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Two Common GST Errors When You Purchase in Foreign Currency

12/6/2017

 
Ask: Is this a local or an overseas supplier?

Yes, whenever you receive a supplier invoice denominated in a foreign currency, ask yourself this question. 

This will help you determine what amounts to report in your GST F5 return under Boxes 5 and 7.
GST F5
GST F5 Box 5 (Taxable Purchases) and Box 7 (Input Tax)
​Let's break it down.

Error 1: Local Supplier - Confusing with the In-house Exchange Rate for Accounting

Your supplier may prefer to invoice in a foreign currency even though you've made a local purchase.

Should the supplier be GST registered, then the supplier is required by GST regulations to indicate the local SGD equivalence for the invoice amounts based on an acceptable exchange rate. Like this:
How to report GST for local purchases

Here, accounting and GST reporting differ.

For accounting purpose, you may ignore the supplier's SGD amounts and use a different rate to record the transaction into SGD. 

For example, you may record in SGD @ 1.5 as follows:
Dr  Purchases                   1,500
Dr  GST Input Tax               105
Cr     Accounts Payable                    1,605

However, for GST purpose, you should use the supplier's SGD equivalence for declaring the taxable purchases and input tax:
Box 5 :   1,400
Box 7 :        98

You can understand the rationale for this approach when you see that the supplier would have reported an output tax based on the SGD amount shown on their invoice. As such, IRAS cannot be made to gain or lose from the same output/input tax.

Error 2: Overseas Supplier - Not Following the Import Permit Date and Amounts

When you import goods, the supplier - being an overseas supplier - does not charge and collect GST on behalf of IRAS. 
How to report GST for imports
Instead, the customs department collects GST by issuing a document called an import permit when you (or your freight agent) clears the goods. 

According to IRAS, the timing and value of GST (both input tax and purchase amounts) should then be based on the import permit as follows:
Picture
Source: www.iras.gov.sg (as at Jun-2017)
Take note of two things here:

(1) The import value calculated by the customs on the import permit generally differs from the supplier invoice because the customs adds extra charges, e.g., insurance and freight, and uses its own published exchange rate to convert to Singapore dollars. 
(2) The date to declare the GST (both input tax and purchase amounts) is the date of the import permit, not the supplier invoice.

For QuickBooks users, learn how to account for import GST in QuickBooks at Qcom's website here.

Related: ​GST Return F5: Can the Value of Revenue (Box 13) Differ from the Total Value of Supplies (Box 4)?

Do You Backup Your Data?

17/5/2017

 
Picture
​The only shower room in the building is closed. I just had my morning walk and am all sweaty. I don't have a backup plan. What a sticky way to start Monday! 

In the office, we face the same situation. Computers break down. Computers get infected with viruses. Computers fail.

What is your backup plan?

Backup is a big topic ranging from business continuity to data backup. 

Let's address some basic questions at the lowest level of data backup:

Who is responsible?
You. Nobody else.

What needs to be backed up?
Your data, i.e., all sorts of files - documents, pictures, videos.

Where to store backup copies?
Any storage medium other than the original location.

When to do it?
When you don't have the time. 

Why?
Because... computers break down, computers get infected with viruses, computers fail.

How?

1. The manual way

Literally copy (e.g., right-click: copy) important files onto an external drive (e.g., USB flash drive).

2. The automated way

The better way is to buy an external backup hard disk. It usually comes with a backup utility that lets you  copy your documents folders onto the external disk (or even clone your computer). You can activate the backup process manually or set a time schedule. The backup process runs in the background while you continue to do your work. 

3. The double backup

In (2) above, what you're doing is a global backup. When you use a piece of software for work, the software itself may have a backup function to let you backup the data of that software. Depending on how regular your backup in (2) is, you may do an extra "local" backup here so that you can sleep better at night. 

For QuickBooks users, read more about backing up and restoring QuickBooks data at Qcom's website here.

GST Return F5: Can the Value of Revenue (Box 13) Differ from the Total Value of Supplies (Box 4)?

10/4/2017

 
Cultural difference: Lift vs elevator, first floor vs ground floor
Spot the difference...
Yes. According to IRAS, "the value of your revenue should be extracted from your profit and loss account. It does not have to be aligned with GST reporting."

