Matsobanemetja Business Consulting Pty Ltd

The Components of the Annual Financial Statements

When I teach small business owners the importance of Bookkeeping, I always highlight that they know the following categories by heart. That is: Assets, Liabilities, Income, Expense and Owners ‘s equity.

The reason I do that is because, the above-mentioned categories play a huge role in preparing the company Annual reports known as Annual Financial Statements – AFS.

Briefly, the importance of AFS is that you want to know the performance and the position of the business after a certain period. I also urge the business owners not to wait for a 12 months period before they prepare the reports. Preferably on a monthly basis. That way you also understand the business, risks to mitigate if any as well as improvements to be made. You do not want to wait for a year. It will be a little too late and so much would have been lost.

The four primary parts that forms the Annual Financial Statements are: Income Statement, Balance Sheet, Cashflow Statements and Statement of owner’s equity.

1. Income Statement
– explains the performance of the business. Consists of the operating and non-operating section. This report have all the the details of the company earnings as well as the company spending. Earnings in the form of sales generated/ revenues. Spending is operational expenses incurred in order for the business to operate. However prior we list the expenses we also have to take into account the COS – Cost of Sales. To simplify it, COS are the raw materials that are needed to be put together in order to have the end product. They are known as the non operational section of the report. Not all businesses will have this part of the report. It depends on the nature of business. The reason to minus the expenses from the business sales it is so that we can determine how much profit we are left with. That is the net profit of the business. The figure is also known as the taxable income by the receiver of revenue. From this report, you will be able to see if the business is profitable, stagnant or non-profitable, thus the performance.

2. Balance Sheet
– explains the position of the business. It consists of the Assets and Liabilities.
Assets are the items that the business owns. The use of assets is to generate an income. We have current assets and non-curremt assets. Current Assets are those items that change their position at anytime. For e.g. cash, stock,etc. While non-current Assets have a long time span in the business. For e.g. vehicles, machinery, property, etc. Though they lose their value over time but they help in generating income for the business over and over again. Liabilities are the people that the business owes. Such as loan, suppliers, tax, etc. We call them liabilities because you are obligated to pay back.

3. Cashflow Statements
– it pertains the inflow and outflow of cash in the business. The person reading this report they are able to determine your relationship with the money. As money comes into the business as sales/revenue or a loan – we also scrutinise the manner in which it leaves the business. The business funds must be used for the following reasons: Operational use, Investing and Financing. If anyone reads the cashflow statement and they find the discrepancies that are not of the above-mentioned reasons, they can conclude that you are then careless with the money. And this conclusion may block many opportunities for you. No one would like to risk doing business with an irresponsible individual. Thus, seriously be in check the relationship you have with the money.

4. Statement of Owner’s equity
– the main objective of this report is to indicate how much of the business owner is stored in the business. For e.g. the money that the owner inject into the business is called Capital. The transaction can be allocated on the balance sheet section of the financial statement. As it has the same effect as those of liabilities.

Let It be known that all these reports combined are called Annual Financial Statements. You cannot prepare one and name it AFS. They each give a specific status of the business.

These reports are also important to external parties such as the banks, Sars, investors, funding institutions, government, and many others.

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

Compiled by Ms. Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting (Pty) Ltd

For more information: enquiries@matsobanemetja.co.za

“You have more independent eyes scrutinizing the decision-making and financial statements of companies.”
Steve Odland

#TaxMatters |CAPRICORN FM INTERVIEW

1. My employer deducts tax from my salary every month, why am I expected to file the tax return every tax season?

– The employers are obligated to collect the tax monies from the employees every month in the form of Pay As You Earn. Individuals are further required to validate the information submitted to the receiver of revenue every tax season that takes place in July every year. The employer will issue the tax certificate called – IRP5 to use to cross refer the information submitted against the SARS portal. It must also be added that it is not only the IRP5 that may be required but other third parties tax certificates such as medical aid tax certificate, retirement annuity tax certificate, logbook if the employee receives travel allowance from the employer, and many others applicable to an employee.

