Basic Accounting for Small Businesses in Malaysia

Basic Accounting for Small Businesses in Malaysia

Basic Accounting for Small Businesses

We’ve heard many stories from entrepreneurs that they have the vision to start their small businesses, but they always have a similar question in mind. They always cry out for help regarding the matter and is most often held back from taking the first step.


“Can someone who studies accounting share their knowledge with me? I have no clue what to do or how to start managing my business accounts!”


Accounting is such an unlikable subject to many of those who have no interest in figures and math. It’s just all too complicated! If only there was an accounting guide for small businesses in Malaysia right? Well, this blog will give you a small introduction to the complicated subject. We’ll dial it down for you in the simplest way possible, so get ready and take notes!

1) Setup your business bank account

Most sole traders and small business owners start their sole proprietorship business by using their personal bank account and this is a very wrong move. Can you imagine having your personal bank transactions combined with your business bank transactions? Wouldn’t it be very messy?


Set your own business account, be it a saving account or current account – as long as it is specifically for your business purpose.


From the bank statement, you will be very clear on all the money received, whether it is either revenue or capital, or the money spent is for normal claims or payment to suppliers. This will definitely help in revenue recognition, cost of goods sold or expenses. After the financial year-end (which typically is 31st December for Malaysian businesses), you will be sending your documents to your outsourced freelance accountant or accounting firm, and it will ease their job in doing the bank reconciliation.

2) Accounting VS Bookkeeping

Accounting and Bookkeeping are the two important roles that a small business owner plays within the system.


Accounting is the process of analyzing, interpreting and gaining financial insights from the financial information and data from bookkeeping.


Bookkeeping is the process of recording day-to-day financial transactions (e.g. sales, payments, receipts, etc.) into a database. They may seem similar to the eye of a non-accounting student, but they are two very different processes to first clarify in the accounting aspect.


Now, let’s go through how accounting and bookkeeping are done. There are two ways to do your bookkeeping –


a) Manually (E.g. Excel Spreadsheet)

b) Accounting App or Software (E.g. Xero – Cloud Accounting Software)


The basic upkeep of your business transactions is a rather simple process that can be done by outsourcing to a bookkeeper or by hiring an in-house accountant. But if you wish to do it yourself, the easiest way would be by using an accounting app or software. An accounting app allows back-end bookkeeping without the usual manual process. With it, your accountant or yourself may do the bookkeeping while you’re away and inside the office.

3) Managing and Recording Transactions

It’s starting to sound complicated, but it’s what you would need to know in effectively managing your small business’s account. By identifying these few items, you will have little to no problem in recording every single business transactions accurately.


Cash Cycle: The ‘cash cycle’ is the process of keeping a close eye on the financial transactions of the business. Most of the small business owner is not planning to increase their financial transactions individually.


Identify Fixed Assets: It is not only your fixed assets that are counted but also your cash positions, inventory, and loaned not yet converted. You should put total and consolidated fixed assets on the tiled floor.


Track Down Payroll: Payroll is the day to day running of a business. If you don’t keep track of your payroll, you will not be able to contribute to the revenue of the business. The same applies if you start from the employee’s payslip. You can easily implement an accounting system to track the payroll.


Monitor Your Profit & Loss (P&L): The P&L is set up for you as a business owner to understand the profitability of your business. Net Profit Margin is important but it is equally important to monitor your Gross Profit Margin too. If you are able to know the standard Gross Profit and Net Profit Margin in your industry, it will be useful to set it as your benchmark to build your business.

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4) The Importance of Accounting & Bookkeeping

When it comes to managing your business accounts, you may have it simple and concise. After all, it’s just to keep track and record your expenses and calculate your profits at the end of the day right? There’s more to just keeping records of your business’s money in the books. Besides it being a legal requirement, let’s get to some of the reasons.


i) To make informed decisions


This is the art of reporting on the finances of a company. Once you have the figures sorted out in your accounting books, you’ll be able to have better control of your cash flow. (Read more on What is the Importance of Cash Flow and How to Get Paid Faster?) Then, you can plan, spend on expenditures and invest without financial uncertainties. As small business owners, you can strategize on your short and long term goals realistically with the ease of having real numbers.


ii) Increases process and business performance


Accurately managing your small business accounting can save your business from going into hot water when you have a clear picture of the financial information presented in your financial statements. For example, updated bookkeeping can help you identify due payments. Besides, an updated account will help you organize your financial representations better – through charts and reports. Although, you will need to be able to determine whether the information is correct or not, or else your small business’s flow will be jeopardized.

5) Inside an Accounting System

This system includes accounting software for the business. It might be the sole provider of your bookkeeping and invoicing, but it may also provide the option to manage the business by means of the payroll software. It includes the power of accounting software to manage the business and also keep track of the expenses of the business and also to print the bills. It incorporates the accounting software program for small businesses where it helps a business owner with the accounting requirements.


All these systems carry an accounting feature that software is designed to prepare financial reports to the accounting software. It can be work as an accountant, bookkeeper, or even salesperson. A small business owner will enjoy the ease of using and implementing the business accounting software. It will help with the accounting tasks like repair an invoice, reconciliation invoice, working cash flow after the loss, work over bank transactions as well as providing updates to financial reporting as per the requirement of SME.


Though of course, we highly recommend using Cloud Accounting Software!


For accounting systems to work, calculations are inevitable. Here’s a short read on The 3 Impactful Financial Numbers Every Business Owner Should Know By Heart.

Of course, we are not saying these are all you need to know! There are many more breakdowns to each aspect of accounting. If you’re ever unsure, consulting an accountant and getting an accountant to handle your business account is never a bad idea. Remember, sort out your financial records by keeping them updated regularly. This way, you’ll be able to make the best out of your small business through beneficial and informed decisions.

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