This article was written in collaboration with OCBC Business Banking. All views expressed in this article are the independent opinion of DollarsAndSense.sg based on our research. DollarsAndSense.sg is not liable for any financial losses that may arise from any transactions and readers are encouraged to do their own due diligence. You can view our full editorial policy here.
Starting a business in Singapore for the first time can be both unnerving and exciting. Leaving a good job and stable monthly salary for much less or even nothing, especially in the initial days of your start-up, can create self-doubt and raise even more business questions. However, becoming your own boss and forging your own path can energise you to push ahead.
These are natural human reactions – and something I personally had to overcome when I finally made the decision to leave my job to work on DollarsAndSense full-time.
Since no business venture will ever be a sure thing, you may find yourself weaving in and out these two states of mind – frequently finding that there are no ends to the questions you will have about your business.
Staring down a barrel of endless “what ifs”, you can easily become distracted. To avoid this, and build greater confidence in your start-up, you need to be asking the right questions. We list four common and important business questions that entrepreneurs in Singapore should ask themselves. We asked ourselves some of the same questions when we started and, in a way, they have moulded the way DollarsAndSense is today.
#1 Why Am I Starting My Own Business?
This is the first question any budding entrepreneur needs to ask themselves. While there’s no correct answer to this question, there are definitely some wrong answers. One big misconception is that business owners earn a lot of money, while employees don’t. This can’t be the case, especially at the start of your entrepreneurship journey. You may also be a high-performing employee – already drawing a good salary.
When I first left my corporate job to work on DollarsAndSense, I took a pay cut of more than 30%. Personally, I think this was quite a generous buffer to begin with as the website was already established for several years. I know of many founders who have taken much larger pay cuts when they transitioned from their corporate job to start their own businesses.
Other wrong answers include trying to escape a tyrannical boss, insufferable colleagues, annoying clients or a heavy workload. You continue to manage these things (and more) after starting your business. In fact, you also have to manage other things that you may have been shielded from in a corporate job, like finding a workspace, understanding your business cash flow, managing your HR policies, and many more.
These are all challenges you have to relish, rather than seek to escape, if you want to establish and grow your business.
#2 How Do I Start Collecting Payment From My Customers?
One of the first things you have to think about as a business owner is how your clients will pay you. There are three parts to tackling this question.
Firstly, you should consider separating your personal and business bank accounts, so that payments flow into your business bank account. While it may seem more convenient to use your personal account, it becomes very messy when you need to start crunching numbers for your business, and ultimately report your earnings to IRAS.
At DollarsAndSense, we paid for certain things at the start on a personal level. To be fair to us, we were not treating it as a business at that point, and it was not bringing in any revenue either. However, once we were serious about making it a business in 2015, we opened our business bank account. This was more important for us, especially since we had more than one shareholder in the business.
Today, banks such as OCBC have made it even simpler to incorporate our business and open a business account at the same time. Often, new business owners will think of these administrative tasks as a chore – and would prefer to minimise any effort spent on it since it does not grow the young start-up. OCBC provides a one-stop shop, enabling you to also enjoy exclusive discounts on your company incorporation, corporate secretarial needs, accounting and bookkeeping services along with your OCBC business account.
Separating our accounts required us to open a suitable business bank account. Ultimately, this is where all your payments will be collected and your bills will be paid from.
Being a new business, you will unlikely have a lot of financial resources. We understand, we were there. Consequently, you should search for an account that requires a low minimum initial deposit and average balance, and charges a reasonable fall-below fee. At DollarsAndSense, we use the OCBC Business Growth Account, as there is a low monthly average of $1,000 (without which there is a small fall-below fee of $15). The minimum initial deposit today – at $1,000 – is also an affordable amount for new businesses.
Another perk of having a business bank account is being able to offer your customers greater convenience with more payment options. Depending on the type of business you run – i.e. whether you are brick-and-mortar, e-commerce or business-to-business – you may need to offer different types of payment options.
As a rule of thumb, more payment options mean greater convenience for your customers. If you have a brick-and-mortar outlet, customers may be used to paying with cash, credit cards, and contactless payment options such as mobile wallets and PayNow. If you have a business banking account with OCBC, you can collect via PayNow through OCBC OneCollect.
E-commerce companies may need to provide even more convenience for their customers, as they are just a click away to another website. Some common online payment methods include credit cards, mobile wallets, PayNow, eNETs, PayPal, and more.
When determining payment solutions you want to offer, you also need to consider your costs and how long it takes for you to receive payment. Typically, credit cards tend to be the most expensive option and takes a slightly longer lead time for you to receive payment. You likely also have to rent Point-of-Sales (POS) terminals to accept payment via credit cards and NETs. Similarly, mobile wallets may charge you a fee for collecting payments.
