The holiday hangover is a time-honoured tradition, and one that even small businesses can suffer from. Unfinished business from the year before tends to dominate January, and until you’ve resolved it, it can be difficult to move on to your priorities for the next twelve months.
Tax can be a particular annual frustration. The deadline for the tax year-end is February 28; making adequate preparations is necessary – and it’s better to make them in good time.
If you take the correct steps, you can get your tax affairs in hand well in advance of the final deadline. Here’s how.
Profit and loss
The priority for small businesses looking to get their accounts in order should be to review their income statements. These documents identify each revenue-generating item and all tax-deductible expenses, giving you a precise picture of how your business has performed over the preceding financial year.
This is especially important because it will also give you a good understanding of the state of your cashflow. A positive cash flow is obviously essential to keep your business afloat and knowing exactly how much cash you have on hand is essential for year-end, and for your continued operation.
Pay the piper
Making sure everyone’s paid when they’re supposed to be paid will save you a big headache, especially in terms of your tax obligations. Vendors and contractors should be paid in full and in accordance with regulation; this will ensure both compliance and the absence of complaints.
Get your payroll records in order before February 28th, and make sure they’re organised in accordance with the most up-to-date legislation. If you’ve paid employees a Christmas bonus, be certain that you’ve retained the required tax: this kind of payment is taxed, but at a different rate from a standard salary payment.
Tax deadlines vary from business to business: your internal structure will dictate when, what, and how you pay. The SARS calendar is a valuable resource here: it provides up to date information regarding penalties for late payments and allows you to apply for a deadline extension.
You also need to determine your insurance policy. Establishing this in advance of the February 28th deadline is a wise move – so long as your policy meets all statutory requirements.
Technology and automation
Technology considerably simplifies the process of getting ready for the tax year end. It’s no replacement for an accountant or financial advisor and if you haven’t solicited the right advice already, do so as soon as possible, and well before your deadline. Nonetheless technology can help you estimate what you need to pay and manage your cashflow and payroll systems. Cloud accounting software can be of particular use for tax purposes: it automates time-consuming manual processes, freeing up your finance team and your accountant to focus on more strategic tasks that will help grow your business.
Getting ready for the tax year-end doesn’t have to overly time consuming, and when you’ve made the appropriate preparations you can finally let go of the year behind you and focus on the year ahead.
*by Colin Timmis, SA Head of Accounting, Xero.