Most businesses have already entered their new financial year end since the first of March. Their year end being February. The fiscal year is 12 months long.
I have compiled this blog to make things easier for your next financial year end. With summarised points below.
1. Bank Reconciliation
To really avoid the unnecessary discrepancy of your books you need to make sure that transactions are captured daily, timeously and with accuracy. That way you will ensure that the reconciliation is correct and reflects the true status of the business. We encourage that the reconciliation be made on a monthly basis not wait for the financial year end.
2. Reconciling expenses paid with personal money
Let it be known that the business can coexist with the business owner. Provided that there is a very strict discipline built between the two entities. The funds that are deposited into the business account by the owner to cater for the business expenses are classified as Capital.
The two accounts that are affected is the liabilities and the expense accounts. Thus the reports that will be affected here will be the balance sheet and the profit and loss statement. A qualified bookkeeper or accountant will assist in explaining to you as the business owner what effect these accounts and reports play in your business.
3. Categorization of the transactions
The misallocation or transactions will obviously create the imbalances of the reports. Some transactions are not deductable business expenses, so you must make sure that they are not included in the profit and loss instead of going to the balance sheet. This is important to avoid under-paying your income tax to the authorities. We all know by now that this will be called fraud if the authorities were to find out.
4. Reconciliations of the debtors and creditors accounts
In accounting we use an accrual system, which means we are allowed to carry over some accounts to the next financial year. This will be great as you will avoid capturing non-paid invoices as income. Creditors need to be captured as well because those are the business obligations.
5. Writing off the bad debt
As a business of any size it is crucial that the invoices are to be paid and on time. Cashflow is the heartbeat of every business. Equally so, note that the debts not paid over a long period of time will have to be written off. Which means the profit and loss account will be affected. You will understand that this is imperative as I have previously indicated that unpaid invoices should not be captured as income. As much as this is a loss but the advantage is that the figure written off will reduce your profit thus the taxable income.
6. Count your stock
Obviously based on the nature of the business you will be operating, especially the retail kind of business stock takes need to be performed frequently. This will help in the management of inventory. Occurrences such as shrinkage are as a result of theft, damages, etc.
7. Reconciling the business payroll taxes and sales taxes
The emphasis of capturing transactions on time is so that the reconciliation should also be made on time to avoid disputes being rejected or penalties being added on your account as a result of not fixing the errors not within the reasonable time.
8. Calculating the depreciation
Non-current assets as much as they have a long lifetime span they also lose value over time. The reduction of the value is called the depreciation. This will be allocated on the profit and loss statement which then reduces the business profit thus the taxable income.
You will realise that with the proper allocation of the transactions, as much as a loss may occur but there is also a consolation of a reduced tax. Who wouldn’t want to enjoy such advantages?
Matsobanemetja Business Consulting (Pty) Ltd has a great package of a retainer contract that will make your business finance life easy while you concentrate on building and growing your business.
Enquire with us by sending an email to enquiries@matsobanemetja.co.za
Compiled by Ms. Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting (Pty) Ltd – Registered Accountant and Certified Tax Practitioner.
If you need a consultation with us with regards to your business, any type of business – please reach out to us on email PA@matsobanemetja.co.za
“A person doesn’t know how much he has to be thankful for until he has to pay taxes on it.”
Anonymous
Matsobanemetja Business Consulting Pty Ltd 