2. I received an auto assessment from SARS, and I had a refund that is already paid into my bank account, is there anything that I am expected to do?

– Receiving an auto assessment does not necessary mean that you should not verify the submitted information. You are still required to log into your SARS e-filing profile and check all the details if they are correct. Should you be satisfied, no further action is required. However, should there be any corrections required to be made, you may please go ahead and request the correction to re-submit the assessment. The new assessment will override the initial one made. You may be required to upload the supporting documents to validate the change on your return.

3. I am employed full time however, I have a property that I own that I am receiving a rental income from, do I need to declare the extra income and how?

– All the other extra income that is received by the taxpayer needs to be declared to the receiver of revenue. Under a normal circumstance the employer is the one deducting on your behalf, but in the case that you still need to declare the extra income on your own, you please need to prepare the recon / financial statement to this regard. The recon must include the income less all the expenses incurred because of the operation during the tax period. The individual Tax period runs from March to February every year. When submitting the return on e-filing you must indicate on the question wizard that you have received an extra income so the additional form can be created for you to submit the information as per your reconciliation.

4. What happens when I do not declare the extra income? And how will they know?

– Let it be known that SARS is a very powerful entity. Thus, they can exercise their powers to request from all the third parties your information pertaining to your earnings and contributions. They can request your bank statement from the bank without your knowledge and prepare their own recon to build a strong case against you. You will be given an opportunity to dispute, just as long as you have all the relevant information and supporting documents. I did not know – is not an acceptable defense! J

5. There are scenarios where I receive a refund from SARS and there are cases where I may owe SARS – what could be the reason for these discrepancies?

– Few technicalities may lead to the discrepancies, especially the miscalculations with regards to the employee ‘s pay as you earn. Under payments results to payable by you to SARS & over payments may lead to a refund to you. Other discrepancies may derive from the third parties such as own medical payments that you have paid for yourself were the medical aid could not pay for your medical bill – SARS can refund you the portion of that ‘own payment’. But there are may technicalities to this effect.

The interview took place on Capricorn FM with @mrmao_AF #CapricornSunrise and Ms. Dikeledi Seoloane – Chief Accountant and Tax Practitioner at the accounting firm Matsobanemetja Business Consulting (Pty) Ltd – http://www.matsobanemetja.co.za

For more information, please contact us: enquiries@matsobanemetja.co.za

I did not know, it is not an acceptable reason not to comply with the taxman
Dikeledi Seoloane

AVOID SHORT CUTS TO COMPLIANCE

There is no doubt that compliance plays a significant role in every entity. For smooth operation and other advantages that comes with it.

Compliance will help your company avoid legal risks. Lawsuits and settlements can easily cost you millions of rands. Fines and other compensatory payments can also add up.

Even if you are able to pay these costs, you might see your sales drop dramatically. Some tenders or job applications require that you comply before they approve your application. The banks, funding institutions, etc.

Damage to your company’s reputation can take years to repair. It’s impossible to estimate just how much monetary damage it can do. It’s better to practice compliance and avoid a breach altogether.

Do not seek short cuts to Compliance.
Please be in the know what makes a business to comply. In this case we refer to Tax compliance. As a business owner make it your primary duty to understand what it takes for a business to be Tax compliant.

I mean, you cannot just comply automatically especially if the business is in operation. To be Tax compliant you need to have financial statements for the business prepared so you can submit your tax return. I am referring to Income Tax here. After submission, if the business was profitable, you will have the tax calculated then pay the funds to the receiver of revenue – SARS. Once the payment is allocated against your business tax account then your status will become compliant.

When you are a VAT registered vendor, you are expected to submit the VAT returns every two months.

If you have other statutory taxes registered such as PAYE, UIF, etc you are expected to file their returns every month, before the 7th of every month.

