Preparing for financial year end

The health of a business is not only determined by the generation of profits and the effective management of cash flow, but also its ability to maintain proper financial records at the end of its financial year, this will ensure a seamless transition to the next financial year as well ensuring that the company’s financial statements accurately reflect the financial activities and events for the accounting year.

Preparing for financial year end is the process of reviewing and reconciling accounts, preparing adjusting journal entries and the preparation of financial statements to ‘close the books’ of the company. This short article has been prepared with the purpose of sharing some tips to effectively prepare for financial year end:

The first step towards preparing for year end Is creating a list of tasks to be performed and setting a timeline for when each of the tasks is expected to be completed.

Secondly, all relevant supporting documentation for financial transactions should be gathered and the reconciliation of bank accounts should be performed.

Third, a review of accounts receivables and payables should be done to determine if all outstanding accounts and payments have been accurately recorded. A review of the company’s assets as well as adjusting for depreciation and impairment should also be completed to determine the book value of the company’s assets.

Other adjustments to be done will be dependent on the type of entity such as the valuation of inventory on hand etc, the other crucial step entails gathering all tax documents and calculating deferred tax and income tax implications. Once the entity is satisfied that all these steps have been followed it may then begin with the process of preparing financial statements which at minimum consists of the statement of profit and loss(P/L), the statement of financial position or the balance sheet and the statement of cash flow and the relevant notes to these financial statements as well as outline any changes and adjustments that occurred during the financial year.

To conclude, preparing for financial year end is in essence mandatory to ensure overall compliance, it also ensures that accounts remain up to date and eliminates unnecessary admin and penalties due to late submissions. Preparing for year end affords the entity with the ability to accurately report on the financial health of the entity and allow for the ability to plan and set goals for the upcoming financial year.

In case you are getting stuck in the mix of it all, you’re welcome to contact us at MAS to close those books officially.

Sole Proprietors

A Quick Guide

A sole proprietorship is a popular choice for entrepreneurs seeking complete control over their business. It’s the most straightforward business structure, allowing you to make all decisions and enjoy all the rewards almost instantly, but it also means shouldering all the risks.

This structure means you and your business are legally one entity, with no separate legal status, no board of directors, and no one else to share the profits or headaches. You handle everything from business decisions to covering any debts, making it a common choice for freelancers, consultants, small shop owners, and those who prefer a streamlined approach.

The key advantages of a sole proprietorship include full control, easy setup, straightforward taxes and keeping all profits. You make every decision and can pivot quickly without needing approvals of lengthy meetings, offering autonomy. Setting up a sole prop is simple with minimal paperwork and no incorporation fees required. it is advisable for freelancers who value their independence and the self-employed individual.

However, this structure comes with significant drawbacks, primarily unlimited liability. Since there is no legal separation between you and your business, you are personally responsible for all liabilities. If the business faces financial troubles, your personal assets could also be exposed to risk. Hence a lot of entrepreneurs eventually convert to more formal structures such as a private company.

Funding can also be more challenging as this trading vehicle is not generally favoured by investors or lenders of credit. Another disadvantage is the lack of continuity/going concern. In the case where there is inadequate succession planning, should you pass away, that could be the end of your business and legacy.

In conclusion, while a sole proprietorship offers flexibility and ease initially, you may need to reconsider should the goal/vision of the business change and as you contemplate the growth and success of your business. However like other entity types, you still need to address your taxes and financial reporting. This brief summary may be of assistance:

Registration and secretarial requirements: None; it is run by one person.

Taxes: Register as a provisional taxpayer and submit your tax returns as such. In the case where you are also an employer or meet the requirements of a VAT vendor, please register for these tax types as well.

Financial reporting: You can make use of systems like Bloo Money to manage your finances. Thereafter compile your financials for submissions and reporting.

MAS is also excited to assist you delve deeper into this trading type, please do contact us on any of our communication options. We look forward to serving you 🙂

Tax disputes: what are your options

SARS may issue an assessment to taxpayers based on various reasons such as understatements and late submissions. SARS may also issue an additional assessment on a submitted return should it feel there is a misrepresentation of actual amounts. While SARS may be correct at times, it is not always the case. Should a taxpayer be aggrieved by an assessment, here are some options to consider:

Request for reason: when the grounds provided in the assessment do not enable the taxpayer to understand the basis of the assessment, the taxpayer is entitled to request for reasons within 30 days from a SARS assessment.

