Matsobanemetja Business Consulting Pty Ltd

Basic COMPLIANCE in Business
– CIPC & SARS Annual Returns.

What to do after you have a business idea?

As we all know, a business starts with an idea. Then you gather equipment and resources such as Capital or Material needed to start trading but before trading we are required to register this business idea. We register with CIPC (Companies and Intellectual Property Commission ) formerly known as CIPRO.

Why do we register a business idea?

In simple form, we operate our businesses in a country that has Business Laws and Companies Act(s). Once a business is registered, it means it has all the legal entities allocated to it for recognition, identity , development and for protection.

What to do after business registration?

So now that the business is registered ,what is the next step? Trading , right? Yes.
But do we only focus on trading and forget the rest? Definitely not! As Company Owners we are now binded by the law and obliged to follow suite. Below are just the basics that I prefer and encourage each and every Business Owner to know and understand after registering their companies.

1. Ever heard of the South African Revenue Services (SARS) and what it stands for?
This is the institution not to ignore as a responsible citizen as well as a Business owner. I mentioned the words “LEGAL ENTITIES” on the above paragraph. When your company is registered you receive the papework pularly known as CK 🙂 that details all the legal entities of the company which are company name, registration number, Tax number, Adress, etc.
Another one of this legal entity found on the documtation is the FINANCIAL YEAR END. The financial year end means a month you have chosen when you register your company that you will submit your ANNUAL RETURNS at the reveicer of the revenue.
For example, if you have chosen February this means every year in that month you are expected to file your TAXES. What does it mean to file your taxes?
You have been trading, making profit, incurring expenses, etc. so now you must prepare your Company Financial Statements according to the transactions you have recorded during the year.

This financial Statements include the following :
The Balance Sheets which determines the business position andThe Income Statements which determines the business performance.
Once this is worked out , you then submit these reports and SARS will determine how much you must pay as your tax contribution. Please note: You are taxed as per you Net profit (Taxable Income) reflecting on your Income Statement.
Whether you are trading or not, you must file .If you are not trading you must also submit but in that case you will file ZERO instead.
Failure to file means you are not in good books of the law and you will be referred as Non-Compliant .Being non-compliant is a disadvantage as you will not be receiving the compulsory documentation such as TAX CLEARANCE CERTIFICATES / PINS, etc.

2. The next one I want to highlight is CIPC as stated above. You are also expected to file annually to this institution .The difference with them is that they expect you to file on the anniversary of the business , meaning every registration date of the company you must file.
However, their standard fee is R100.00 per year for small companies that make less than R10 million per annum.A penalty of R50.00 is charged for late submissions.The reason for your company to comply is to inform the Commissioner that your business is still active and they still have the correct business details on the database.Failure to do so other than penalties added on every year, your company would be DEREGISTERED. When a company is deregistered it means it is non-existence.
Thus, as a Business owner you really need to make sure that this is in order to avoid the stress of reinstating / reviving or starting from scratch in registering a new company – it is too costly.

I have witnessed many Business owners loose opportunities and watch deals pass by because they are not in good books with the law.It is frustrating and a very regrettable thing to go through .You do not need to be an expert in these fields you just need to understand the basics or you can have an
Advisor, a very good Accountant or a Bookkeeper to guide you especially in this field.

I have tried to simplify the two but if you are still not sure and need our assistance you can send us an email enquiries@matsobanemetja.co.za

We are Matsobanemetja Business Consulting – Pty Ltd.

No business can afford to pay its founder a salary, however you are expected to draw a salary from the business as the owner. This is because you started the business with skills and experience acquired over many years. Starting a business is like pumping oxygen into an inanimate object and bringing it to life.

Why draw a salary from the business?
You withdraw a salary because, as the business owner, you are still responsible for your individual tax. You are not the business and vice versa, hence you have separate tax numbers. Being self-employed does not let you off the hook; you become the employee in your own business. The company must register for Pay As You Earn – this means all the deductions made relating to the company salaries will be withheld in correspondence to the company’s PAYE. This part of your business is referred to as ‘Payroll’. The fact that you are a small business does not exclude you from this process, in fact, these are the most basic business operations that every business owner must know and practice.

