Kirsten Van Tonder – Page 27

20 Mar

If your business doesn’t have an effective accounting system in place, you run the risk of making serious errors in your finances. Furthermore, a good accounting system simply makes life easier and allows you to focus more on growing your business.

• It helps you evaluate the performance of your business: A good accounting system gives you a thorough overview of the financial performance of your business. If you don’t have an accounting record, how will you know if your business is growing or shrinking? So, your account records help you know if your business is growing, stagnant or slowing down.

• It helps you manage cash flow and meet deadlines: Cash flow management means knowing what you do with the cash that comes into the organisation. Your accounting system helps you know areas that need cash. For instance, cash may be needed to finance your debts, or make major renovations or order for new stocks, and it is your accounting system that will help you know this. In short, no business will growth further without a good cash management system. Also, your accounting books help you know when bills like your rent needs to be paid.

• It’s needed for business goal setting: Your accounting system will help when setting new business goals for the week, month or year, as seeing the business performance for the last financial year will help you project and set goals for the New Year and plan ahead for the business.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

20 Mar

5 tips for managing your small business payroll

Kirsten Van Tonder

Accounting, Finance News

Payroll is typically the number one concern for many small business owners worried about getting it right. But it needn’t be difficult – here are 5 top tips to make payroll easier.

1. Know your big deadlines

Dealing with accounting deadlines and employee returns is much less stressful when you know what you need to action well in advance. Make sure you have a good system in place that alerts you to important dates and if you need to do anything. Working ahead gives you time to sort out any concerns or problems.

2. Invest in a payroll software

Payroll systems such as Sage Instant Payroll or Sage One Payroll will automate the whole process for you, taking care of things like NI and tax calculations, generating payslips for employees, keeping up with legislation and providing information for end of year tax returns.

3. Keep up with payroll legislation

Changes in regulation may affect how you need to run your payroll, so it pays to keep abreast of major new laws. Benefits and tax change frequently and while you don’t necessarily need to know all the details, it’s worth staying informed and getting advice when you’re not sure.

4. Have a financial back-up plan

Keeping on top of payments is crucial in any growing business. Setting up a good credit control system, sending out invoices promptly and always chasing late payments firmly as soon as they become due will help avoid cash flow disruption.

5. If all else fails… outsource

If managing payroll yourself is proving a real headache, consider outsourcing to a payroll company. They’re experts at what they do, and can save you the hassle of managing everything yourself and staying on top of regulations and paperwork.

Reference:

“8 Tips For Managing Payroll | Small Business Advice | Sage Singapore”. Sage.com. N.p., 2017. Web. 29 June 2017.

13 Mar

Research and development

Kirsten Van Tonder

Finance News

The research and development (R&D) tax incentive contained in section 11D of the Income Tax Act was introduced to encourage private sector investment in scientific or technological R&D undertaken in South Africa. It includes a 150% income tax deduction for qualifying operating expenditure and a 50/30/20 depreciation allowance on qualifying plant and machinery or any improvements thereto.

Approval from the Department of Science and Technology (DST) is required though in order to qualify for the tax incentive. Moreover, only expenses incurred on or after the date of receipt of the application for approval by the DST will be eligible as qualifying expenditure.

Taxpayers that may qualify for this tax incentive are persons undertaking activities that involve innovation or high levels of technical risk in order to discover non-obvious scientific or technological knowledge. Taxpayers will also qualify if their R&D activities include the creation of new or improved inventions, functional designs, computer programs or knowledge essential to these products. These activities would normally require the taxpayer to employ technical personnel (e.g. engineers, scientist, chemists, software developers, etc.).

The type of expenditure that would qualify for the 150% income tax deduction are direct expenditure items incurred solely in respect of eligible R&D activities. Examples of such expenses include labour costs of personnel engaged directly and solely in eligible R&D activities as well as materials and consumables directly related to such operations.

Expenditure on activities that directly support eligible R&D activities may also qualify for the income tax deduction. This would typically include scientific and technological planning activities as well as the design, construction and operation of pilot plants and prototypes that are used in R&D related experiments.

Overheads should be carefully considered, since this would mostly involve expenditure being incurred both directly towards both qualifying R&D activities and non-R&D related activities. Although these expenses could qualify for the 150% income tax deduction to the extent that it is directly attributable to eligible R&D activities, such costs must be apportioned between eligible R&D activities and supporting R&D activities, and activities that are not directly related to R&D.

