It is vital for founders and directors of private companies to know a thing or two about financial and tax deadlines in order to ensure that their financial year-end goes by without a hitch. In this post, we clarify some general sticking points and offer practical solutions from industry experts.
Benefits to staying up to date and compliant:
It’s so easy to put annual tax and compliance deadlines in a “compliance only” category and pass these on to the accountants. There is, however, so much more to gain from adhering to deadlines than merely ticking compliance boxes.
Your financial statements have to be drafted 6 months after year-end and your second provisional tax needs to be submitted on year-end, and by adhering to these deadlines you can add heaps of value to your business, as set out below:
- When doing your second provisional tax submission, it is an ideal time to reflect on the past year’s business and consider tax planning for the year ahead. Being tax compliant also assists greatly when fundraising is required or a tendering process is coming up.
- Drafting your financial statements timeously ensures that accounts are up to date. This is also an amazing opportunity to do budgeting and forecasting (with accurate up to date information) and to see in which direction your business is taking off and where some TLC is required.
- Reflection and comparing actuals to budgets will also indicate how the entrepreneurial innovation during the past year paid off. Sometimes seeing is believing.
- Another big value add, is that all information that may be required when the next big investment opportunity comes around is already available for decision-making purposes.
Note that for companies with February year-ends the following annual deadlines are coming up:
- Second provisional tax returns to be submitted by 28 February 2022
- Annual Financial Statements to be prepared by 31 August 2022
- If still outstanding, 2021 income tax returns to be submitted by 28 February 2022
Other deadlines to consider during the financial year:
While these deadlines often loom largest on our calendars, there are other dates and ongoing submissions that shouldn’t be forgotten. Below is a handy table, but keep in mind that not all submissions and deadlines are applicable to all companies.
|PAYE||Pay-as-you-earn: Tax on salaries paid||7th of each month|
|VAT||Value added tax (VAT) is an indirect tax on the consumption of goods and services taxed at 15%||This is depending on the period your company falls in, but is due no later than the end of the month, but for ease of mind purposes, submission should be done by the 25th.|
|Companies tax||Corporate Income Tax (CIT) is a tax imposed on companies||One year after your company’s year ends.||February year end 2022 will submit February 2023.|
|Provisional tax||Provisional tax is not a separate tax from income tax. It is a method of paying the income tax liability in advance, to ensure that the taxpayer does not have a large tax debt on assessment.||
1st provisional tax:
6 months after year end
2nd provisional tax:
12 months after year end
3rd provisional top-up payment:
18 months after year end
|Year end Feb 2022:
1st due August 2022
2nd February 2023
3rd topup before August 2023.
|EMP501||EMP501 reconciliations must be submitted twice during a financial year: Interim period – for the six month transaction period 1 March to 31 August, Annual period – for the full tax year 1 March to 28/29 February||
First interim submission: October
Full annual submission: May
|Dividend tax||Dividends received by individuals from South African companies are generally exempt from income tax, but dividends tax at a rate of 20% is withheld by the entities paying the dividends to the individuals.||The tax withheld to SARS on or before the last day of the month following the month in which the dividend was paid.|
|Compensation Fund ROE’s||The deadline for submitting the ROE is officially 31 March each year; however, in practice, this is generally extended to 31 May|
Now that we have our dates lined up, let’s consider FAQs that, if properly addressed, can greatly improve the financial position of any growing enterprise.
What happens when the company tax year coincides with personal taxes for directors?
Is it important to have a strong monthly accounting and reporting function throughout the year, or can everything just be done at year-end?
Which financial tools are recommended for entrepreneurial companies at their growth stage, and why are they effective?
The journey to implement financial tools to run your company can be overwhelming as a simple google search will give you hundreds of different options. What we at OCFO recommend as a basic application stack for most of our clients are the following applications, as they will enable you to start operating effectively and efficiently with minimal implementation costs:
- Xero – A world class cloud accounting software that is made for the business owner, it automates manual administrative tasks in your business and enables you to run your business anywhere and at any time.
- Dext – a pre-accounting tool to help business owners automate the collection and filing of supplier invoices. This will speed up the manual processes involved in capturing these documents.
- SimplePay – is an easy online payroll system that enables business owners to be compliant with minimal effort.
All of the above applications seamlessly integrate with each other allowing you as a business owner to spend more time on your business instead of spending time in your business.
What are some pointers for non-finance founders to help them navigate complexity and build a thriving business?
Cash flow management is key. If you don’t stay on top of your cash flow, you are going to put your business in a very dangerous position. It doesn’t matter how good your idea might be – when you run out of money you hit a brick wall. Establish a budget and stick to it.
- Limit your fixed expenses in the beginning. In the earlier stages of a startup, keeping your expenses low is the key to longevity. You don’t need a huge elaborate office in the heart of your city or fully catered meals three times a day. Operate thin so that you can allocate the majority of your capital to growth, which will enable you to one day implement any perk you want.
- Focus on customer acquisition. Without customers, you have no business. The sooner you figure out how to acquire customers and scale, the greater the chances are of your company making it. Once you identify different acquisition channels, work on optimization to lower your costs.
- Marketing is different from selling. In simple words, selling transforms the goods into money, but marketing is the method of serving and satisfying customer needs.
- Get your internal processes rock steady from the get-go. Businesses typically need new systems to make their lives easier through streamlining business processes and centralizing information. Ensure consistency and understanding across the business. Reduce confusion during implementation. Identify areas for efficiency gains or controls.
Keep these pointers in mind in order to navigate the financial year-end and hit all your business growth markers. If you need a partner on your financial journey, reach out to OCFO today.