How do I pay myself / calculate my salary?
As I have initially explained – no business can afford to pay the founder on its startup phase. For obvious reasons, the business requires Capital which, as the founder, you need to organize, therefore most of the time you will compromise for its survival sake. At the same time, you cannot compromise the common practice of earning a salary as the business owner. It is advisable that you start this as early as possible. That way you get used to the process and a clear discipline will be drawn between you and the business.

How do I calculate my salary from my start up business?
I always advise that when starting your business, your first priority should be paying off your debt. You certainly do not want to have a huge financial burden when trying to focus on building the business.
You start by getting real about your personal expenses. You start by looking at the following factors:
FIXED EXPENSE: These are necessary living expenses that don’t change from month to month, such as your Rent / Bond.
VARIABLE EXPENSES: These are necessary living expenses that fluctuates month to month, such as groceries etc.
EXTRA EXPENSES: These are fixed or variable expenses that are not essential for you to live, such as eating out / entertainment.
You can therefore gauge your expenses from the abovementioned factors and transfer the same amount monthly into your personal account as a salary. Prepare your pay slip and make sure you stick to the process and the budget, irrespective of the business growth. This will help you grow the business.

For more interactions on topics such as this one, please attend our Free Compliance Workshops brought to you by Bookkeeping Fundamentals. Please visit and like our Page on Facebook – Bookkeeping Fundamentals and Instagram @bookkeeeping_fundamentals for next year’s updates.

By Ms. Dee – Founder & MD http://www.matsobanemetja.co.za

When do you know that the business is doing well?

The blog is meant for both start-ups (fairly new companies) or medium to large enterprises.

Most businesses start with a loan. The loan could be the capital which the owner ‘s money was injected into the business to start / funding acquired from various institutions / some even lucky enough are afforded the business grant.

However the loan remain a liability to the business, until such time the company has generated more income to payback the loan. Under no circumstances should the money injected into the business be referred to as the Revenue. It is borrowed money. It is the business obligation to pay the money back.

I have met businesses that assume that by acquiring business assets via credit equate to the business doing well. And that’s not the case.
However this will be the case when the loan have been paid off and the business is in full ownership of the assets obtained.

For example: Inventory bought on credit: Stock need to be sold and be converted into sales to be able to pay back the amounts owed to the suppliers. And furthermore be able to pay for the business operational expenses such as salaries, rent, taxes, etc.
This is the reason why we can never assume that by just a mere fact that there are revenues in the business then it means the business is doing well.

In short a business must be able to take care of it’s financial obligations in hope to be on full ownership of the business assets. Until the assets are paid in full, the assets purchased on credit still belongs to the seller. Thus we cannot claim success / ownership.

Here are characteristics that may symbolize that a business is doing well.

1. Revenue Is Growing.

2. Expenses Are Staying Flat.

3. Cash Balance Demonstrates Positive Long-Term Growth.

4. Debt Ratios Should Be Low.

5. Profitability Ratio Is on the Healthy Side.

6. Activity Ratios Are In-Line

Advise: Fight for a constant growth all the time. Let your profit margin grow from month to month. While you are growing the profit margin careful that the expenses do not accelerate unnecessarily. They will harm the growth.

Tip: It will be wise to pay off the obligation as quick as possible to cater for more resources, that way we will be able to measure the business growth.

Check out our next Blog soon.

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

https://drive.google.com/file/d/15DHrDMiN1EXIqEJUrmEt43OjlGXpDUpM/view?usp=drivesdk

The Heading of this Blog is hurtful, isn’t it? No one enjoys a loss, especially when you are in business and having clients is the driving force behind success.

We have heard and know that the role of entrepreneurship is to provide valuable solutions to individuals or organisations. This is same with me when I started my practice. I have only worked for big companies’ i.e. Recognised retailers and saw fit to use my knowledge, experience and education to serve the SME’s so they can build their businesses with direction. I don’t believe anyone can start a business that they don’t want to be successful.

