Purchase-to-Pay Process Automation

In today’s environment, traditional companies are getting disrupted as the business environment gets more competitive. The pressure to drive productivity and cost savings has increased. It is thus critical for management teams to remain agile and focus on streamlining business processes as much as possible.

In line with this development, the finance function in a company has also evolved from purely accounting into a more strategic one. Hence, CFOs desire to streamline their manual finance processes so that more time can be dedicated to strategic planning and analysis.

One of the critical but very manual functions in most finance departments is the Account Payable function. This function handles all cash outflow, both spending and investment and they provide the source data for spend analysis. In a recent 2018 survey conducted by Canon, 76% of CFOs interviewed believe that Accounts Payable (AP)/Purchase-to-payment (P2P)’s will grow in influence and importance in the next two years. Efficiency, automation, and improved accuracy are top priorities for the finance function. With accurate and timely data, we will be able to synthesize insights to help the management team make better decisions.

Five Reasons to embark on Purchase-to-Payment Automation

Improve accuracy with less time spend on reconciliation

Large number of supplier invoices coupled with time pressure could result in manual entry errors. Furthermore, as hardcopies of supplier invoices are usually circulated, there is a lack of paper trail. Hence, this would increase the risk of losing an invoice. At times, the same invoice could be processed twice because proper control measures were not put in place. Based on our experience, any invoice loss or entry errors could result in 23% more time spent on tasks resulting in inefficiency.

With automation, supplier invoices can be archived with an electronic trail. In addition, an improved data entry interface could also reduce human errors in data entry. For certain companies, they might consider outsourcing their data entry function offshore. This will allow the existing finance function to perform the role of a checker and increase accuracy without incurring too much cost.

Better staff morale and increased productivity

With less time spent on manual tasks, finance staff could be upskilled to do more meaningful tasks. Instead of being employed to do data entry and hardcopy filing work, finance staff can spend more time on analysis and supporting business development efforts.

It will also improve the staff morale of other functions. The interaction between finance and other operations is crucial as these operations usually provide the source information. Due to finance control requirements, it could increase administrative load if the process is too manual. In fact, this causes a high turnover rate in certain roles for one of our clients. We helped them to plan for an integrated system to reduce the administrative workload for both finance and non-finance staff.

Better visibility on invoice processing and approval status

With a structured and digitalized workflow, stakeholders will have a better visibility of each purchase requisition request. The correct financial approval level of authorization will be applied. In addition, companies would also have visibility over their spending and ensure that various divisions spend within their approved budget. For certain companies, they would also have a list of approved vendors which ensures that they spend in-line with their internal policies. This will promote greater transparency in spending.

Faster P2P cycle, earlier payment discounts and less late penalties

In a typical manual process, hardcopy supplier invoices are usually shuffled between various stakeholders. As a result, the finance department may run a risk of delays, or that the hardcopy invoice could be lost during the transfer from person to person. Worse, late penalty charges may be imposed for certain supplier invoices that are not processed in time.

Also, with automation, most orders will be pre-approved, with all invoices being PO-based. This means that th invoices can be easily matched with the corresponding purchase order (“PO”) and delivery order (“DO”). Hence, the AP staff will no longer be required to chase for payment approval and the company could potentially benefit from early payment discounts.

With a faster payment cycle, supplier relationship will improve, and the purchaser will be better positioned to negotiate for further discounts or other terms.

Sets the foundation for companies to scale operations

A business should not stay stagnant but should strive to remain competitive. However, a manual process could result in over-working certain staff when operations load increase. We spoke to a restaurant client of ours. During the discussion, they were concerned that their finance executive is unable to cope with their accounts. With only three outlets, the executive is already struggling. The business owners are worried that things will get worse when two more outlets open.

Our suggestion was that they should deploy automation to their P2P process and outsource the data entry overseas. With this, the business owners are more comfortable to scale operations.

Critical success factors for successful implementation

One of the pitfalls is the deployment of software without proper consideration of the business specific workflows. There is existing software in the market that promotes finance process automation. However, our experience tells us that there will not be a one-size-fit-all solution. In fact, we noticed that many companies deploy tech solutions which later became white elephants as they are not used.

