For small businesses, it is important to keep a record of how they are doing financially. This record will assist the owner to determine how the business is doing from a profit point and to determine if the business is sustainable. This also allows the business owner to pick up on any costing issues from the beginning.
Even if your business is only starting out record keeping is very important. Record keeping can be done for free on cloud-based software such as Wave where the business owner can write up their sales invoices with ease as well as keep record.
When the business grows and has available cash flow, it can then look to use paid cloud-based software such as Sage and Xero which is very user friendly.
The aim of any business starting up, in the beginning, is to keep all overheads as low as possible to build up some profits for the purchase of stock or products.
Then once the business is breaking even and covering its costs, it will be able to change its structure to grow in staff numbers or in the amount of stock it holds.
The value in keeping your business compliant is so that you give your business the opportunity to grow. For the growth of any business you will need to show accounting records, this is imperative for taking out a loan or for handing to a potential investor looking to assist your business in expanding.
Furthermore, the registration of a formal business such as a Proprietary Limited creates the feeling that your business is not a fly by night and that you are going to be a reliable business to trade with in the future.
The most important compliance certificates which will be asked for by suppliers and banking institutions is the Tax Statements and Tax Clearance Certificate. The Tax Clearance Certificate ensures that all the registered business tax is up to date.
It is a symbol that the owner is looking after the business and running it professionally and to company and tax laws.
Micro and small businesses are able to make use of special tax rates in the form of Turnover Tax as well as Small Business Corporation Tax.
The South African revenue service uses this reduced tax rates to encourage small businesses to trade and to use its profits and cash flow to grow the business further.
When the business grows from being an owner-only business, it will then add casual and full-time employees to keep up with the work required. This brings with it further responsibilities such as monthly Wages and Salary Payroll. Here it is imperative to register with SARS for UIF and PAYE. In addition, they should also register with the Compensation Commissioner for staff injuries where they can then obtain a Good Standing Certificate.
These are the main Compliance areas which are needed for all small and medium-sized businesses.
About the Author
Cheron Roggen: Director of Canvas Compliance
Experienced Accountant with a demonstrated history of working in the accounting industry. Skilled in Sage Accounting and Payroll, E-filing, Microsoft Excel, Microsoft Word, Microsoft PowerPoint, Management and Leadership. Strong accounting professional with a Bachelor of Commerce (BCom) focused in Accounting and Business/Management from the University of the Western Cape. www.canvascompliance.co.za