Section 11D also sets out certain expenditure that will not qualify for the generous income tax deduction. For example, administrative related costs (i.e. costs linked to administration, financing, compliance and similar overheads), routine testing and analysis, the collection of information and quality control in the normal course of business, will not qualify. In general, the development of internal business processes would also not qualify for the R&D income tax deduction, unless such process is intended for sale to unconnected parties.

The take away is that that taxpayers that are involved in R&D activities should consider whether or not these activities could qualify for this very beneficial income tax allowance, and then take steps to ensure that they apply for and ultimately qualify for this available income tax incentive.

13 Mar

Accounting best practices for small businesses

Kirsten Van Tonder

Accounting, Finance News

When it comes to looking after the welfare of a business, accounting tops the list as being the most important. Without proper accounting, a business runs the risk of losing everything. The following are a few best practices that are essential for businesses to take note of.

1. Check it off your list first

Proper accounting should be a priority from the start. Not only is keeping accurate books crucial to your company’s financial health and success, but it will only get more complicated down the road if you keep putting off until later.

2. Focus your time and energy where it’s needed

Though there may be a period when you’re responsible for a wide variety of roles, take time to evaluate where your skills are most needed and best used. The chances are this isn’t the accounting department… identify what you need to do to make sure your time is spent effectively and efficiently.

3. Get the right software

Without the right software, it will be difficult to keep track of what’s going on in your business. There are plenty of services out there to help you keep your finances, including payments, invoices, payroll and taxes, organised and in check. Identify which tools you need for your business activities and look into different options by taking into consideration your company size, growth rate and location.

4. Never overspend

Just because a software package is the most sophisticated and expensive, doesn’t necessarily mean it’s the right software for your company as many small businesses won’t need enterprise-level services. Furthermore, more complicated software doesn’t do you any good if you don’t know how to fully utilise it.

5. Hire a professional

If you are not familiar with accounting processes and are sure you don’t know what you’re doing, then it is the best option to hire a professional to get the job done for you. This is one area where you cannot afford to learn by trial and error.

13 Mar

Tax clearance certificates

Kirsten Van Tonder

Finance News, Tax

Taxpayers may require SARS to issue them with a tax clearance certificate for various reasons. This includes a general confirmation that the relevant taxpayer’s affairs are all in order and up to date (a so-called “Good Standing” tax clearance certificate), or a certificate being required to participate in certain government tenders.

Perhaps most notably in recent times, natural person taxpayers are also requesting “FIA” tax clearance certificates, being tax clearance certificates issued to taxpayers who intend to utilise their R10m annual foreign investment allowances to transfer funds abroad for investment purposes. The South African Reserve Bank (through its authorised dealers (most commercial banks)) will not grant approval for transfer of funds in this manner without confirmation from SARS in the form of a FIA certificate being issued that the individual’s tax affairs are all up to date and in order.

Many do not realise that the issuing of tax clearance certificates is a process specifically regulated by the Tax Administration Act. Any tax clearance certificate must be requested in the prescribed form and manner by a taxpayer or his/her representative. A tax clearance certificate must be issued in the prescribed format and include at least the original date of issue of the tax compliance status confirmation to the taxpayer, the name, taxpayer number and ID number (or company registration number) of the taxpayer.

After receipt of an application in the prescribed form, SARS must either issue or decline to issue the tax clearance certificate requested within 21 business days, or such longer period as may reasonably be required if a senior SARS official is satisfied that the confirmation of the taxpayer’s tax compliance status may prejudice the efficient and effective collection of revenue.

In practice, SARS often takes well in excess of the 21 business days in which to issue tax clearance certificates, especially for purposes of Foreign Investment Allowance applications. In terms of the Tax Administration Act, SARS may not take longer than the 21 days to process such an application, unless there is some form of proof that tax collections may be jeopardised if the certificate is issued (and which will rarely be the case). Where such delays are experienced though, taxpayers are in practice left with very few remedies, which are conceivably limited to either approaching the Tax Ombud (whose recommendations are not binding), the Public Protector or the High Court for an order forcing SARS to make a decision on issuing a certificate. Most taxpayers will therefore, sadly, simply have to endure SARS’ delays in processing tax clearance certificate applications.

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