There are three main considerations that a company should pay attention to before any technology deployment:

Firstly, the new system introduced should be integrated with other existing systems. Otherwise, it will be counter-productive and cause an increase in workload instead. Of course, one of the options will be to revamp the whole company’s system which would be costly and time-consuming. We recommend that companies first map out their current workflows. We will then need to figure out how this new system is going to integrate with the existing systems. Ideally, the systems should be seamlessly integrated with each other.

Secondly, management should give assurance to AP staff. While they might see the benefits of finance process automation, they could be worried about their job security. Without their buy-in, the implementation will not be successful. There must be a plan to re-purpose existing staff to perform tasks with higher responsibility and greater business value. Furthermore, as the learning curve could be steep, it is vital to deploy any changes in incremental stages.

Lastly, data collected will be meaningless unless they are moulded to suit decision-making. Different users within the organization will require different information. Communication with various stakeholders is crucial to design dashboards tailored to their specific needs.

Next steps

Every company has different needs. We believe that you will need to have an intimate understanding of existing processes and systems before deploying any new technology. Also, the budget for every company will differ. Any technology investment should generate a ROI that justifies it. Hence, we will need adjust and tailor the solutions specifically to the company.

Excide has worked with various organizations ranging from MNC subsidiaries to SMEs. We help companies to define their objectives and budget.

Once defined, a bottom-up approach will be critical to understand the pain-points on the ground. Without buy-in from staff, implementation will be challenging. Hence, we will go hands-on and experience their work. This experience will also uncover any blind-spots that management might have.

We do not rush into implementation and will roll out changes in phases. This ensures that staff are not overwhelmed by the steep learning curve in migrating to a new workflow. During implementation, we will guide company staff step-by-step for a smooth onboarding.

About Excide

Excide specializes in transforming finance functions in Singapore and Myanmar. We work closely with various stakeholders in the company to better understand their needs. Our hands-on approach allows us to better tailor our solution and commit resources in the most value-added features. This will allow our clients to achieve maximum value during the various implementation phases. We commit resources on-site to ensure that we understand your business, build stakeholder relationships, and ensure smooth onboarding. If you are interested to find out more, please contact me at [email protected] or call +65 9698 1755.

SME Go Digital Industry Briefing (21 July 2017) – Five Things Excide learned from the Briefing

SME Go Digital Program has been the focus of discussion for many technology vendors and solution providers. It is an effort by Singapore to spearhead the digital transformation efforts for Small and Medium Enterprises (“SME”).

Launched in April 2017, IMDA aims to enhance the digital readiness of SME by providing subsidies for their digital purchases. This scheme is meant to replace the seven-year-old iSprint scheme and Innovation and Capability Voucher (“ICV”) for Integrated Solutions.

On a side note, ICV has been extended to 31 December 2017. However, we notice that many providers have been taken off the list and the application check has become more stringent.

In this article, we would like to share some key takeaways from last Friday’s session.

More transparent but stringent approval process

One of the biggest barriers for solution provider is the lack of clarity on the pre-approval process. However, transparency could also result in more complaints and less flexibility for the government agency.

However, IMDA mentioned that the team is ready to take this risk and be transparent about their pre-approval process. While feedback could be expected, they will take them positively and use it to improve the internal process.

The solutions will be evaluated based on SME’s requirements, user friendliness, and price affordability. Unlike current schemes, the accreditation will only be valid for a year. The bar will be set higher over time, and present board-based criteria would be further refined. However, IMDA will give ample time for the solution providers to adapt to the requirements.

SME Digital Tech Hub

ASME has been awarded the operator rights for SME Digital Tech Hub. In partnership with IMDA, it will provide more specific advice for SMEs with more advanced technology needs.

Advisors at Tech Hub will help to diagnose their business needs, prescribe the right solution and guide them on the implementation. This approach could smoothen SMEs’ transition to adopting the technology.

The Tech Hub is expected to be launched later this year.

Focus areas – Cyber-security, Personal Data Protection and Data

Cyber-security, data analytics, and personal data protection are three priority areas mentioned during the briefing.

As part of Singapore’s push towards advanced manufacturing and a digital economy, these focus areas will be increasingly important. Critical systems will have to be protected as the country embarked on our digital transformation journey.