I am writing this blog in hope to caution you against the religious force of compliance without following all the necessary steps. Such as capturing the transactions, preparing the reports and having them ready for submission to the taxman. First and foremost prior to the submissions as the business owner you need to make sure that you approve all that has been prepared for the business so you can understand your business position and performance. This will make you understand why you are paying the figure that you are paying.

Force compliance can be in the form where your tax returns are submitted but as zero returns. Which means you are saying the business is dormant. This cannot be the case if there is movement of funds in the business bank account.

If you need a consultation with us with regards to your business, any type of business – please reach out to us at PA@matsobanemetja.co.za

Compiled by Ms. Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting (Pty) Ltd

For more information: enquiries@matsobanemetja.co.za

If you think compliance is expensive, try non-compliance
Unknown

Individual tax season, provisional tax payers and SARS auto assessment.

Individual tax season has opened, the official filing resumes on 07 July 2023. From 30 June to 07 July SARS will be issuing communications to all the tax payers that have at least less complicated tax affairs auto assessment via text or email.
If you have not received one yet, please wait a bit till the 07th July.

If no auto assessment has been received still then you may proceed submit the tax returns manually on e-Filing.

A reminder that it is your responsibility as the tax payer to make sure that all the tax returns for all the periods have been submitted to avoid late submission or non submission penalties being imposed on your account. Tax is an obligation.

SARS Auto assessment:
It is generated automatically when the tax authority believes no additional input from the taxpayer is required. The assessments are based on data from your employer, medical scheme, financial institution and any third-party data providers. All these institutions are obliged to submit your contributions for the past 12 months to make sure that all are taken into account.

If I receive an auto assessment do I just accept it?
No! You MUST check the SARS auto assessment carefully before accepting or rejecting it. No one knows your tax situation better than you, and due to the assessment being automatically generated, there is every chance it could be inaccurate and that can result in you paying monies to the tax-man as a result of such omissions. Because of this the issue of underpayment or overpayment may arise.

Another aspect that you need to take into careful consideration is, if you are a full time employee and also receive an additional income other than that of your employer – you need to make sure that you account for it. For e.g. Rental income, locums, network marketers,etc. When submitting your tax returns using your employer’s Irp5 – you need to declare the extra income received in the past 12 months period. Keep records of all your earnings and expenses so that they can be used to calculate the taxable income. Failure to do so, you are opening up yourself for audits that will drag and exhaust to you. We all wish for a seemless experience with the taxman.

Provisional taxpayer
– are people who earn income other than a salary / remuneration on which no income tax has been deducted/withheld. They will need to declare their total estimated taxable income on their provisional tax returns (IRP6) and pay the applicable tax thereon. Under normal circumstances, your employer will deduct tax on your behalf as PAYE but should you be in contractual agreement that requires you to take care of your taxes, you then fall under this category!

N.B. If you are to use anyone for the submission of your tax returns, be sure to use registered consultants. SARS is in the business of collecting money from the citizens. Please do not withdraw money that you are not sure how they came about. Do not let anyone perform fraudulent activities using your account.

Compiled by Ms. Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting (Pty) Ltd

For more information: enquiries@matsobanemetja.co.za

“The hardest thing in the world to understand is the income tax.”
Albert Einstein

What happens when I don’t make use of the business bank account yet the business is trading?

I am not sure how best to respond to the above question other than say “it is a self sabotage”

When a business is registered, it is given its own legal entities. Name of operation, registration number, tax number and must have it’s bank account opened for it so that all the business transactions can take effect from. Which means, it is a legal entity beyond it’s owner.

In instances where you have a business that is operating and do not utilise the business bank account, but use the personal account instead please note that you are merely saying the business is not trading thus you must file zero returns on the business financial year end. It means the business is dormant.

The Business that operates under the sole owner ‘s name is called a sole proprietor.

What is meant by a Sole Proprietor?
– is a business that is owned and operated by a natural person (individual). This is the simplest form of business entity. The sole proprietorship is not a legal entity. The business has no existence separate from the owner who is called the proprietor.