Request for remission: the request for remission (RFR) can be lodged by a taxpayer on different tax types. However the taxpayer does bear the burden of proof once again, under what basis must SARS grant a remission, whether partially or in full. Either way, here you are at SARS' mercy, give them a good reason why they should. The taxpayer can object to the imposition of certain other admin non-compliance penalties or interest where the request was not allowed r partially allowed. The RFR must be submitted to SARS within 30 business days of an assessment.

Notice of objection: The taxpayer has the right to object to an assessment or decision by SARS. An objection must be submitted within 30 business days after the date of the assessment. Where the taxpayer requested reasons for the assessment, the objection must be submitted within 80 business days after the date of the notice or decision.

Suspension of payment: the taxpayer may request SARS to suspend the payment of tax or a portion thereof under an assessment if the taxpayer intends to dispute or disputes the liability to pay that tax. SARS will not institute any collection steps from the date in which a valid request for suspension of payment is received, until 10 days after being informed that the request has been declined, or after a notice is received that an already approved suspension of payment has been revoked. The dispute resolution options explained above are a measure implemented by SARS to ensure that taxpayers are afforded with an opportunity to dispute tax assessments which they may not necessarily agree with, and it is important that taxpayers are aware of the time frames as well as steps to follow to lodge a dispute to ensure that a compliant tax status is maintained.

Alternative Dispute resolution: another form of dispute resolution other than litigation, or adjudication through the courts. This method has also proven to be more affordable than the other progressive types. A taxpayer may request this means however it is at SARS’ discretion that it is granted. This kind of dispute is considered where the taxpayer is not satisfied with the outcome of your appeal. It takes approximately 90 days to conclude this process.

These are just some of the easily accessible and cost-effective methods of disputing/disagreeing with the tax collector that are available to any taxpayer who has access to sufficient evidence and documentation to support their claim. In most cases, it is advisable to work with a tax practitioner for a favourable outcome, however not guaranteed either. In the case where you encounter an assessment you are not happy with, you’ll thank yourself for keeping accurate records to support every claim and tax detail, from case numbers to invoices and maybe even recordings; a quote or two from the income tax act may also go a long way!

MAS is happy and ready to meet you halfway when you are ready 🙂 Happy filing!

Maximizing 2024 tax savings

Who does not love saving money? Especially when it comes to taxes! In South Africa, there are plenty of ways to keep more of your hard-earned cash by taking advantage of personal tax deductions. Let us dive into these awesome opportunities and see how you can slash your tax bill with ease and a smile!

First up, let us talk about retirement savings. Think of it as a double win: you are preparing for a secure future while getting immediate tax relief. When you contribute to a pension fund, provident fund, or retirement annuity, you can deduct up to 27.5% of your income, capped at R350 000 per year. This means you pay less tax now while ensuring a comfortable retirement. It is like giving your future self a big financial hug!

Medical expenses can be a huge burden, but they can also be a great source of tax

savings. With the medical scheme fees tax credit, you get a fixed monthly deduction from your tax bill of R364 for you and one dependent, plus R246 for each additional dependent. And if you have high medical costs, the additional medical expenses tax credit can give you even more relief. It is like a financial first-aid kit for your tax return!

Supporting your favourite charities can also help lower your tax bill. Donations to

registered Public Benefit Organisations (PBOs) are deductible up to 10% of your taxable income. Just make sure to get a Section 18A certificate from the charity.

Plus, if you are working from home, you can claim deductions for home office expenses like rent, bond interest, and repairs.

Your home office can become a tax-saving powerhouse! You can claim a wear and tear allowance for personal work equipment like laptops. Ensure to have a copy of your contract from the employer that allows you to work from home as it may be required for audits.

There are other great ways to save, too. If you use your private vehicle for work, keep a logbook to claim travel expenses.

Do not forget about Tax-Free Savings Accounts (TFSAs), where the interest, dividends, and capital gains are all tax-free. And if you earn interest on savings, the first R23 800 is tax-free (R34 500 if you’re 65 or older). By leveraging these deductions, you’ll keep more money in your pocket and enjoy financial peace of

mind.