Among our business clients are also professionals such as lawyers, doctors, etc. some of which have full-time jobs and locums, which is where we as the accounting firm come in. We always advise them to allocate their locum income to business as it similar to a part time job, the exercise will also help to lower their Personal Income Tax and further motivate them to start and build their own practice(s).  They love this concept!!

Earlier this year we signed a new client who is an Audiologist, just relocated to here in Johannesburg. (She was originally based in Durban) She was referred to us by another client of ours who is a Speech Therapist because she is “happy with us”.

As usual after her first call we arranged a meeting to understand her work and to iron out the details of our working relationship/contract.

The new client has just started her practice working full time for only a few months now. She is always on the road attending meetings, seeing clients, etc.

As she did not have an accountant or a bookkeeper we had to back date her books which includes closing off the previous tax season (12 months’ work), update & begin with the new one.

The first months’ work and reports clearly show the actual sales, expenses, costs of consumables and the practice assets. Immediately after submitting for this first month the client requested a meeting to clarify some pointers and transactions. We arranged a meeting and added on some advice, little did we know – this was opening our client‘s eyes to our loss.

In the fifth month, when we request the monthly paperwork she decided to give me a call. The call was to let me know she would be stopping work at the practice and going back to the field – working full-time for the government because the practice thing was not working. This was sad for both of us. For me I thought: “We helped you see the light and now you just drop us like that?” (Inside voices) but I realised I must also be reasonable and put myself in her shoes, and further remind myself that the reason I started my practice was to solve people’s problems – so this was one of them!

The client said, “I know it is sad for you Dikeledi, you’ve been so good to me and my practice but I am not making money out of this and the practice consumes so much of my time with no satisfactory returns because I end up relying on my husband for fuel and stuff, I mean you have seen that”. And truly I had, under normal circumstances I would advise the client to start working harder on getting new clients but she had already made up her mind and was ready to start her full-time work in a month’s time.

She further said “I would still like you to do my personal filing” (this means once a year) “Plus I have a new client for you in Pretoria she is a GP – here are her details. I have already spoken to her about you ” (then there was the positive) I will refer them to you don’t worry.

My message about all this is – In your pursuit of purpose you are going to see that by providing solutions to people you will, at the same time, be the reason for them to leave to their benefit but because you have done your work so well and you were honest they will feel they are indebted to you and do some marketing on your behalf.

Whatever you do, serve…

A Special Quote from me:  “Without bookkeeping, it’s impossible to measure the true success or failure of your business dealings. You won’t know that your R – per month magazine ad campaign isn’t worth the investment. You’ll have no idea why you barely have enough money to operate your business and you won’t know where the money went. A smart business owner realizes bookkeeping has several undeniable benefits”.

Compiled by Dikeledi Seoloane – On behalf of Matsobanemetja Business Consulting Pty Ltd. (Coaching Division)

www.matsobanemetja.co.za

____________________________________________

What It Means To File Annual Tax Returns and Receive Refunds.

I have dealt with numerous cases where individuals are facing problems such as owing SARS money and being unable to receive their last pay-out after their resignation/retrenchment. This has included elderly people that are already on pension.

My wish is for my fellow citizens to understand the role taxes (SARS) play because many have fed themselves with your funds while you also receive partially while still employed.

When one receives a refund it is important to ask “How am I receiving a refund?” There is always a reason. Please understand this: the function of SARS is more to collect monies from the taxpayers (citizens) and less to pay money out. There are many organisations that give out money, but make no mistake, SARS is not one of them.

What is filing annual returns?

You or your company on your behalf pay taxes every month – PAYE (pay as you earn) and this is deducted on a monthly basis to SARS as reflected on your payslip. This means you are already paying tax.

Question: Why must you still submit when you are already paying and there is proof?

Every tax season you are required to gather your IRP5 and a summary of all deductions such as medical aid (you must provide a medical tax certificate), log books for those who have car allowances, retirement annuity deductions, etc.