Which means for the sole proprietor to account for its taxes, it will do so under the individual tax number, not the company tax number.

You cannot even request that the transactions that happened under your personal account be transferred to the business account especially when all the transactions, including sales and purchases were transacted from personal account.

I know there are scenarios where some business owners would like to make it easier for their customers that prefers to transact from personal account. This can be done however – the transaction has to carry an equal debit and credit. Meaning as soon as the money comes into your personal account, it is transferred to the business account as it belongs there.

As an accountant, I wouldn’t advise on this method of transacting. It has elements of complications as it creates unnecessary administration for you. As much as you transfer all the money to a business account, you are still required to reconcile the individual account. To show that it is at zero. Meanwhile you do that, the bank also charges for utilising the facility- bank charges. Which means you pay bank charges on both the accounts. Is it worth it? I think not!

Let us stretch it further. What happens when SARS decides to raise an audit on all your bank accounts?
SARS doesn’t raise an audit without them having done their own reconciliation. Bear in mind, they have the powers to obtain your Bank accounts details without your permission. Yes they do that. They can even debit your account or raise a garnishee orders from your employer. That’s how powerful they are.

Thus if you are serious about building your business, why would you want to mess with such a powerful state entity? I advise that you keep things clean.

When you have a registered business, please use it to receive your salary that you will get from the business and transact all your personal activities from there.
SARS do not entertain the “I did not know” type of defense. They will still want to penalise you so that you do know for the future. Do not forget that SARS is in the business of collecting money, that’s their revenue thus they wouldn’t let you go easily!

You can consult with us if you need a more detailed clarity. Our email adress is enquiries@matsobanemetja.co.za

Compiled by Ms. Dikeledi Seoloane – Accountant, Tax Practitioner and Owner at Matsobanemetja Business Consulting – The Accounting Firm

http://www.matsobanemetja.co.za

He who buys what he does not need, steals from himself.
– Swedish Proverb

Common Bookkeeping Mistakes that Small Businesses Make and ways to avoid them.

Making small bookkeeping mistakes that are costly or even damaging to your business is an unwelcome possibility. However, understanding common errors and how to avoid them can help you stay on top of your books and make sure your business stays afloat.

Overlooking Deadlines

Overlooking deadlines is a common mistake that small businesses make in bookkeeping. This mistake can be costly as it could result in late fees, penalties, and even legal issues. Small business owners must prioritize their finances and stay on top of important deadlines to avoid these negative outcomes.

One way to avoid missing deadlines is by keeping track of all the tasks that need to be done and when they are due. Creating a schedule or using accounting software, with built-in reminders can help ensure that nothing falls through the cracks. Additionally, delegating tasks to team members or hiring a professional bookkeeper can take some of the pressure off and ensure that someone is responsible for meeting deadlines.

Ultimately, overlooking deadlines can have serious consequences for small businesses. By making organization a priority and utilizing available resources, small business owners can avoid this costly mistake and keep their financial records up-to-date.

Not Separating Business & Personal Accounts

One of the biggest bookkeeping mistakes small businesses make is not separating business and personal accounts. The line between personal and business expenses can get easily blurred when using a single account. This can cause confusion during tax season, leading to incorrect deductions or overpaying taxes.

Not only does mixing accounts complicate your bookkeeping process, but it also puts you at risk for legal issues. If you’re ever audited, they’ll want to see clearly separated accounts. Mixing personal and business expenses raises red flags and increases your chances of being selected for an audit.

To avoid these potential problems, it’s important to open separate bank accounts for your personal and business finances. If your business isn’t incorporated, you don’t need a business bank account but a separate personal account that you use for business is extremely beneficial.

Keep detailed records of all transactions made on each account so that you can track your spending accurately throughout the year. By doing so, you’ll be able to stay organized come tax time and reduce the likelihood of any costly errors or legal issues down the road.