Data is also a key focus as we strive to be more data-informed. We need use these data to make critical decisions and remain a competitive edge. However, with more data collected, this also explains the growing importance of personal data protection.

Industry Transformation Map

IMDA will work closely with industry leaders to develop Industry Digital Plans (“ICP”). This ICP will be aligned to the Industry Transformation Maps (“ITM”). Industry consultations will be held with industry players and solution providers.

Two industry consultation sessions have been announced during the briefing:
Logistics: “A Nationwide Federated Locker network transforming the future of last mile deliveries in Singapore” – 16 August 2017 (Wednesday)
Retail: “Emerging digital technologies and innovations for the Retail Industry” – 18 August 2017 / 25 August 2017 (Friday)

The sessions will be by invitation only.

Digital platform

Data-driven innovation and artificial intelligence have been identified as the key growth enablers for companies and Singapore economy. IMDA has also called for submission for a commercially managed digital platform that will drive the adoption of these technologies.

The call for submission document can be requested on IMDA website. The deadline for pre-qualification proposals will be on 8 September 2017, 12 pm.

Deriving Business Strategy using Financial Model

There is a fine saying by Sun Tzu: “know yourself, and you will win all battles.” In the business context, I cannot think of a more tried and tested tool than the financial model which spurs entrepreneurs to stay constantly updated with a 360 degree understanding of their business.

Do you really know your business inside-out?

What is Financial Modelling?

A financial model goes beyond a financial statement (you cannot manage what you cannot measure) and a budgeting exercise (you cannot spend beyond what you can earn).

Unlike a financial statement which is a snapshot of the present and a budgeting exercise which places a stronger emphasis on immediate future needs, a financial model is meant as a diagnostic strategic planning tool to secure your business’s longer-term future.

A financial model == financial statement or budgeting exercise

I would like to think of financial model as the numerical version of chess (underlined are similar benefits and attributes). At the starting line, you position various business drivers/resources and as the game unfolds, watches the situation from a bird’s eye view and deploy changes accordingly.

Ultimately, you reach your goal by understanding the inter-connectivity of available resources and stimulating various outcomes before determining the next move.

Below are some commonly received questions from past clients on how the financial modeling process works.

Five Commonly Asked Questions

Question:
How does financial modeling for business owners differ from other types of financial modeling?

Answer:
The focus on financial modeling for business owners is more for business decisions – the aim is to help the business owner make as accurately as possible any material decisions to improve business profitability.

While assumptions related to the cost of capital and balance sheet strength are important to a loan banker looking to evaluate credit score of business client, assumptions related to profitability (i.e. revenue and cost driver) are the more important aspects of the financial modeling process for business owners.

Question:
How does financial modeling unveil insights for decision making? Can you walk us through via a real-life case study?

Answer:
There are a few key components to the financial modeling process which forces business owners to consider their business workflow from various perspectives.

Consequently, fresh insights arise.

These components include but are not limited to: identifying business drivers, deducing cash cycle and deriving business valuation.

Zooming into identifying the business driver, let’s take a Chinese eatery for instance.

Factors affecting revenue generation including but not limited to space capacity constraints (consider seating layout), table turnaround, average spend per customer, average spending per peak/off-peak hour, takeaway hurdle (dependent on chef capacity).

Factors affecting cost include but not limited to: employee labor productivity, rental cost, inventory cost.

Some key revelations from the above that surprise our past clients include uncovering of certain popular menu items that might be underpriced and more economical sense to shorten operational hours (during the less active hours to reduce labor cost).

Question:
How do I determine my revenue model?

Answer:
Broadly speaking, revenue is a multiplication of two components – price and volume.

For pricing factors, it is usually a consideration of:
1) Cost plus basis – what is the cost of service or raw material for the output
2) Market rate – what your peers might be charging
3) How aggressive a pricing strategy you might like to deploy

For volume, you may like to think about:
1) Top-down regarding maximum potential market size
2) Bottom-up approach via looking at your sales distribution channel capacity
Together these two approaches form the lower-bound and upper range of the total quantity playing field.

Question:
How often should the financial model be updated?