An IRP5 in simple terms is a summary of all the deductions made by your employer over the last 12 months. It is always a must that you have it. After obtaining all of the documentation we file; either via eFiling or directly at a SARS branch. The filing process consists of the comparison of the deductions as presented on the IRP5 and what SARS has received from you previously (from your employer) if all the figures agree there is no refund for you and you don’t owe the taxman.

How does one get a refund? If after filing what you have on your IRP5 is not equal to the data SARS has on their system it means that your company was over-deducting from you and that money is paid back to you by SARS – we call it a REFUND.

There are instances however where you may owe SARS – this will be because your company was under-deducting your taxes and as a result you must pay back the money after all the reconciliations have been made. This is a result of your companies’ short payment.

My focus with this blog is on those that have been receiving pay-outs from SARS. I have found out that one will use a consultant with the promise of a refund without understanding what it is or how it happens. This is what happens: Consultants will take out information – a summary of deductions from the IRP5 (when they file) and this will guarantee that you receive money back because your documents will reflect as if your company has been over deducting. This is illegal and fraudulent. What you have received as a refund is an illegal refund.

The consequences: you are bound to receive incentives as a lump sum from SARS upon your resignation, retrenchment or pension. Therefore if you have been getting illegal refunds while still employed you are absolutely digging a hole for yourself.

You are lucky if SARS notifies you while you are still employed and you are able to fix it because many others only realise when they submit their final returns and it becomes very confusing and painful – but I did say SARS would never give you money that does not belong to you. At times they do not notify you, they just have a garnishee order put against you via your employer.

SARS is not your investment/savings institute where you put money in only to receive it back later. Please always ask questions as to how anyone receives money from SARS, especially when they are using your profile.

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

www.matsobanmetja.co.za

info@matsobanemetja.co.za

Having CSR Projects is compulsory for every business irrespective of the company size or age this is my view. I will mention at least 3 reasons in hope to encourage all SMEs to join force. Through my business engagements many think this practice is only good for Big companies and they therefore dismiss the idea or not pay attention to it and I think this is a mistake. It must be the mentality of running small businesses that led to this conclusion 😉

Big companies are taking advantage of the use of CSR projects and link them to their core businesses. Companies such as Pick n Pay, Liberty, etc have their own registered Foundations and you know why? From an Accountant point of view I know the CSR Projects help reduce their Income Tax bracket (this is legal by the way) but this is not the only reason they are involved. CSR is an important building block.

Here are my 3 reasons why your ‘Small Business’ will benefit from CSR Projects.

1. CSR are a good use as a Marketing Tool (though they deny this fact)

• The main purpose for CSR is to uplift and empower communities but while at it you are able to put your Company name out there. Society will be able to identify you and your brand and what you stand for, that is called – BETTER BRAND RECOGNITION.

2. Positive Business Reputation

Building a reputation as a responsible business can lead to Competitive Advantage. Once people recognise you for the work that you do for the communities they don’t just want to buy from you – they insist on it. This will help with Sustainability.

3. Better Financial Performance

The more people know about your business the more they come to you and you will receive referrals too. This will no doubt increase your profit margin which lead to a Business Growth.

As much as Government has guidelines policies and form partnerships with some of these big companies / corporates but my thorough analysis is the big winner in all this is still the companies, they are reaping more rewards because this method works. For example look at how they all jumped to the Learnerships & Internship Programmes which that too is supported by the Government. Your argument will be you lack resources but you can contribute your TIME for starters.

My advice though: If you are going to do it please do it wisely. Make sure that the community will not ONLY recognise you for your social projects but must be able to identify your main business too that is very important, Link the two wisely.

Compiled by Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting (Pty) Ltd – Coaching Division.

www.matsobanemetja.co.za

___________________________________________________________________________________

Question: A potential client and business owner, referred to me by a good friend, has been registered for VAT since 2008 and yet has never submitted his Company VAT schedules. Now he wants a Tax Clearance Certificate from SARS and he cannot get it as he just found out that he owes SARS 45K. Dee, can you help?

