The devil is in the detail
By Irvine Green
The hardest part of running a business, small, medium, large, XL or XXL is the time consuming, non-productive, admin side. Paper, paper, paper (or electronic equivalents).
While not every business produces the same amount of paperwork or admin overhead, there is nevertheless ALWAYS some.
And then at year end (Feb 28, or 29 in a leap year) you have to keep in mind that by late September (at the latest) you have to have put the previous year’s paperwork in some sort of order to create annual profit and tax obligation info.
In a small to medium, sole trader, type of business you don’t have to create ‘annual accounts’ in the full sense of the word anymore (ie – trading profit, nett profit, debtors and creditors totals, balance sheet etc). In the past you had to supply such documentation with your tax return – now you just provide SARS with the basic figures regarding income and expenses and a few other details and make sure YOU keep basic proof of all that for five years. (Companies such as CCs, Ptys etc have to do inc and exp, balance sheet etc for shareholders and by law, but a sole trader doesn’t. And SARS aren’t interested in it anyway. All they will ever want in case of a query, whether sole trader or JSE listed company, is PROOF of what you said was the case).
So, let’s presume you are going to operate as a sole trader (the assumption all along ever since my first blog). What you need to do from the start is keep a separate list of income (especially if it’s mostly cash, otherwise bank statements will do as a source document) and expenses.
Regarding expenses, you could – as most busy entrepreneurs do – just put all your expense slips into a big box and then sort them out nearer to tax time, or have at least a few boxes titled ‘petrol’, ‘telephone’, ‘office refreshments’ (yes you can claim some – after all you need sustenance on the job), ‘stationery’, ‘magazines/subs’, ‘postage and courier’ and so on.. and one called ‘other’ for once or twice in a year odd item purchases.
Whichever route you choose, as you get closer to ‘tax info needed’ time you need to go through your slips, sort them into headings, total the pile and make a note of it.
Ditto income – record your income (cash and/or bank deposit, and interest received) and also bank charges (they are legitimate deductible expenses) and similarly interest paid (if you have a loan/overdraft facility).
As a sole trader (or company director) you have to declare your assets and liabilities too. House, car, other personal possessions (from furniture to jewellery, TVs etc) and cash in bank, as well as cash on hand at midnight on Feb 28 (how many people keep a REAL record of THAT? MOST just guess). Investments need to be declared too (retirement annuity, shares, or whatever).
Many people leave it to an accountant/bookkeeper to do all this. You can if you feel the expense is worth it – but often it helps you to have a better insight into what is going on if you do it yourself. The money saved helps too if you are bootstrapping.
You could perhaps ask a teenager in the house to do it for some pocket money. It’s not rocket science.
Finally, before the end of November each year you will have to submit these figures to SARS. You can do it via e-filing… or just take your list of figures with you (plus ID) to SARS, sit around for 2 hours or so while you catch up on that reading you never got around to, and provide the info to the consultant. I take this route. THEY want this info, THEY can feed it in. And being an inveterate reader since age 3, there’s always reading to catch up on that one never quite manages to keep up with.
Yes – you might have to put off doing some business for this short period… but the odds are you will save more by doing the submission yourself rather than leaving it to a tax consultant. No ways you would have earned in two hours or so what you would pay the tax consultant to do. When I had a CC it was a tax consultant’s nightmare – I hardly left anything for him to do except write up the requisite 5-page document SARS needed and so my charges were minimal, which tax consultants HATE.
In my case I have just decided to always do the tax submission, on-site, myself after SARS lost a manually submitted tax form a few years ago, which led to hassles you DON’T want to know about.
One day they lose my electronically e-filed tax form TOO. I’d rather do it on-site, have proof of submission in my grubby (newspaper ink-stained from all the reading while waiting) little hands and sleep easy. If their system crashes there’d be a few thousand others in the same boat and it’d be obvious the fault of a missing tax submission wasn’t MINE. I’d have PROOF it went INTO their system, as above.
These two or so hours at SARS reading once or twice a year (provisional tax days too) are worth not having lost e-filing submissions ‘sez me’. Besides, you will have some quiet time to ponder some add-ons or new ideas to expand your business. And maybe even by chance meet some new customers you can do business with.
Next time – cash received, cash due, payments due, etc (debtors, creditors, profits, etc).
