Navigating challenges is what you should expect if you want to grow a small business. Most often, one of those challenges includes recording financial transactions.
Recording your financial transactions becomes a considerable challenge if you don’t have an in-house bookkeeper.
In this article, we examine four common challenges that bookkeeping can solve.
Let’s dive in!
Payroll is not as straightforward as most people seem to believe. There are payroll requirements and submissions that every company in South Africa needs to comply with.
Failure to comply with those requirements may lead to SARS and the Department of Labour knocking on your door with penalties.
Here are some of the requirements that you should be aware of:
- You should register your company with SARS and the Department of Labour.
- You must submit your monthly returns at SARS and the Department of Labour.
- There’s a cap on how much UIF every business must pay. As per South African law, your company should contribute 1% of your employees’ salary as a UIF contribution. From there, deduct 1% of your employee’s salary as a contribution to UIF.
- Monthly PAYE payments are due before the 7th of every month – even if it’s a weekend.
- You need to submit your Employer Bi-Annual Reconciliation Declaration twice a year.
- It would help if you prepared employees’ tax certificates once a year.
- If you don’t calculate your tax accurately, your employees will pay too much.
At least 40% of small business owners are likely to incur tax penalties due to payroll errors. Most payroll errors stem from not having a bookkeeper.
Trying to do bookkeeping on your own exacerbates this problem. Hence, it’s crucial to delegate bookkeeping to a bookkeeper. You have an option to outsource bookkeeping services, too.
2. Tracking Expenses
Tracking expenses can be daunting for business owners. Even more challenging if you are not a bookkeeper.
Without a proper accounting system in place, tracking your expenses is nearly impossible. And if you can’t track expenses, you won’t be able to draft financial statements, which are a summary of your expenses and income.
The easiest way to track your expenses is to have a bookkeeper record all your transactions.
As a business, you must submit your Employer Bi-Annual Reconciliation Declaration twice a year. The reconciliation is due between 31 May and 31 October each year. You have to submit it through SARS’s Easy file system.
Reconciliation also ensures the actual money spent or earned matches the money leaving or entering a bank account at the end of a fiscal period.
By reconciling the accounts, you will know if there is fraudulent activity and prevent financial statement errors. Without an effective bookkeeping process, it will be impossible to do reconciliation.
Here are some of the reasons businesses reconcile bank statements.
- Identify fraud: Bookkeepers reconcile transactions to identify fraud.
- Validate data entry: You can identify any irregularities, such as entering wrong amounts, duplicating entries, and other data entry errors.
- Controls theft: When you reconcile your bank statements, you will prevent theft.
Without bookkeeping, it’s virtually impossible to be tax compliant. Every business operating in South Africa is obligated to pay one of the following taxes:
- Corporate tax rates in South Africa
This tax is a flat rate of 28% for all companies (27% for years ending on or after 31 March 2023).
- Capital gains tax – Capital gains tax (CGT) is not a separate tax but forms part of income tax. A capital gain arises when you dispose of an asset on or after 1 October 2001 for proceeds that exceed its base cost.
- Transfer duty tax – Capital gains tax (CGT) is not a separate tax but forms part of income tax. A capital gain arises when you dispose of an asset on or after 1 October 2001 for proceeds that exceed its base cost.
- Value-added tax – Value-Added Tax is commonly known as VAT. VAT is an indirect tax on the consumption of goods and services in the economy.
- Pay As You Earn (PAYE) – Employees’ Tax refers to the tax required to be deducted by an employer from an employee’s remuneration paid or payable.
To take your business to the next level, you will need a team of trustworthy accountants and bookkeepers.
An accounting service can help you record transactions, compile budgets, draft financial statements, and track expenses. All at an affordable fee!
Find out how MGT Accounting can help your business by emailing email@example.com www.mgt-accounting.co.za