Answer: Of course I can but the client needs to understand that this is a case on its own. It cannot be solved as easily and swiftly as the client wishes.
Business Owners: Compliance is very important; unfortunately it is not a choice but a must. When you run a business, you need to adhere to the rules and regulations that have been put in place.

When you are a VAT registered vendor, you act as an agent on behalf of SARS. The 14% that you add on your goods sales is not yours, but SARS, we need to be clear of this from the beginning. Every two months you are expected to submit your VAT schedule to SARS, failure to do so it will mean that you are Non-Compliant. Your VAT submission to SARS is calculated against what you’ve charged your customers/clients and what your suppliers have charged you. You will, then not be paying out the total amount you’ve charged, but the difference of the VAT INPUT and VAT OUTPUT (in line with the 14% in SA).

By interacting with clients, or even during my Bookkeeping workshops, I’ve realised how few people actually understand the VAT effect or implications in business, or even Compliance for that matter. Some clients’ think that VAT increases their profit – they are completely incorrect, the 14% VAT amount you charge on your invoices IS NOT YOURS. See a brief how VAT works.

When we calculate VAT, we consider the two types of VAT which are VAT INPUT and OUTPUT. VAT INPUT means when a company buys goods or services from another supplier, VAT is charged on the purchase price.This account will usually show a debit until the output VAT comes into account.
VAT OUTPUT – means when the company sells its own goods or services to its customers and charges VAT. Therefore, in the VAT settlement, you deduct VAT input from output; the resulting amount must be reported to your regional tax office. As you can see, you only pay tax to the state on the value your enterprise has added to the goods. If your purchases exceed your sales in any one period, the difference naturally is refunded. There are instances where SARS may owe you or vice versa!

After what I have mentioned above you also cannot cheat SARS and claim that you have not traded, because your business transactions will be reflected on the suppliers that are compliant and they will show that they had been charged VAT by you on certain invoices, that’s how they will see that your information does not correspond to that of your business counterparts. SARS will then be able to calculate how much you owe them and can also raise an audit on you.

So with regard to the client here, it means that we must back date VAT schedules from 2008 to current and prove to SARS that the client actually owes a certain amount and not the 45K being claimed, if that is the case. SARS will still, however, open their own audit to see if you are not defrauding them, seeing that they already had expected that amount of money from you. They won’t let it go that easily.

It is very important to comply. In the midst of all this, jobs are passing by because you are unable to get a Tax Clearance Certificate; you have, in fact, disadvantaged yourself.

Compiled by Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting (Pty) Ltd – Coaching Division

info@matsobanemetja.co.za
http://www.matsobanemetja.co.za
_____________________________________________________________________________

Q: I run a small business and have about five employees working for me, i always struggle with the issue of submission especially on the Payroll side.

A: You will always struggle with your Payroll Compliances for as long as proper bookkeeping is not in place.
Especially if deductions has to be made from your staff salaries, deductions  such as PAYE and other tax issues on a monthly basis.  Such deductions can be those of Deparment of Labour, Medical aid, SARS, Employee allowances, etc.

All this need to be done accordingly and accurately. If you always delay the immediate payments to this departments you are adding to yourself a painful hassles as when the Tax season opens this contributions must be up to date and if not it means that you will need to backdate the monies owed.
Let me just explain the three mentioned above.
1. PAYE

 A pay-as-you-earn tax (PAYE) is a withholding tax on income payments to employees. Amounts withheld are treated as advance payments of income tax due. They are refundable to the extent they exceed tax as determined on tax returns. Therefore as the employer you are responsible to register your employees for Tax Returns and the deductions to be made. If for instance you delay the deductions, it will be your fault when the Tax season opens and you have not paid the funds to the Receiver of Revenue then your company will be held reliable and could be concluded as fraud as it is illegal to use the employees PAYE contributions for your company use or witholding it. The money belongs to SARS.