Sounds confusing? Let's break down this statement into 3 situations where differences may arise:
​
  1. Revenue recognition
  2. Revenue definition 
  3. Supply scope

Read More

How to Create a New Company Data File in QuickBooks

29/3/2017

 
QuickBooks program, Data file, and Data file location
A simple way to understand how a software program reads data
​First, understand that the QuickBooks accounting system comprises 3 components:
  • QuickBooks program (application) - you must have installed this.
  • Data file (*.QBW) - you use the QuickBooks program to create this.
  • Data file location (folder) - you decide where you want to save the data file. 

Therefore, after installing QuickBooks, use QuickBooks itself to create a blank data file. Read more at QCOM's website here.

How to Explain QuickBooks File Extensions to Your Boss

16/3/2017

 
Some occupational file extensions
Joke: File extensions
You're puzzled by all the QuickBooks file extensions in your computer: .QBW, .ND, .DSN, .TLG. "Do I need to know them?" You ask.

​I'll explain the following file extensions to you in a while:
​
  • Main working file (*.QBW)
  • Backup file types (*.QBB, *.QBM)
  • Database support files (*.ND, *.DSN, *TLG).

Before that, let's begin by understanding how a software program reads data files. For example:

Software Program : Data File
MS Word : Filename.docx
MS Excel : Filename.xlsx
MS Powerpoint : Filename.pptx
Adobe Reader : Filename.pdf 

Similarly, this is then how the QuickBooks program reads a data file:

QuickBooks : Filename.qbw 

​This filename.qbw is what we commonly call a QuickBooks ​company data file (or data file, or company file, or QuickBooks file in short). It is the main data file where all your company financial records are stored.

​1. Main Working File (*.QBW) 

​Now, where does QuickBooks save this data file? 

In QuickBooks, with a company file opened, press F2 to call up a Product Information page like this:
QuickBooks Product Information (F2)
QuickBooks Product Information (F2)
Here, you'll see some crucial information about your QuickBooks and data, including the (Data) File Location.
​Suppose you want to backup your company data, you can do so by using the internal backup function in QuickBooks (File > Back Up OR Create Copy).

What then are the file formats for QuickBooks backup files?

Read More

Use Simple QuickBooks Reports to Detect Fraud

8/3/2017

 
You are a busy (owner-)manager and you don't have time to oversee every transaction. Yet you want to ensure that money is not wasted or stolen. So you set up preventive controls to protect your assets. For example: 
  • You sign every cheque.
  • Every payment must be supported by valid documents to pay.
  • Every document must be counter-checked by a competent person. 

But fraud is still closer than what most people are willing to admit ("I trusted him/her"). A survey by KPMG in 2014 showed two key findings:

  • Out of 4 companies, at least 1 had encountered fraud incident(s) over the past two years. 
  • Of the companies that experienced fraud, almost 3 cases out 4 were perpetrated by internal staff.

(Source: KPMG-SMU Singapore Fraud Survey Report 2014)

No wonder you go to sleep every night wondering whether you've missed out anything. 

Yes, you have.

​If you ignore simple detective-control reports you can get from your accounting software. What are these?

Preventive vs Detective Controls

First, let's understand the difference between preventive and detective controls. 

Preventive controls aim to prevent errors or fraud. For example, keeping the cheque book under lock and key, and all the measures listed in the opening paragraph above. 

On the other hand, detective controls hope to uncover errors or fraud had they happened. For example, checking the drawer and discovering that the cheque book is lost.

While fraud prevention is important, early fraud detection is necessary to minimise any loss. That's where your reports come in useful.

Remember the moonwalking bear? 
It's easy to miss something you're not looking for.
The Shady Characters

So, let me identify a few shady characters:

The Pickpocket 
a.k.a. skimming

Skimming involves taking cash "off the top" of the daily receipts of a business and reporting a lower total. For example, a customer's payment in cash is pocketed and the sales invoice deleted from the system.

The Forgiver
a.k.a. write-off scheme

Here, instead of deleting the invoice, the fraudster creates an unauthorised credit note to offset the sales invoice.

The Ghost Supplier 
a.k.a. fictitious purchase

Another common way to siphon money off the company is to make payment to a personal account while masquerading it as a normal company purchase. 

Now, what reports can you use in QuickBooks to uncover any such incidents?

