Congratulations on the set up of your first company, or at least being almost there to having a business registered under your name. It must have not been an easy task to summon the courage, not to mention the funds as well, to take the step towards entrepreneurship. To help you sail through your journey, we share our expertise to compile 5 accounting steps for setting up a new business in Malaysia:
1. Open a business bank account
This is the first step that you would need to do, as you would need an account to receive payment from your customers, and to pay your suppliers or vendors. Never use your personal account for business purposes; there should be boundaries between personal and business finances even if you may think that it is okay if you are the sole company owner. If you have one or more partners, also consider opening a payroll, investment and general operation accounts which will help you to segregate your finances better.
2. Register with LHDN
You will need to register your company with Lembaga Hasil Dalam Negeri (LHDN)/Inland Revenue Board (IRB) for tax filing. Fortunately, the registration can now be done online. The tax returns and deadline for submission depends on your company’s ownership, whether the business is a sole proprietorship, partnership, private limited (Sdn Bhd) or Limited Liability Partnership (LLP).
3. Check for SST qualification
The Sales & Service Tax (SST) was introduced on 1st September 2018 to replace the Goods and Services Tax (GST). Sales taxes are charged at 10% while service tax is at 6%. However, there are products that are exempted from sales tax, such as basic food, pharmaceutical products and steel products. There are also items that are taxed a lower rate of 5%, such as prepared fruits, vegetables and meat, mobile devices and printers. If your company manufactures taxable goods with an annual sales value exceeding RM500,000 or provides taxable services exceeding RM500,000, you will have to register your company for SST. There are exceptions that apply, so check at your local customs office for further details.
4. Subscribe to an accounting software like SQL
You may do your accounts in MS Excel for a start, but you will soon find it overwhelming especially when it comes to computing your company’s taxes. We suggest starting with an accounting software right away, so that you wouldn’t have to spend time later transferring data from Excel into your new accounting software later on. Factors to consider when scouting for an accounting software include the integration with other existing software, user-friendliness, report features and real-time availability.
5. Plan your bookkeeping
You have some time for this until the business has acquired more cash flow. With data from your accounting software, prepare the three most important financial statements that will form the backbone of your bookkeeping – profit & loss statement (P&L), balance sheet, and cash flow statement. Many SMEs engage the help of accountants for this task, so you don’t have to overwhelm yourself in producing these financial statements which can be difficult for someone without an accounting background.
We hope that by laying out these tips, we are able to give you a kick-start in your business.