We’ve shared a few tips on tax management, accounting services and bookkeeping for small business owners to help you avoid pitfalls and manage your business finances appropriately.
Separate Your Income and Expenses from Business Income and Expenses
If you are an individual freelance contract worker and pay provisional tax, it becomes essential to keep your expenses separate from the business. For this, meticulous accounting is needed. It is easy to fall into the habit of throwing all receipts and invoices into one box. When it comes to doing tax returns, you realise that you can no longer remember which costs should be allocated to personal expenses. Using our accounting services and bookkeeping expertise will help you to keep adequate record of personal and business expenses, making it easier to calculate taxes payable.
Do Monthly Bookkeeping
As small business owner, time is a valuable resource. Don’t procrastinate on doing the books. Unless your books are kept up to date it will be difficult to make projections and you will miss out on business growth opportunities because you lack insight regarding the financial state of the business.
In order to do monthly bookkeeping, you must have a system in place that enables daily input of accounting information. We strongly recommend investing in appropriate software for the purpose. As alternative, use our accounting and bookkeeping services, which include online and software accounting solutions.
Keep Debt under Control
Whether it is debt owed by your business or debt owed to your business, you need accurate record keeping. Don’t let debt spiral out of control. Clients who don’t pay their accounts should not be able to order more products. Set a policy on payment of invoices and stipulate such in your quotes. Keep to this policy in order to minimise the risk of cash-flow problems because of non-paying clients.
At the same time you need to ensure that you pay your accounts on time. If you don’t, you will end up with interest to pay, judgments, risk of forced liquidation, inability to order products and inability to deliver products or services to paying clients.
Distinguish Between Accounts Receivable and Payments for Repayment of Loans
As start-up or small business you may need to borrow money at beginning for setting up the business and to pay for initial marketing expenses. You need to separate the accounts receivable payments from the loan accounts that must be repaid. The borrowed funds should not form part of income. If you don’t make the separation you will not be able to clearly identify what income belongs to your business and what amount must be paid back to the lender.
Move from Weekly Expense Calculation to Daily Expense Calculation
If you only calculate the expenses on a weekly or monthly basis, you will not be able to budget appropriately. By keeping record daily regarding expenses you gain better insight regarding the cash-flow available and can thus make better forecasts and budget for expenses accordingly.
Determine the Minimum Profit for Survival
Review all the monthly expenses to get an overview of the most important financial obligations. Now set a monthly target for income to ensure that you can meet all the financial obligations every month. Rent, employee salaries and utilities are expenses you will have every month.
When to Outsource Accounting and Bookkeeping
Decide whether to manage the payroll in-house or have an outsourced company handle it. If you don’t have experience in small business accounting, then outsourcing the function will help to ensure accurate recordkeeping, on-time payment of employees and compliance with tax regulations.
Apart from payroll management you will benefit from using outsourced accounting services and bookkeeping solutions to streamline the monthly recordkeeping, preparation of financial statements, setting budgets and making the relevant payments. With such services you also have the option of outsourcing the tax function which will help you to focus on business rather than struggling with complex calculations and compliance requirements.
Professional accountants and tax consultants can help you determine whether to register for provisional tax or turnover tax. The turn-over tax is a relief system for micro-businesses. In addition, the accountants will help to streamline bookkeeping with appropriate software and assist in other aspects of running a business in South Africa such as registering for B-BBEE.