Poor Record Keeping Practices

Poor record-keeping practices can be detrimental to any small business. It can lead to financial losses, missed tax deductions, and even legal issues. One of the most common mistakes made by small businesses is not keeping track of their expenses properly. This can lead to overpaying taxes and missing out on potential deductions.

Another poor record-keeping practice is failing to separate personal and business finances. This can make it difficult to accurately calculate profits, losses, and expenses for tax purposes. It can also put personal assets at risk in case of a lawsuit or bankruptcy.

Finally, relying solely on paper records can be a major mistake for small businesses in the digital age. Digital records are much easier to manage and organize, reducing the likelihood of errors or lost information. Failure to adopt digital record-keeping practices could put small businesses at a significant disadvantage compared to competitors who have embraced this technology.

Not Tracking Expenses Accurately

One of the biggest bookkeeping mistakes made by small businesses is not tracking expenses accurately. This can lead to a number of problems down the line, including missed deductions and incorrect financial statements. It’s important for small business owners to develop a system for tracking expenses that work best for their needs.

One way to track expenses accurately is by using accounting software or apps. They can help automate the process of recording transactions and categorizing them correctly. Alternatively, keeping careful records in an Excel spreadsheet or even on paper can also be effective.

By accurately tracking expenses, small business owners can gain insights into their spending habits and make more informed decisions about future investments. Additionally, they’ll have all the information they need at tax time to take advantage of all eligible deductions and avoid any potential issues with the South African Revenue Services
“Creativity is great, but not in accounting.”

Not Managing Accounts Receivable

One of the biggest bookkeeping mistakes that small businesses make is not properly managing their accounts receivable. This can lead to serious cash flow problems and ultimately, business failure. Failing to follow up on unpaid invoices in a timely manner can result in lost revenue, and customers who regularly pay late can cause significant stress for business owners.

To avoid these issues, it’s important for small businesses to have clear policies and procedures in place regarding invoicing and payment collection. This includes setting payment terms upfront, sending invoices promptly after services are rendered or products are delivered, following up with reminders as necessary, and potentially even offering incentives for early payment. Utilizing accounting software to track receivables can also help ensure nothing falls through the cracks.

Ultimately, effective management of accounts receivable is crucial for any small business looking to maintain a healthy cash flow and avoid financial troubles down the line. By staying on top of invoicing and collections processes, entrepreneurs can better focus on growing their businesses without worrying about unpaid bills piling up.

Not Managing Accounts Payable

Not managing accounts payable is one of the biggest bookkeeping mistakes small businesses make. Failing to properly manage accounts payable can lead to serious financial problems for a business, as it can result in missed payments, late fees, and even damage to the company’s credit rating. It’s important for small business owners to stay on top of their bills and make sure that all payments are made on time.

One way to avoid this mistake is by implementing an efficient system for managing accounts payable. This could include setting up reminders for bill due dates, creating a schedule for when bills need to be paid, and keeping track of all invoices and receipts. Another important step is to regularly review the accounts payable ledger to ensure that everything is up-to-date and there are no outstanding bills or errors in the system.

Small businesses should also consider automating their accounts payable process. This can be done through accounting software or other tools designed specifically for managing finances. Automation can help save time and reduce errors in the billing process, making it easier for business owners to stay on top of their finances and avoid costly mistakes down the line.

Not Monitoring Cash Flow

Not monitoring cash flow is one of the biggest bookkeeping mistakes small businesses make. Managing cash flow effectively is crucial for business success, yet many entrepreneurs fail to keep track of their finances properly. This can lead to serious problems down the line, such as an inability to pay bills on time or a lack of funds for future investments.

One reason why small businesses do not monitor their cash flow is that they find it challenging to track expenses and income regularly. However, failing to do so means that they are unable to identify potential issues early on and take corrective action before it’s too late. Another mistake that small businesses make is not having a budget in place for managing expenses and revenue. Without a budget, there’s no way to determine how much money should be allocated toward certain areas of the business or how much revenue needs to be generated each month.