Answer:
The rule of thumb is as often as you will need to make strategic business decisions.
I would say minimally on a monthly basis.
It is best if the information feeds in real-time.

Question:
Any recommendations for someone looking to get started on financial modeling?

Answer:
1) Attend training/classes – the benefit is complete mastery and control over how you can maneuver it for your needs, and the downside is, of course, your time
2) Engage a consultant to help them through the process – it all boils down to consultant value to fee. A consultant can help you set up a tailored financial model structure, but it will only be valuable if you provide the input to the numerical assumptions
3) Purchase or source for existing financial model template – the benefit is you can get started immediately, but as is not your template, it will be challenging for you to modify it in your maintenance or to customize it more specifically for your industry

Introduction to Accounting

What is accounting?

Accounting is pertinent to all business owners. It is the process of recording, summarizing, analyzing, interpreting and reporting the financial information of an organization. This financial information gathered is key to assist managers and executives to make business decisions.

Importance of accounting

Information derived from the process of accounting help serve both internal and external stakeholders of a company.

1.Internal stakeholders

Internal stakeholders can be split into two major groups, which are the stewardship and decision-making process of a business. A steward is responsible for managing the economic resources of a business to ensure these resources are optimally utilized to maximize profitability.

For decision-making, senior management is dependent on the information summarized in financial reports to make decisions relating to the business. A show of growing revenue but stagnating profit would prod management to evaluate the expense components incurred by the company. Further analysis of the expenses might provide a clearer view of what are the specific cost drivers that are adversely affecting the firm’s profitability, allowing managers to pinpoint the source and resolve it.

2.External stakeholders

External stakeholders are individuals or entities that are situated outside of a company but are affected by the financial performance of it.

Shareholders and investors of the firm, who are considered the company’s owners, rely on the financial information from accounting to make their investment decisions. Investors would cleverly avoid companies having recurring losses or high debt ratios in case of the risk of bankruptcy.

Banks and other lenders would utilize financial information to assess the business’s ability to repay its loans.

Forms of business entities

When an individual incorporates a business, the business itself is considered an entity and its activities are separate from the personal activities of its owner. What forms of entity should one incorporate then? Forms of entities are dependent on a few factors, such as number of owners, how the businesses are managed, the amount of reward and the level of investment risk for the owners.

The three common form of entities are sole proprietorship, partnership and company, each with their own characteristics, advantages and disadvantages.

1.Sole proprietorship

Usually established only with one owner and it’s the least expensive and easiest to incorporate. The sole owner is entitled to all the profits of the company. Speaking of profits, any losses, debt incurred or liabilities are borne by the owner. This makes it risky for the owner as he is personally liable for all the debts that the company undertakes.

2.Partnership

It can only be established with a minimum of two owners. These partners share the profits and losses of the business. However, if the business fails, some partners may have to pay all the debts.

3.Company

A company is a legal entity on its own, separate from its shareholders. Articles of incorporation must first be filed with the state to establish a corporation. There is no limit to the number of owners and provides limited liability to shareholders, up to the amount of investment they have made.

Types of work pass and permits for foreign professionals

Types of work pass and permits for foreign professionals

Singapore is very dependent on foreign talents to help boost its economy. In June 2016, the total foreign workforce surmounted to 1,404,700 people. This is approximately a fifth of Singapore’s population. There are many debates on whether foreign talent is essential in Singapore’s economic growth or is hindering it instead but essentially, everyone knows that the Singapore government will no doubt still emphasize on the importance of foreign talent and will definitely continue bringing in foreigners in.

All foreigners are required to have a valid pass (work visa) before being able to work in Singapore. If you are engaging with foreigners to work in Singapore for you, they are also required to hold a valid pass before being eligible to work. Penalties will be issued to offenders if they do not comply with the rules and regulations set by Ministry of Manpower (MOM).

To start off, here is a list of common offences and penalties for each offence committed that you should be aware of:

Table 1: Offences and Penalties

There are three types of pass types for foreign professionals:

Table 2: Types of passes for foreign professionals

Foreign Professionals Employment Pass

Eligibility

The Foreign Professionals Employment Pass is for foreigners who:

  • Have a job offer in Singapore.
  • Work in a managerial, executive or specialised job.
  • Earn a fixed monthly salary of at least $3,600 (more experienced candidates need higher salaries).
  • Have acceptable qualifications, usually a good university degree, professional qualifications or specialist skills.

