By: Business Partners Limited
How to stay financing-ready this Global Entrepreneurship Week
One of the most valuable lessons that small and medium enterprises (SMEs) will take away from the COVID-19 pandemic, is to keep their house in order on an on-going basis. This applies to everything from business structure and financial information, to employment contracts and tax compliance – SMEs must ensure that they have everything they’re supposed to and stay up to date.
This is according to Kevan Govender, manager at Business Partners Limited (BUSINESS/PARTNERS), who says that non-compliance proved to be a major obstacle for many SMEs when applying for business relief or support. “As administrator of the Sukuma Relief Programme (Sukuma Fund) – a private initiative aimed at supporting SMEs that were financially impacted by COVID-19 – BUSINESS/PARTNERS saw first-hand just how many SMEs could not access financing due to compliance issues. It was the same for many relief funds.”
It is also worth noting that, accordingly to the third quarter 2020 Business Partners Limited SME Index – a quarterly measure of the attitudes and confidence levels of South African SME owners – 22% of businesses surveyed said they weren’t successful in their applications for COVID-19 relief funds or initiatives.
“We found that something as standard as an EMP201 – a monthly payment declaration in which an employer declares the total personnel payment together with the allocations for PAYE, SDL, UIF and ETI – was not always readily available,” says Govender. “Proving tax compliance and viability prior to the arrival of the pandemic was also difficult for some SMEs, as they just didn’t have a firm grip on their financials.”
In light of Global Entrepreneurship Week (16-22 November 2020), Govender has put together a concise compliance checklist, to help any current or aspiring business owners to ensure that their businesses are financing ready.
- Is the business properly registered?
Over and above registering as a company, you need to ensure that your business is registered with all the necessary legislative bodies. If you employ people, for example, the business needs to be registered as an employer with both SARS and the Department of Labour. In cases where a business needs a license to trade, such as a liquor license, there may be an annual renewal required, so it’s best to stay on top of these things.
- Are your financial records in order?
To put it simply, your financial records reflect your company’s income and expenses. At a minimum, you should maintain three sets of financial records, namely a balance sheet, income statement, and cash flow statement. Importantly, you are required to keep your books and records for 15 years, as SARS can ask to examine them at any time, should something not add up or seem suspicious. Most importantly, the majority of financiers require tax compliance or adherence.
- Do you have supporting documentation?
Together with these financial records, you must also keep all other documentation (such as receipts, invoices, cancelled cheques, deposit slips, etc.) that support the entries in your records and tax returns. These “supporting documents” are very important, so file them in a logical order and store them in a safe place. There are several apps available for filing your receipts, consider the best one for your business and pocket.
- Are you on top of any regulatory changes?
Legislation changes all the time, so you need to keep up to date with not only all the changes that have taken place, but also the changes that are being proposed for the future. This is particularly important in terms of SARS, as any VAT and tax changes could have a financial implication on your company if they are not correctly and timeously implemented.
- Have you considered consulting a professional?
If there’s one area you shouldn’t skimp on professional help, it’s with your finances and legal compliance. So, if your company’s financial administration is in arrears, or even if it’s just not your area of expertise, it’s probably best to get a professional tax consultant involved. It’s worth spending the extra money – after all, failing to pay your taxes is not only illegal; it can also lead to the closure of your business.