For businesses that come into regular contact with your customers, OCBC OneCollect is a viable option, enabling you to collect payment via PayNow QR and SGQR. There is no setup fee, and only a very competitive 0.25% transaction cost.
While collecting cash may seem the most convenient and fastest way, it’s not always the case. You have to rely on employees to manage the collection, pay for over-the-counter cash deposits into your bank account, and it may not be safe to regularly transit large amounts of cash.
#3 Do I have Enough Cash In The Business?
You may think that having healthy sales and profit margin mean that you have a sustainable business. However, the reality is that this may not translate into cash in hand quickly enough. Without enough cash, your business may risk becoming insolvent – as you will not be able to pay salaries, utility, rental and other payments that keep your daily operations going.
This highlights the importance of forecasting your current and future cash flow. Doing this manually can be extremely time-consuming and prone to error, while using software can feel expensive for younger businesses. Relying on a free cash flow tool, such as the Business Financial Management tool that your OCBC business account gives you access to, can be a sensible option.
By visualising your cash flow history, you may be able to pick up on potential cash gaps down the road. You can even go a step further to predict future cash flow gaps by leveraging on the same Business Financial Management tool to keep track of invoices issued to clients and upload outstanding bills you have to pay in future.
This will give you sufficient time to rectify situations where you may encounter a cash flow strain. When you know that a potential cash flow gap is on the cusp, you can apply for loans and trade financing tools to help you overcome the short-term constraint. For example, you can apply for a government-assisted Working Capital Loan (WCL) enabling businesses to borrow up to $500,000, with a flexible repayment period of up to 5 years, and you can redeem it earlier without any penalties. These loans can be used to bolster your day-to-day operations, or to expand your operations and/or invest in new equipment. During Budget 2022, the SME Working Capital Loan programme was extended until 31 March 2023.
Similarly, a trade financing tool, such as Invoice Financing (Sales) allows you to collect payment from invoices you have issued to clients upfront, even if you have provided longer credit terms.
Besides forecasting cash flow gaps, you may also realise you have enough or even too much cash on hand after answering this question. This may give you the indication (and confidence) that you are ready to hire more people, move into a nicer/bigger office or plough more resources into marketing or equipment upgrades. You could also pay it out in dividends or bonuses or channel it to higher-yielding financial products, such as fixed deposits, bonds or stocks.
#4 How To Reduce My Corporate Taxes?
How much you pay in taxes could hinge on your business entity.
If you are starting your entrepreneurial journey, it could be worthwhile to think about the pros and cons of incorporating a company or working as a sole proprietor. One of the main differences is the way income is recognised, as companies have to pay corporate taxes on their profit – at a flat 17% in Singapore – while individual sole proprietors pay for profits at their personal income tax – which can range from 0% to 24%.
By planning ahead, you will also not be shocked by your tax bill when you see it. You can also factor this payment into your cash flow management model, so you will have sufficient cash resources to pay it off.
At the same time, planning ahead also allows you to take action early. If you are forecasting a large tax bill, you may prefer to invest the money to expand your business by enlarging your marketing budget, hiring more people to grow your business, or even paying out more bonuses to yourself – if you are within the lower income tax brackets – to reduce your overall taxes. You could also make donations to charities you support to reduce your corporate tax liabilities, while doing some good.
Surround Yourself With The Right People And Resources (To Answer Your Questions)
As mentioned, it is not uncommon to have an endless number of questions as an entrepreneur. As the business leader, your responsibility is to solve the biggest problems for your organisation. This means surrounding yourself with capable co-founders and employees who are able to answer (and solve) some of your questions.
Another go-to strategy is to be able to lean on like-minded individuals. Having fellow entrepreneurs you can bounce certain questions with can be very helpful. Many of them may have had the same questions, and now are able to give you very good answers. Alternatively, even if you have a uniquely difficult question, they are best-positioned to give you an alternative viewpoint that may have been on your blindside.
You can also look for business resources to answer your questions. Certain websites, like DollarsAndSense Business, aim to provide useful content for business owners. Banks, such as OCBC Business Banking, strive to equip entrepreneurs with resources for their business – whether it’s learning more about how to incorporate your business, onboarding digital tools and software, getting timely financing facilities or attending exclusive events to learn from experts and network with other entrepreneurs.
You can join OCBC’s Digital Academy where Digital Specialists will guide you to collect and make payments digitally, create and manage invoices, and leverage on government programmes such as Start Digital. Also, check out its free Business Starter Kit to help you do things smarter, right from the start!