So there you have it, simple, effective ways to save big on your taxes. With these

deductions, you are not just lowering your tax bill but making smart financial moves that benefit you now and in the future. Remember, every rand saved is a rand earned. Stay savvy, keep your records straight, and watch your savings grow.

Now go forth and conquer tax season like a pro!

Financial Accounting

Financial accounting might sound like a lot of numbers and jargon but it is actually the secret sauce that keeps your business running smoothly. At MAS, we turn the complicated world of accounting into something anyone can understand. Here is a quick and easy guide:

Financial accounting reflects the real image of your company, much like a mirror. Keeping a record of all your financial transactions allows all parties to observe how things are progressing. The key is to be truthful and upfront. Imagine operating a vehicle without a dashboard. It sounds scary, right? Financial statements serve as your company's dashboard. They assist you in determining where you are and assisting you in choosing wisely where to go next.

It is important to abide by the rules. Financial accounting ensures that you are following the rules and keeps the tax man from giving you any unpleasant surprises. Are you curious about the state of your company? You get the scorecard from financial accounting. It facilitates future planning and progress monitoring. Do you require a loan? Banks and investors request to view your financial statements. Good accounting procedures improve the way your company appears on paper, which helps you raise the capital you need to expand.

We at Mcusi Accounting Services monitor every penny that enters and leaves the office. It is similar to having a neat, well-organized business wallet. We prepare all of the necessary paperwork, including income statements and balance sheets. See these as report cards that provide information about the performance of your company. While taxes can be complicated, we can help. We make sure you only pay the amount you are supposed to, nothing more. You should not fear if the taxman shows up. We will assist you in organizing everything and address all of the challenging inquiries.

In need of guidance? We are available to assist you in making the best financial choices for your company. Consider us as your financial GPS.

Happy New Year or Financial Year?

What is a financial year and how is it different from a calendar year and the implications thereof for owners of an entity?

“Compliments of the New season!!!”

A term commonly used by individuals at the beginning of a new year, in a business setting does the new year represent a new financial year?

A calendar year always begins on New Year’s Day (1 January) and ends on the last day of the year (31 December) whereas a fiscal year can start on any day (as per your entity incorporation documents) and end precisely 365 days later. The fiscal year reflects on the financial performance of the entity for the period, it is determined by the owners of the entity and will depend on when the company does business and as such will prepare its financial statements based on transactions taking place between these dates. The financial year for businesses helps to establish consistent accounting practices and tax reporting.

The implications for directors at the end of each fiscal year are to declare and file the annual returns and tax returns to the relevant authorities such as CIPC and SARS in order to retain their active status. Failure to comply with the filing requirements may result in de-registration and penalties/fines and possible imprisonment due to non-compliance.

To conclude, it is important to note that the directors of a company should exercise due care when it comes to the company’s year-end as it will ensure compliance across the board with all the relevant authorities and potential investors.

Budgeting 2023

Budgeting for 2023

Things to consider saving up for this new year:

- A vacay

- A fixed asset (car/home,etc.)

- Retirement/pension savings or investments

- Medical or other emergencies

The truth is these will come in handy when you least expect it so it's best to stay prepared and not need it then the opposite, we've seen how that episode goes. Here are some tips on how to go about it:

1. Estimate/project how much you'll need for each of the categories above. You can always shop around to see what the internet has to say about a 35 year-old's pension savings and start from there. Alternatively, speak to professionals in each field.

2. Try the 50/30/20: 50% is for essentials, 30% to discretionary spending and 20% to savings/investments.

3. Become a jack of more than one trade: consider additional streams of income

4. Resist instant gratification but ... you can reward yourself now and then, emphasis on a reward, it needs to be earned!

Lastly, credit... this is not the best or first answer to any challenges you may encounter but it would be prudent to monitor your credit score and keep it on the green scale. You can remain green by:

- Paying all your bills on time

- Avoid using credit to cover your basic needs

- Don't spend your entire credit limit

And many other things you can consider to clean up your credit and get your financial ducks in a row. We wish you all the best for 2023!

Do you accept this auto-assessment to be your lawfully submitted return?

"You've been auto-assessed..."

The infamous last words for a large amount of taxpayers who have not declined this offer by SARS as yet first let's get a few things out of the way:

What is an auto-assessment?