2. The Department of Labour Contributions

Contributions such as Provident and Pension Fund. The main aim of a pension or provident fund is to provide benefits for its members when they retire from employment. The fund also usually pays benefits when a member dies while still working, or is unable to work because of illness, or is retrenched. Once you have registered your employees for Provident or Pension Fund you must make sure on a monthly basis this funds are deducted and allocated accordingly from their salaries to the relevant Governmental Institutions.

3. Medical Expenses

If your company has the medical aid scheme that works with and you offer it to your employees, then this mean you as the employer need to deduct straight from their salaries and pay out to the schemes as their contributions. It is your Company ‘s responsibilities and obliged especially if you have made this compulsory for your employee (s).

If you do not have a good proper bookkeeping system in place you will have te figures messed out and will therefore be difficult to work out your employees contributions,p as all this contributions should show on their payslips.

As much as your employees are not submitting their payslips on a monthly basis to SARS but the deduction summary will reflect on the IRFP5. Therefore that will be the time to reconcile what your Company has been deducting against the employee as equal to what the Company has been paying to this Institutions.

Of course the deductions varies from company to company because it depends on what your Company offers to the employee. Compliance plays an important role in your company and need to be adhered to.
Compiled by Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting (Pty) Ltd – Coaching Division
http://www.matsobanemetja.co.za
_____________________________________________________________________________

A QUESTION WAS POSED TO ME – Goods Supply.

The question is from a client who sells African costumes and accessories, and now has the opportunity to sell in bulk to shops.

Q: Hi Dee. Is it a good idea to supply the same things to different shops?

Do I need to disclose to the other that I’m supplying another shop with same things? What if they are at the same mall and selling the things at different prices?

A: A definite YES. I have never heard that Tiger Brands cannot supply goods for both – Pick ‘n Pay and Checkers if they are operating in the same shopping center. Anyone who wants more customers visiting their stores must make use of their marketing strategies to attract more customers. Your job is to sell your product and convince them to buy more.

When you started your business, you did not plan to sell to specific people ONLY, but the masses who are interested in your product(s). Surely, your goal was to sell your items directly to the public instead of bulk supplying to shops, however as business grows things change and you as a business owner, need to adapt. Stores are showing enough interest in your products that they want to buy in bulk and sell in their stores, and this affords you a great opportunity to grow. You need to grab this opportunity with both hands and never look back.

It is your product that you are selling, therefore no one should dictate where and how to sell it. The issue of your customers competing with one another has nothing to do with you and you have nothing to disclose, really. If you do disclose anything, let it be to convince and motivate the other to buy and display your products in their stores. It is up to them how they choose to market and beat each other with sales. You continue selling to anyone in need of your product. You deal with your own competition. If all the stores in a shopping mall need your product, let it be, supply as much as you want. All retailers stock products of Unilever, Procter and Gamble, Tiger Brands etc. Ask yourself why?

Don’t limit yourself, create a supply Chain instead. Supply Chain simply means – every company that comes into contact with a particular product, for example, the supply chain for most products will encompass all the companies manufacturing parts for the product, assembling it, delivering it and selling it.

That’s when you have to expand and learn more about the Business and growing of it, you might want to learn the stages of Supply Chain. Read below.

Plan

The entire process of supply chain management must be planned out with the primary goal of the organization in mind. The plan should also address how the organization’s goods or services will fulfil the needs of their customers.

Develop

A major component of this process is to develop strong relationships with suppliers. The potential suppliers are then contracted and conditions of delivery, payment and transportation are then finalized with them.

Make

The product is finally manufactured, thoroughly tested and packaged and then launched into the market.

Deliver

Involves the transportation of the product through various channels ultimately into the hands of the customer.

Return

Customer queries and complaints are handled subsequently. If there are any defective items present, they are returned to sender.

Compiled by Dikeledi Seoloane – On behalf of Matsobanemetja Business Consulting (Pty) Ltd., Coaching Division.

www.matsobanemetja.co.za

info@matsobanemetja.co.za

___________________________________________________________