If foreign professionals fulfill these eligibility requirements, they are required to apply for the employment pass. Applicants who are young graduates from acknowledged institutions are required to earn $3,600 in order to qualify. More senior and experienced applicants require a higher salary before being eligible to apply. All nationalities are eligible to apply for the Employment Pass.

Each application is on a case by case basis. There is no proper list of approved institutions that applicants are required to be from. Instead, applicants are evaluated by their own merit which is based on a wide range of criteria. Hence, applicants who have acceptable qualifications does not necessarily result in approval. Likewise, applicants without acceptable qualifications are not necessarily rejected. Track-records and skill sets are taken into account as well which can result in the approval of the employment pass.

Employers may be required to advertise their job opening on the Jobs Bank before submitting an Employment Pass application. This advertisement has to be open to Singaporeans and run minimally for 14 days. The employer or an authorised third party is required to apply for the candidate’s application. However, if you are an overseas employer and you do not have a registered office in Singapore, you are required to:

  • Get a Singapore-registered company to act as a local sponsor and apply on your behalf.
  • The local sponsor must apply manually.
  • The candidate will still need to meet the Employment Pass criteria.

Cost

Submission of application is $70 for each pass. When the pass is approved and issued, it will cost $150 for each pass and $30 for each multiple journey visa. Online application will take approximately 7 working days to process. Complicated cases will require a longer time. Manual application will take approximately 5 weeks to process.

Required documents for application

The required documents needed prior to the application is as follows:

Table 3: Required documents for application

Other documents may also be requested when your application is being reviewed. For non-English documents, you must submit the original document and an English translation. The translation can be done by a translation service provider, embassy or notary public.

Additional documents are required for the following:

For regional representatives of overseas companies

You will need:

  • A copy of the approval letter from International Enterprise Singapore for setting up the representative office in Singapore.
  • A letter from the representative’s office headquarters stating:
    • The purpose of the application.
    • The duration of the candidate’s assignment.
    • A guarantee for the maintenance and repatriation of the candidate.

For healthcare professionals, lawyers, football players or coaches:

You will need supporting documents from the respective professional bodies:

Table 4: Supporting documents for professional bodies

For employees in a food establishment:

A copy of the licence issued by the National Environment Agency.

Duration of Employment Pass

The duration of first-time candidates is up to 2 years. Renewals of employment pass lasts up to 3 years.

Renewal of Employment Pass

Employment Pass can only be renewed 6 months prior of pass expiration date. You must apply before the expiry date.

For Employment Pass (sponsorship)

You can start applying to renew when you get the renewal forms in the mail, 3 months before the pass expires. Your application has to reach MOM at least 2 weeks before the pass expires.

It is important to know that not all renewals are guaranteed. Each application is reviewed and evaluated according to the current eligibility criteria. Always remember to apply for renewals early. If you miss the date line, you are required to apply for a new pass using the renewal forms for Employment Pass (sponsorship) holders. Renewing of pass does not result in you losing your remaining days. It will only take effect when your current pass is expired.

You can check up on the pass expiry date for your employment pass here

Existing EP holders whose passes expire on the dates stated below can expect a renewal of 1 to 3 years:

How to renew

Log in to EP Online to apply for renewal.

For Employment Pass (sponsorship): complete the renewal form and mail it to us. Remember to include all supporting documents mentioned in the form. The outcome letter will be mailed to you.

Upon renewal of Employment Pass

When you renewal application is successful, you will get an In-Principle Approval (IPA) letter which is valid for only 3 months. During this 3 months, you must get the pass issued. The duration of the renewed pass will start when the current pass expires.

Taking up secondary directorship

Eligible companies can appoint Employment Pass holders from another related company to their Board of Directors. the employer who intends to appoint EP holder to Board of Directors may apply directly. The process will be done within 5 weeks.

Directorship with related company

If you wish to appoint an Employment Pass holder from another company to your Board of Directors, you must first seek approval. If approved, the Employment Pass holder will be granted a Letter of Consent (LOC).