Not monitoring cash flow can be detrimental to any business – big or small. Small businesses need to understand that keeping track of finances regularly isn’t just important but necessary if they want their companies to thrive in today’s competitive market. By setting up a solid accounting system and sticking with it consistently, entrepreneurs can ensure better financial health for their ventures while avoiding costly mistakes along the way.

Not Understanding Tax Requirements

Not understanding tax requirements can lead to legal and financial problems for small businesses.Charging the correct amount of taxes on sales, and not remitting taxes collected on time. The SARS imposes penalties and interest charges for late or incorrect filings, which can add up quickly.

To avoid these mistakes, small business owners should educate themselves about their tax obligations. They can consult with a tax professional or use online resources provided by SARS. It’s important to keep accurate records of all transactions and receipts in case of an audit. In addition, setting aside funds each month for taxes owed can prevent cash flow issues when it’s time to remit payments to SARS. By taking these steps, small business owners can avoid the stress and financial burden that comes with non-compliance with tax laws in South Africa.

Avoid Common Errors

One of the most common errors that small businesses make in bookkeeping is failing to keep proper records. It’s important to keep track of all financial transactions in order to ensure accuracy and prevent errors down the line. This includes keeping receipts, invoices, and bank statements organized and up-to-date.

Another mistake that small business owners often make is confusing personal and business expenses. It’s important to keep these two categories separate in order to accurately account for tax deductions and avoid any legal issues. This means having a designated business bank account and credit card, as well as only using personal funds for truly personal expenses.

Lastly, failing to reconcile accounts regularly can lead to significant errors in bookkeeping. Reconciling involves comparing your records with those of your banks or credit cards, ensuring that they match up correctly. By reconciling on a regular basis (monthly is recommended), you can catch any discrepancies early on and avoid costly mistakes down the line.

Compiled by Ms. Dikeledi Seoloane – Accountant, Tax Practitioner and Owner at Matsobanemetja Business Consulting – The Accounting Firm

If you need assistance with bookkeeping for your small business, please email us enquiries@matsobanemetja.co.za

http://www.matsobanemetja.co.za

Making good judgements when one has complete data, facts and knowledge is not leadership – it’s Bookkeeping
Dee Hock

PAYROLL TECHNICALITIES FROM AN EMPLOYER AND EMPLOYEE PERSPECTIVE

I am writing this blog at the right time where many employers are already in the middle of preparing their monthly payroll run.

The objective of the blog is to breakdown the distinctive features of payroll from an employer and employee perspective.

1. EMPLOYEE – as an employee you do not worry much about the calculations, preparations and monthly submissions. The only activity is the expectations of a payslip, IRP5 with info already populated on the documents. Payslips are issued every month on or before your payday. IRP5 is issued to you by your employer every 12 months. They stipulate your gross earnings, deductions, company contributions and the net amount that transferred in your bank account as a salary.

Deductions such as PAYE, UIF, Medical aid, Provident fund, reflect on the payslip. PAYE – is your tax contributions deducted as per your salary earnings. If you have worked for a company for more than 24 hours, your employer should have registered you for UIF under the company. The contributions, 1% of your salary will be deducted from your salary and be paid to the unemployed insurance fund on a monthly basis. And the employer equally contributes an additional 1 % towards the UIF contributions.
All these should reflect on the payment remittance/ payslip.

2. EMPLOYER – quite a few things are expected from an employer as far as complying with the legislative labour laws are concerned. First, make sure that the company is registered for the statutory taxes, at least UIF and PAYE so that the entity can account for all the employees deducted monies as well as the company contributions. The procedure is performed on a monthly basis.
With regards to the PAYE – your company monthly submissions are processed via EMP201. This is a payment declaration in which the employer declares the total payment together with the allocations for PAYE, SDL, UIF and/or ETI. You file the declarations via the eFiling portal, once submitted the system will generate the payment reference which you will use on your online banking as the reference. That way SARS will be able to allocate the payments accordingly.

