back on track – and our businesses
Although South Africa was spared a credit ratings downgrade, we still have a long way to go to get our economy back on track.
With strategies and plans in place to achieve this, the Government is expected to address the many problems facing our country.
The question is how will these plans affect local businesses?
Says Octagon Chartered Accountants: “It is clear that the fiscus is looking for more money, and they will find it in the form of increased taxes and increased tax compliance. As a business owner you should be prepared for increased SARS tax audits. If you are not giving it to them they will find it.”
Tax law is complex and there may be certain risk areas that your internal accounting team is not currently applying, says the auditing and tax advisory firm. “Our advice would be to ask your auditor or accountant to do a VAT/Income tax/PAYE risk analysis on your business.”
The sad reality is that economic challenges are forcing many companies to rethink the way they do business. And as a result, many of these need to find cost-effective ways to meet compliance obligations in the tax and financial space. Octagon Chartered Accountants advises companies to keep in mind the following when it comes to the aforementioned:
- Expect your internal accounting staff to know and to be up to date with the latest tax legislation pertaining to your business. A good bookkeeper is great; a good bookkeeper who refuses to move onto SARS E-filing is not really an asset to you.
- As part of your year-end process, ask your accountant or auditor to perform additional procedures to identify risk areas – in many cases, the money spent on pro-active analysis prevents much larger cash outflows in the form of SARS penalties/interest.
- A good accountant or auditor should be able to advise you of applicable laws to your industry.
While putting cost-effective measures in place for those who are struggling is a smart move, there are other measures that businesses can put in place to stay afloat during the unstable economic climate. Octagon Chartered Accountants advises:
- Keep residual cash-flows as reserve funds.
- Keep your clients happy, happy clients are less likely to leave you.
- Don’t rely on a few clients; let your client base be a diversified one.
- Review your overheads and costs, especially old service level agreements that tend to be inflated due to annual escalations.
- Bankers – secure lines of credit with the bank so that you have a safety net in times of need.
- Suppliers – don’t rely on a single supplier, have alternative suppliers for products.
- Don’t sign long-term agreements that may lock you into overheads based on your current operational level. If you ever downsize you will find that you cannot get out of a particular agreement that may no longer be required.