are not too complicated. Two basic obligations must be met with regards to the continued compliance requirements of establishing a holding company in Singapore. These two requirements are the customary tax filing obligations and the financial reporting obligations. 

• Supportive Economic & Legislative Environment

The Singapore government often offers schemes and incentives that aim to boost specific sectors of the economy and to attract foreign investment in the country. The Economic Development Board (EDB) has several grants and schemes to support growing businesses, innovation and R&D, as well as productivity. 

Lastly, Singapore has a comprehensive tax treaty network regulated by the Inland Revenue Authority (IRAS). These tax treaties help to mitigate double taxation of both passive and active income.

Conclusion

Businesses should carefully consider where they want to establish a holding company and some or all of their subsidiaries. They might also consider a corporate services partner who is well-versed in the regulations of the jurisdiction and can assist them throughout the procedure. 

Ledgen Group has helped countless clients to start businesses over the years, whether it is a venture into Malaysia, Singapore or Hong Kong. We continue to serve our clients by offering a comprehensive solution at every step of their business, from incorporation to regional expansion, in several countries around the world. We have professionals in countries to advise you on each step you have to take and make your time valuable for incorporation.

 Contact us today to get started with a holding company incorporation.