MOM will generally grant a LOC only if:

  • Your company is related by shareholding to the Employment Pass holder’s employer.
  • Employment Pass holder is taking up the secondary directorship for purposes related to their primary employment.

Self-Assessment Tool (SAT)

You are able to use this online Self-Assessment Tool provided by MOM to have a good indication of your eligibility. If the SAT states that you are eligible, there is a high chance of MOM approving your application. If it states that you are not eligible, do not apply as it will get rejected.

Use this list of standard occupations for filling out the Occupations field of the manual Employment Pass application form. Choose the closest match for the candidate’s occupation.

Steps to apply for pass, appeal a rejected pass, renew a pass, cancel a pass, replace a pass card can be found here

E-services and forms can be found here

For more information on family passes and informing MOM of necessary changes, click here

Entrepass

This pass is eligible to foreign entrepreneurs who want to start and operate a new business in Singapore. This new business has to meet certain requirements before you are eligible for an Entrepass.

You are eligible for an EntrePass if:

  • You have (or intend to start) a private limited company registered with the Accounting and Corporate Regulatory Authority (ACRA).
    • If registered, the company must be less than 6 months old on the date you apply.
    • If you have not registered, you can wait for the outcome of your application before registering.
  • Your company has at least $50,000 in paid-up-capital. You need to provide a bank statement that shows at least $50,000 in a Singapore-based company bank account.
  • You hold at least 30% of the shares in the company.

Application for an EntrePass is open to all nationalities.

Your company also needs to meet at least one of these requirements, which will be assessed based on merits:

1. Has funding from a Government-accredited VC or business angel

Your company receives funding or investment from a venture capitalist (VC) or business angel who is accredited by a Singapore Government agency.

Examples include:

  • Contact Singapore – Global Investor Programme (GIP)
  • Economic Development Board Investments (EDBI)
  • Infocomm Investment
  • National Research Foundation – Early Stage Venture Funding (ESVF)
  • SPRING Singapore – SPRING SEEDS, Business Angel Scheme (BAS)

Guidelines

  • The company must receive monetary funding of at least $100,000.
  • Submit a shareholder certificate and other relevant documentation to support your application.

2. Holds an intellectual property

Your company holds an intellectual property (IP) that is registered with an approved national IP institution

Guidelines

  • One of the shareholders must be the owner of the IP.
  • Expired IPs can be considered as long as one of the shareholders is the inventor of the IP.
  • The IP must be related to your proposed business.

3. Has research collaboration with A*STAR or a university

Your company has an ongoing research collaboration with a research institution recognised by the Agency for Science, Technology and Research (A*STAR) or institutes of higher learning in Singapore.

Examples include:

  • National Research Foundation – Campus for Research Excellence and Technological Enterprise, Research Centres of Excellence
  • National University of Singapore
  • Nanyang Technological University
  • A*STAR Research Institutes

Guidelines

  • The duration of the research collaboration is not essential.
  • The research institution needs to provide a contact person to verify the research collaboration details, which must be related to your proposed business.
  • You must be involved with ongoing research collaboration.
  • Contract of services is not considered to be research collaboration.

4. Is an incubatee at a Government-supported incubator

Your company is an incubatee at a Singapore Government-supported incubator, e.g. SPRING Singapore’s Incubator Development Programme.

Guidelines

  • You must be an existing incubatee.
  • Your incubatee work must be related to your proposed business.

Documents required for EntrePass

You need to submit documents such as a business plan and copies of your passport along with the EntrePass application.

You will need these documents to apply:

  • Copy of the personal particulars page of your passport.
  • Past employment testimonials in English.
  • A business plan in English (not more than 10 pages) with the following:
    • Business idea
    • Product or service offered
    • Market analysis
    • Market plan
    • Operation plan
    • Financial projections
    • Management team
    • Supporting documents – for example, licensing agreements, product certifications and endorsements
  • For businesses registered with the Accounting and Corporate Regulatory Authority:
    • Company’s latest business profile or instant information.
    • A bank statement of at least $50,000 from a Singapore-based company bank account.

Other documents may be required while reviewing the application.

Application of Entrepass

Submission of EntrePass application can be done at any SingPost branch. After applying, you may still need to register your business and submit additional documents before final approval.