Read More

4 Words that Expose Bad Business Writing

22/2/2017

 
Write better business emails by eliminating 4 commonly misused words
A common business email - FAIL!
Do you mean?
In this enclosure (enclosed), please make an effort to locate (find) our proposal. Read it thoroughly and carefully (peruse) or else you know the consequences (!). We expect you (kindly) to get back (revert?) to us by next week.
You may think that some words sound professional, but they're not. At all.

In fact, they're dead giveaways that you've copied from somewhere - you didn't learn them in school. 

So, do not misuse the following words in your writing:
  1. Find (redundant)
  2. Perusal (legalistic)
  3. Kindly (old-fashioned)
  4. Revert (does not mean reply)

Note: Revert means to return to a former habit, practice, belief, condition, state, topic, etc.

​How about the word "enclose" vs "attach"? Strictly speaking, an email does not have "enclosure(s)" (unlike a letter, parcel, or package). Instead, an email can come with "attachment(s)". Therefore, "attach" is a better choice, but "enclose" is acceptable.

​Here's an amended version of the above email:
Write better business emails by eliminating 4 commonly misused words
Better still, why not just keep it simple (and use "I" instead of "we/us")?
I attach our proposal for your review and look forward to hearing from you by next week.
Interestingly, which of these five words do you see in QuickBooks?
  • Attach
  • Find
  • Peruse
  • Kindly
  • Revert

​Take a moment to test yourself before continuing...

Read More

Time-Saving Tips: How to Bypass the Standard Drop-Down Menu in QuickBooks

23/1/2017

 
Desired path (or line)
A desired line at Melbourne Zoo (2016)
What is a desire line? It is a path made by walkers, as opposed to one that is officially planned, and represents the shortest or most easily navigated route between an origin and a destination. 

Dr Chong Keng Hua, an architecture academic at the Singapore University of Technology and Design, shares his opinion on this phenomenon in public areas:
​Leave the desire lines to grow organically. They are a little messy but such untidiness is a reflection of how we overcome constraints in life. It's a living example of social resilience.
(Source: Well-trodden paths unearth what pedestrians desire, The Straits Times, 19 Jan 2017.)

Consider the following picture I took at Beauty World MRT. In the context of your work, how resilient are you? ​
Software design vs user experience
Desired lines outside Beauty World MRT Station, near Beauty World Plaza (2016, Singapore)

To apply to QuickBooks, let's create some "desire lines" alongside the menu bar to reduce cursor movements and mouse ​clicks: ​
  1. Dress up the Favorites menu. 
  2. Employ the right-click of the mouse.
  3. Be a keyboard warrior, use keyboard shortcuts.

Read More

What Accounting Software Suppliers Don't Tell You

17/1/2017

 
Picture
Buying a piece of software is like getting your office built-in cabinet - you cannot resell it, however good or expensive it is. This means that if you get it wrong, you either live with it or dispose it away. You don't have to make some common mistakes when buying an accounting software.

How?

By NOT talking to a prospective supplier like going out on a first date.

You know what people do on traditional first dates? They don't reveal too much and say only the nice things. Like these:

  • It’s easy to use 
  • You don’t need accounting knowledge 
  • You don’t need computer knowledge 
  • The software can do all these 
  • We can do a non-obligatory demo ​

I'm going to uncover some hidden messages to you so that you can decide for yourself better. See my slide deck here.

Warning: Guard your company information

11/6/2014

 
Optical illusion
Most people see 3. The answer, 6. Why do I show you this?

Because your eyes can play tricks on you.

And cause you to be tricked.

Like this letter that you just received...
Notice for verification of Information
Notice for verification of information (?)
Beware, the last paragraph reads (emphasis added):
This is a database for Singapore companies on www.companyregister.sg, which is operated by Data Register and not by the Accounting and Corporate Regulatory Authority of Singapore.
Did you miss the "not" on your first reading?

Yes, this is the same company that ACRA has brought charges against (78 charges as at last count - maybe ACRA decided to keep the number auspicious).

In order that you don't end up financing their penalty fees, you should do two things:
  1. Ignore the letter.
  2. Tell your friends to ignore the letter.

And consider the third:

After two weeks, thank the site administrator for deleting your company information from the database.

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In the meantime, enjoy the video below (same quiz):
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