Another aspect with regards to the PAYE is the declaration called EMP501 -is a report of all employees ‘earnings, which must be submitted to SARS. Employers are required to reconcile the payroll taxes liabilities (PAYE, SDL and UIF) declared monthly on the Employer declarations (EMP201). The reconciliations must be submitted twice during a financial year: every six months period.

The EMP501 enables the employer to also generate the IRP5 for the employees so that they can use it for their own submissions when the individual tax season opens.

To read more on the above please visit the sars website http://www.sars.gov.za

Compiled by Ms. Dikeledi Seoloane – Accountant, Tax Practitioner and Owner at Matsobanemetja Business Consulting – The Accounting Firm

http://www.matsobanemetja.co.za

DO I HAVE TO PREPARE THE FINANCIAL STATEMENTS AS A SMALL BUSINESS?

We are always asked this question by small business owners when they need us to generate the SARS Tax Compliance Pins. And the answer is simply YES. I would like try to simplify the reason why that is the case.

The most basic requirement of compliance is that you must submit the Tax Annual returns. What is SARS Annual returns?

•The company tax return is a legally binding declaration to identify all income received or accrued and all income taxable in the hands of the company. The ITR14 (SARS form uploaded on the e-Filing profile) must be completed and submitted within 12 months after the financial year end.

• What exactly do we submit to SARS? We submit the Annual Financial Statements. How do we prepare the AFS? Though i will not be able to explain in details how to prepare the AFS on this blog I however would like to emphasize the information required to prepare the annual reports.

• A business is a transaction. Business is the practice of making one’s living or making money by producing or buying and selling products (such as goods and services).

• Thus we need to capture all these daily transactions as they occur.
The process of capturing the transactions is called Bookkeeping.
Hence, data capturing is extremely important in our businesses. Because without the information we will not be able to prepare the annual reports.

• The process sequence like this: Bookkeeping, Report Preparations then Tax. See how all these connect to one another? You will realise that we need source documents to capture transactions. Documents such as Invoices, Bank statements, some businesses have software or applications they use or even spreadsheets. The documents are given to a tax preparer or an accountant so that they can put together the annual reports.

• What are Annual Financial Statements? They are formal records of the financial activities and position of a business or person at financial year-end.

• An annual financial statement contains a list of the company’s assets and liabilities. That section is called the balance sheet. Assets can be anything ranging from cash and cash equivalents to property and intellectual properties, such as patents. Liabilities can for example be equity, the company’s debt or accounts receivable. Thereby, a balance sheet provides a snapshot of a company’s value.

• The income statement is a different part. Therein, a company’s annual income and expenses are listed in order to determine, whether a company has produced a profit or a deficit. Invoices are also taken into account here.

• Balance Sheet – informs the person reading it the Financial position of the business. Whereas the Income Statement informs about the business performance of the business. The final outcome of the income statement is the net profit, which is used to base the tax to pay. Thus referred taxable income.

• Once you register a company you need to understand that you are expected to file the tax returns every financial year end. That is the utmost obligation from your end. This is irrespective of whether the business is operating or not. If the business is doormat – you declare nil returns. Failure to do so will render your company non-compliant. And this will affect your Tax Compliance Status.

Compiled by Ms. Dikeledi Seoloane – Accountant, Tax Practitioner and Owner at Matsobanemetja Business Consulting – The Accounting Firm

http://www.matsobanemetja.co.za

PERSONALITY TRAITS THAT YOU NEED, TO RUN A SUCCESSFUL BUSINESS

Every job has a specific personal trait that one must have, to be able to abide by the job standard or requirements. For example, to be an accountant or bookkeeper you need to be able to keep a secret. You are going to work with confidential information thus you shouldn’t find it easy to disclose some information to just anyone.

On this blog I just want to discuss those general personal traits that every business owner must have.