Cost

There is a submission application fee of SGD $70 for each pass. When the pass is approved and issued, it will cost $150 for each pass and $30 for each multiple journey visa

How long it takes

It takes about 6 weeks for the process to be finalised.

Businesses that are not eligible

The following businesses are not eligible for an EntrePass:

  • Coffee shops, hawker centres, food courts
  • Bars, night clubs, karaoke lounges
  • Foot reflexology, massage parlours
  • Acupuncture, traditional Chinese medicine, herbal dispensing businesses
  • Employment agencies
  • Geomancy business

Applicants can apply directly for the Entrepass. There is no minimum salary requirement for this Entrepass. The Entrepass lasts for up to a year and it can be renewed only when the criteria for renewal is met.

Renewal

The renewal is based on how well you meet your original business plan, the number of local full-time employees you hire and your total business spending, as shown in the table below:

Table 6: Basis of renewal for each catergory

If you had applied for the EntrePass before 28 September 2009, you need to meet all the renewal criteria starting from the first year. This applies to your EntrePass renewals from 1 September 2014 onwards.

If you had applied for the EntrePass on or after 28 September 2009, you need to meet the renewal criteria based on the number of years you have held the pass.

Things to Note

  • You need to inform MOM if you deviate from your original business plan.
  • Local jobs refer to full-time employees who are Singapore citizens or permanent residents. They need to have worked for at least 3 months, earn at least $1,000 and receive CPF contributions.
  • Total Business Spending (TBS) = [Total Operating Expenses – (Royalties/Franchise Fees/Know How Fees to Overseas Companies + Work Subcontracted to Overseas Companies + Remuneration to Applicant)].

How to renew

Complete the EntrePass renewal form. Post the form and the required documents

Work Pass Division
Ministry of Manpower
18 Havelock Road
Singapore 059764

Documents required

You need to submit the following documents with your application:

  • Latest audited accounts.
  • Central Provident Fund statements for your employees.
  • Office tenancy agreement.
  • Latest company registration information from the Accounting and Corporate Regulatory Authority.

You may also submit these optional documents to support your application:

  • Corporate bank statements for the past 3 months.
  • Referral letters from customers.
  • Recent invoices issued.
  • Contracts awarded

Upon renewal

When you renewal application is successful, you will get an In-Principle Approval (IPA) letter which is valid for only 3 months. During this 3 months, you must get the pass issued. The duration of the renewed pass will start when the current pass expires.

Steps to take for application for Entrepass can be found here

Passes for family members can be found here

Apply for pass, renew pass, cancel pass, replace pass card can be done here

E-services and forms can be found here

Personalised Employment Pass

The Personalised Employment Pass is for high-earning Employment Pass holders and overseas foreign professionals. It is not tied to an employer and offers greater flexibility than an Employment Pass.

You can apply for a Personalised Employment Pass (PEP) if you are:

  • An overseas foreign professional and your last drawn fixed monthly salary overseas was at least $18,000. Your last drawn salary should have been within 6 months before you apply.
  • An Employment Pass holder earning a fixed monthly salary of at least $12,000.

You are not eligible for the PEP if you are:

  • An Employment Pass holder under the sponsorship scheme.
  • A freelancer or foreigner who intends to work on a freelance-basis.
  • A sole proprietor, partner or director and shareholder in an ACRA-registered company.
  • A journalist, editor, sub-editor or producer.

Note: You are not allowed to start a business or conduct any form of entrepreneurial activity while on a PEP. If you intend to do so, you should apply for an EntrePass.

Pass Requirements

In order to keep holding a PEP, you must:

  • Not be unemployed in Singapore for more than 6 months at any time. Otherwise, you will need to cancel the pass.
  • Earn a fixed salary of at least $144,000 per calendar year, regardless of the number of months you are in employment.
  • Notify MOM of the following :
    • When you start or leave a job.
    • If you change your contact details, such as local contact person or address.
    • Your annual fixed salary. You need to declare it to us by 31 January of every year.

