Essential 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 Kit
Business Advisor
SME 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

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 the
Equity.

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 make
some strategic moves to improve its financial health.
Many business owners fail to recognize their companies are in
trouble until it's too late. This is because some business owners
aren't examining their balance sheets.

Let banks know if the business qualifies for additional Loans or
Credit.
Current and Potential Investors better understand where their funding
will go and what they can expect to receive in the future.
Investors appreciate businesses with high cash assets, as this
insinuates 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; it
does not show cash receipts (money you receive) nor cash
disbursements (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/creditor
may be hesitant to extend additional credit to the company.
On the other hand, a company that has operated profitably—the
bottom line of the income statement indicates a net income—
demonstrated its ability to use borrowed and invested funds in a
successful manner.
A company's ability to operate profitably is important to current
lenders and investors, potential lenders and investors, company
management, competitors, government agencies, labour unions, and
others

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, Monetary
infusion 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. High
positive cash flow is even better and will allow you to make new
investments (hire employees, open another location) and further
grow 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 or
purchasing property, marketing materials and signage, initial inventory or
supplies, 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 sales
conservatively (better to outperform and have a better inflow of cash
than you thought).
If you’ve already started your business or are purchasing a business
from someone else, you have a distinct advantage: Sales history.
History can’t predict the future, but it can paint a decent picture of
what the future looks like and what business changes you might need
to make.

Cash Flow Statement
Finally, assess your monthly expenses.
This can be a bit tricky because it’s easy to overlook things and get a
surprise you really don’t want. Monthly expenses to factor in can include
rent 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 look
high, simply projecting more sales when you don't have the capacity to
close those sales won’t fill that proverbial water tank.
So perhaps you tighten the outflow. What can you reduce or cut? For
example, if you're launching a boutique, maybe you rent that 500 square
foot 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)

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.

Financial Management Toolkit – Financial Modeling

Financial Statements – Ratios

Formulate Strategies & Actions Plans for Financial Stability
4 Steps to a Stronger Balance Sheet
1. Determine the Current Situation (Starting Point)
2. Determine the Target Situation
3. Examine the resources
4. Close the gap

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

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 – Productivity Solutions
Supportable Categories Examples of Supportable Items
Integrated Solutions
(1st April 2016)
1. Appointment Scheduling and Booking System
2. Asset / Personnel Tracking and Identification System
3. Clinic Management System
4. Customer Relationship Management System
5. Document Management and Mobile Access System
6. Enhanced POS System
7. E-Procurement Management System
8. Fleet Management System
9. HR E-scheduling System
10.Inventory Management System
11.Mobile Ordering and Payment System
12.Queue Management System
13.School Management System
14.Wireless Paging System

How to apply
Step 1
Apply 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.

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 Application
From 1 April 2015
Simplified 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

CDG – Financial Management
Hai’s Pte Ltd
Specializes in the production and distribution of well-
known instant pastes such as curry mix, chili and other
sauces 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 Centre
900 South Woodlands Drive, #06-01,
Singapore 730900
Tel (号码) : 6248 5518
Email (电邮): northwest@smecentre-smf.sg
西北中小企业中心
• Strictly by appointment

1. Status of payments in APAC and Singapore
2. Why late payments?
3. How does late payment affect your business?
4. Learn best practices in getting paid on -time
(or earlier!)
5. Financing options

98% experienced late payment from their
customers
33days
Average domestic payment
terms
47% of the total value of invoices being
paid late
88%
32days
43%
APAC SG
46days
Average DSO
41days

34
31 44.2%
40
42
41.7%
30
46.8% 40
Payment Term
(days)
Late Payment DSO
(days)
Manufacturing
Wholesale / 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 arises)

3. Valuable time is
spent chasing payments

4. Affects your personal
finance

5. Unable to keep the
lights on

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 Lending
Sale of a stake in a business to a
number of investors in return for
investment

INVOICE
TRADING
CASH FLOW
SOLUTION

3. Get paid upfront2. Trade goes live1. Upload invoice 4. Get paid the rest
1 day 60 days
$7,900
80% (less fees)
$1,900
20% (less fees)
$10,000
0 day

Transparent
No lock ins, no hidden
fees, real-time pricing
Flexible
Sell invoices only as and
when needed
Fast
Drawdown funds in 24
hours
PAYG24 hrs
Scalable
funding
Size of funding can scale
with business growth

Digital ecosystem
between buyers, suppliers and funders

1
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

2
Outline
Taxation of Income
Deductibility of expenses
Capital Allowances & PIC
Tax Exemptions & Rebates

3
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.

4
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

5
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

6
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

7
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.

8
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

9
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%

10
Productivity & Innovation Credit + scheme

11
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

12
Corporate Tax Rebate
YA2017
Corporate tax rebate % 50%
Yearly cap $25,000
YA2018
Corporate tax rebate % 20%
Yearly cap $10,000

13
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

14
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.

15
Thank you
Anuradha Rai
Tax Manager
AnuradhaRai@Accountserve.com.sg
Resources: IRAS website

Essential Tips to Overcome a Slow Economy

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