1. Self Motivation – once you decide to start a business please note that the honours lies in you whether you plan to build a successful business or not. You need to get up every morning and report for work like any other employee. Develop a working routine that you follow through on a daily basis. The key is understanding that what you put in will always be equal to the outcome. Thus less work means less income.

2. Be organised – assist yourself by writing down the plan of action for the day so that you do not get overwhelmed by the duties at hand. The last thing you need is to be too busy but unproductive. If you put in the work, the results must be visible. For the jobs that are not under your portfolio feel free to outsource them. This will also help you to focus on running the business as opposed to the minimal operations that are not the core of the business.

3. Ability to schedule and plan – you need to understand the nature of the business. For e.g. an accounting firm is a deadline driven kind of business. We need to make sure our clients work is up to date all the time. This means we need to prepare the interim reports on a monthly basis so that our function is not compromised. Any other business, you must have a turnaround time. The ordering process must be clear to your customers, and they should be able to know when your deliverable will be made.

4. Persistence – running your business does not mean that you choose to work only when you feel like it. You must put in the work everyday. You are most likely required to be creative too. Put in the work!

5. Self-promotion – if you do not talk about your business nobody else will. Advertise your services or products to your potential customers, build awareness, do some research and ask around. There is a quote I like on marketing that says “Doing business without advertising is like winking at a girl in the dark” ☺️

Many people are not born with these personality traits but they are skills that can be learned and mastered over time thus you have no excuse.

Compiled by Ms. Dikeledi Seoloane – Accountant, Tax Practitioner and Owner at Matsobanemetja Business Consulting – The Accounting Firm

http://www.matsobanemetja.co.za

YEAR END CHECKLIST FOR BUSINESS OWNERS

This is the last blog entry for the year and I just thought it would be befitting enough for every business owner to do a bit of “stocktake” with regards to their business standing.

I have realised that many business owners do not really know their businesses legal entities and how and when to maintain them. I would like to challenge you to do this little assignment.

1. Take out your company registration documents – CK . What I would like you to observe is specifically 2 things – registration date of the business and the Financial year end of the business. As much as I would like you to know all the important details on the certificate by heart but I would like us to focus on these 2 for now. I regard the business registration documents as the identity book of the company – it is because of the importance of it, it bit just a paper but a legal document.

2. Anniversary of the business – please make sure you note by heart the exact month your business was registered. The reason is that you are required to file CIPC annual returns every year in the same month so that the business can be kept active on the CIPC database and not be deregistered / removed by the commissioner. This is despite the fact that the business is operating or not. You can read further of this basic business compliance with the CIPC by logging into their website https://www.cipc.co.za

3. Financial year end – on your company registration document please note again the month indicated as the Financial year end of the business. Because you are required every year in the same month to file your SARS annual returns. Financial year end means the month you chose when you register your business that you will declare your earnings and losses to the receiver of revenue. This is also despite whether the business is operating or not. If the company is not operating yet, you are still required to file nil returns. Do not fold your arms and say my business is not operating. The consequences are that you might be penalized for the non-submission. Penalties can range from 250.00 per month.

The above-mentioned are extremely important to every business owner. Even if you have professionals that are taking care of your business – the principle is that by all means please know them by heart.

4. The last item I would like to tackle is taking count of the assets you have acquired in the business for the year. Simplifying the meaning of the word assets – anything that provides monetary benefit in the business currently and in the future. Thus we use assets to generate an income. For example if you are running a catering business – the chairs, table cloths, and all other equipments used for rendering the services are regarded as assets. You use them over and over again to render services to your many different clients. Assets are equally and extremely important in every business thus make sure you grow them every year because that’s how your business grow.
Your business can hardly go under when you have the greatest assets in running your business. Acquire as much as you can and maintain them.

Our next blog will definitely be in the new year – 2023
I wish that you would start positively in your business and feed on more information that will assist in running your business very successfully.

Compiled by Ms. Dikeledi Seoloane. Accountant, Tax Practitioner and Owner at Matsobanemetja Business Consulting – http://www.matsobanemetja.co.za