Benefits of the PEP

The PEP gives you greater job flexibility than other work passes:

  • You can generally hold a job in any sector. However, the PEP does not exempt you from complying with registration requirements to practise in Singapore for professions such as medicine, dentistry, pharmacy, architecture, law, etc.
  • You do not need to re-apply for a new pass if you change jobs; you only need to notify us.
  • You can stay in Singapore for a continuous period of up to 6 months without a job to search for new employment.

Salary

Candidates are able to apply for the PEP directly for themselves. Current EP holders will require to earn at least $12,000 a month. Overseas foreign professionals are required to earn at least $18,000 a month.

Duration

The PEP can last up to 3 year. There is no renewal of the PEP. It is only issued once.

Cost

There is an application fee of $70 for each pass.
When the pass is approved and issued, it will cost $150 for each pass and $30 for each multiple journey visa

How long it takes

It takes around 5 weeks to process your application.

Steps to take for application for PEP can be found at here

Passes for family members can be found here

Apply for pass, Renew of pass, Cancel a pass, Replace a pass card can be found here

E-services and forms can be found here

Source: Singapore’s Ministry of Manpower website

M&A Selection Criteria & Evaluation Process: Transaction Analysis

The final stage of the M&A evaluation is determining how much to pay for the Target. The greatest risk of any deal is paying too much. As such it is imperative to determine what is the fair value of the Target and whether the purchase price is fair and attractive to the Acquirer.

When performing a valuation on the Target, there are several methodologies that should be considered to determine what is a reasonable value. The common methods are the (1) discounted cash flow analysis, (2) internal rate of return analysis and (3) public comparables.

Discounted Cash Flow Analysis

Under the discounted cash flow (DCF) model, the target firm’s intrinsic value is estimated using the future cash flow that is available for distribution to investors of the firm. Free cash flow, as it is known, is derived from taking the operating cash flows and deducting reinvestment in long-term assets and working capital in the future. The free cash flow of the Target is discounted to the present value using the Target’s cost of capital, on the assumption that the firm will continue to operate into perpetuity by using a sustainable long term growth rate. A good estimation of future free cash flows will incorporate both the macroeconomic conditions and understanding of the drivers of the business.

Internal Rate of Return (IRR) Analysis

The concept of the IRR is to estimate what is the implied return on investment that the Target can generate to break even on the initial purchase consideration. This is done in conjunction with the forecasts of free cash flow. The rate of return calculated is compared to the cost of capital that the Acquirer incurs to raise the funds necessary to purchase the Target. The IRR should be equal or more than the cost of funds that the Acquirer incurs to be considered reasonable.

Public Comparables

Using this methodology, the fair value is derived from the trading multiples of listed companies that operate in the same industry as the Target. Common multiples include the Enterprise Value to EBITDA ratio and the Price to Earnings ratio. An industry average of the ratios is derived and compared with the Target to estimate how much the public stock market is valuing the Target.

The Acquisition Premium

Fair value represents the minimum price that a rational seller would accept in the exchange for the loss of the benefit of ownership of the firm. Although it is the starting point of a transaction, a premium above the fair value is usually paid by the Acquirer to entice the Target shareholders to relinquish their control.

To justify why the Acquirer would pay more than what the Target is worth, there must be an additional value that arises when the two firms combine. The additional value comes from either revenue or cost synergy. Revenue synergy is created when the combined firm can generate greater sales than if they were separate. This can be achieved through activities like cross-selling of products among the two firms or greater market power. Cost synergy is achieved by having better economies of scale due to a larger volume of activity.

As a rule of thumb, the additional price paid for the Target should not exceed the present value of the synergies of the combined firm. Otherwise, the Acquirer face overpayment which results in loss for their shareholders.

Transaction Comparables

One method to measure how much premium to pay for the Target is to make use of comparable multiples of previous M&A deals that are similar to the Target. Common multiples include the Transaction Value-to-EBITDA ratio and Offer Price-to-Earnings ratio. The process to derive the purchase price for the Target is similar to that of the public comparables method. However, the value derived here includes the premium paid to the Target.

With many methodologies to choose from and difficulty in forecasting a firm’s performance, executives should recognise that valuation is both an art and a science. After all, the true value of a firm lies in the eyes of the beholder as different managers can deploy the assets in unique ways to generate varying returns. The final purchase price decided is dependent upon the negotiation process which varies according to the needs of the parties involved.