This is an assessment temporarily submitted by SARS based on information from your employer/s. This includes investments, medical aid, earnings, etc. It is on this basis that they determine how much SARS owes you or you owe them.

What happens if you decline?

You are allowed to decline the assessment if the information is different or feel that some data has been omitted from your submission. Declining also means you need to file as per usual with supporting documents; especially for the differences in your recon to SARS.

What if you accept?

That means the return has been filed and you do not need to take any further actions. Well done!

How long do you have to file?

The deadline is 24 October 2022. If requested on time and with good reason, you may be granted an extension.

Where does MAS step in?

If you are not too comfortable handling your own taxes, contact us and a friendly consultant will help you file and be tax compliant, minus 1 big problem!

Management Accounts

Management Accounts

Also known as the management pack, what is it and how does it help me?

This pack usually includes for profit and loss, statement of financial position and cashflows for the month/period under review. As a value-add we also include and accountant’s letter as the forehead to explain to our clients what happened during the month, what was great and what could be improved to match their business financial goals. This pack is useful for a few things.

1. “Screenshot” of the business finances for the month

Each month is different, and each month has different patterns and attributes to it. The pack details how your finances look as at the end of that month, how much was spent and on what as well as income generated. Based on your accounting policies and procedures, the report in entirety would outline how much value the business was able to create, not only in terms of profit.

2. Tax and cashflow planning

This is more useful for VAT vendors especially as they need to submit and possibly pay the Commissioner every two months or so. To avoid tax surprises, looking at the cashflow statement would explain in what categories is the cash being spent (is it capital in nature) and the total outflow in comparison to inflow. In an ideal scenario, the inflow exceeds the outflow.

Hint: After each management pack meeting with your accountant, save the tax portion in a separate pocket (could be a different account altogether) so you can pay your taxes comfortably. This applies to all the tax types you are registered for.

3. Goal tracking

Remember that budget you set at the beginning of your financial year? This is an ideal time to match actuals to budget. For businesses that want to decrease expenditure by 10% and increase revenue by 20%, the profit and loss statement is a good place to start looking where we can ‘trim the fat.’ Having a second forecast also helps you to re-direct the ship once the wheels are in motion and a few things you hadn’t anticipated has affected your performance.

4. Financing

The reason why some companies come knocking at our door is because they are looking for financing and the lender requires annual financial statements and management accounts. Having a pack ready consistently makes the process go faster as you are always ready and knowledgeable about your business finances.

5. Accounting “guru”

Lastly, going through your accounts makes you more comfortable and upskills your understanding of accounting and how it affects your business. This way you can have more effective meetings with your accountant to steer your business in the right direction.

With that being said, your accountant is your friend and not the auditor whose door you need to knock on only when you are in hot water. Speak to us, we are always ready to listen 😊

Private Company Compliance

Private Company Basic Compliance

So now you own a business, a registered business, congratulations!

What do you need to know about the decision you have just made? The Companies and Intellectual Property Commission popularly known as CIPC and the South African Revenue Service expect you to file a few returns in order to run a compliant entity.

CIPC:

First step is to register your company on www.cipc.co.za and fill in all the applicable details. The certificate generated called a COR 14.3 tells you when your financial year end is and your anniversary date. What this means is that once your financial year (not necessarily the same as a calendar year) is over, you need to declare how much the company generated. Depending on your revenue and profit level, you may need to submit a Financial Accountability Supplement (FAS) or Annual Financial Statement (AFS). If the company does not require an audit, a FAS should be submitted with your annual return.

SARS:

There are more returns required by this entity, two provisional tax returns and one annual return (assuming this is the only tax type registered for). A provisional tax return (IRP6) is submitted 6 months into the financial year and again on the last day of the financial year. These returns are based on financial projections that are prepared by the company (this is where budgeting and planning comes in). The last return is called an Income Tax Return (ITR14). This return is more technical and requires a sound knowledge of tax and accounting principles based on the company's performance for the full financial year.

Submitting these 4 returns on time annually will ensure your company is compliant and good to operate. Other tax types may be registered for and each has it's own tax implications, speak to your accountant first before opting for those taxes and they can advise you on what's best for your company.

Congratulations on your new company and welcome to the economy!