Mcusi Accounting Services

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.

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!

2021 Tax Season has you sweating?

Tax season is different this year huh?

SARS is well aware of the changes that came into effect in the blink of an eye since South Africa officially went on lockdown in March 2020. Some unfortunately lost their jobs, some relocated and some were working from home; no matter how your job situation changed, be aware of your tax rights in your specific situation:

1. If you were working from home, you may claim certain expenses that you incurred directly in the production of income (salary). For example, you may not claim groceries because those are not directly connected but you may claim a computer monitor you bought in order to work. Very important, you must be able to prove these expenses! You may be asked for invoices, contracts, pictures, etc. to prove your expenditure. Worst case scenario, SARS may request to come on site and physically inspect the premises.

2. If you did receive an auto-assessment, you have a right to decline should you believe not all relevant data was taken into account.

3. Waiting period for a response is 21 business days, should you not receive correspondence within that time period about a dispute, you may contact SARS again or lay a complaint.

With rights, come responsibilities, these responsibilities include:

1. Declare all income you received for the tax period, whether on a contractual or once-off basis as a casual worker (for example).

2. Keep all documentation that affects your taxes for at least five years.

3. Let SARS know of any changes in your personal details (address, banking details, etc.)

With that being said, we wish you all a happy filing season!

Please be aware that the individual filing season closes in November 2021, but don’t wait for the last minute, let us help you at MAS.

Managing your finances better

HOW CAN I MANAGE MY COMPANY FINANCES BETTER?

The most common misconception for SME owners generating less than R1 million per annum, is that the company bank balance, is your balance. It looks healthy and well-fed and you worked hard to get there, so why can’t you spend it, it is yours in a way right?

The importance of separating yourself from the business comes at play here. Legally, the company is normally a legal person in itself with it’s own rights and responsibilities the same way you are. You have an ID number and the company has a registration number; see? Different! Here are a few things you can implement as the guardian of your company:

1. Have a separate bank account.

This has proved to be a significant contributor to tax nightmares because your McDonald’s receipts are all mixed up with your raw material invoices. Do you really have the capacity to sort these at least once a month successfully?

2. Register the company on CIPC

If you haven’t registered, perhaps this could be the right time. The advantages of a listed company far outweigh the costs. Your clients can vet the company and base opinions and referrals on the company alone without implicating your personally. Should you wish to work with government contracts for example, they will ask for the company’s CK documents. The more people ask about your business the more business you have to give away...

3. Compliance checklist

Certain industries have standards that need to be satisfied and requirements to be met. For example with us certified accountants, we are required to provide proof of learning and improvement in the form of training, i.e. continuous training and professional development. Things change a lot in our profession and we need to always provide our clients with the relevant and updated data affecting their accounting division. We submit reports and pay our license fees as part of it.

In addition to this, the other compliance measures are around the company taxes. When do you need to submit your provisional taxes and your annual returns, what about monthly submissions? Tabulate these and set auto reminders to comply.

Lastly check in with your SETA, what do they need from you in order for your business to keep it’s doors open and growing. Keeping compliant is a savvier option as opposed to running around last minute trying to save the business in the eleventh hour. You can avoid unnecessary penalties and interests levied on non-compliance.

These are just three tips, there are many more ways to manage your company financial affairs. For additional tips, reminders or just fun facts, be sure to look out for us on our social pages.

We look forward to welcoming you on board.

Our very first blog

Being a business owner or manager in 2020 sure has taught a lot of people about strategies and flexibility. When plans change on the drawing board, we also need to change the master file, in other words the financial plan backing those strategies.

Although it may not seem as something urgent or important till tax time comes, it's important to consider the financial implications from every aspect of a change in strategy. Okay so now that you are hosting consultations virtually, you may decide to take a 20% cut on your rate but what about your financial commitments and assigned budgets?

The magic hand behind book-keeping is this; because you have been keeping track and analyzing your performance these past few months prior COVID-19, you know where to trim, how to do it and how to recover what was lost based on the analysis reports from the book-keeping system.

We had the privilege of doing a second forecast for a client earlier this year and within three months of implementing the new strategy based on historical records, his business is enjoying maximum tax benefits, payment flexibility and an extra revenue stream. How has good book-keeping changed your business? Do you need help? We are excited to hear your stories! Send us an e-mail to info@mcusi.co.za.

With great power, comes great responsibility...

- Uncle Ben