5 Things to Know About Your Small Business & Tax
Does the word ‘tax’ fill you with dread? Here are 5 tips to help your small business with your tax planning, so you can avoid any nasty tax surprises.
There are plenty of perks to owning your own business: you’re your own boss, you enjoy freedom and flexibility, and you get to do work you’re passionate about – and then be paid for it. Unfortunately, there are also things you’ll need to do that aren’t nearly as enjoyable – like tax. After all, who enjoys preparing tax returns, and worse, being told you owe an amount you haven’t budgeted for? Luckily, with a bit of planning, you can avoid nasty tax surprises that may be lurking around the corner. Here are 5 tips to help your small business when it comes to tax planning:
1. Make provision as you go
Few things are as stressful as having to suddenly pay over a large provisional tax amount (or any other tax payment) out of the blue, when your small business isn’t cash flush. Forking out like this can impact your cashflow in other areas of your business, such as paying suppliers or salaries. To avoid this, make sure that you do a rough calculation every month of the tax you think you owe from that month’s transactions. For example, if you’re VAT registered, transfer the VAT portion of every invoice that’s paid into a separate account, so that the money is ready to be paid over every two months, without affecting your regular business bank balance.
2. Call in the experts
You may be talented as an entrepreneur but weak at all things tax and accounting related! But this is a disadvantage in a small business environment, where you need to wear several different hats. If tax isn’t your strong point, the worst thing you can do is bury your head in the sand and hope it will magically take care of itself. Consider paying for the services of a bookkeeper or accountant who specialises in tax and small businesses, who can also help with other tasks, like company registration, payslips and BEE certificates. Catherine Black from content agency Black Mountain finds the services of their accounting firm invaluable: “While this is an added expense each month, we find it so worth it, as it keeps our cash flow positive and ensures our payments to SARS are correct and up to date”.
3. Put work-related expenses through the business
A business takes resources to run. Besides your time and materials needed to create your offering, there are also other everyday expenses, such as transport, office equipment, an internet connection and a phone line. The good news is that you can put most business-related expenses through your business – in other words, you can pay for these using pre-tax revenue that flows in. SARS has a large resource of publications that can help you navigate what’s deductible and what’s not: a good place to start is their Small Business Tax section.
4. Keep your paperwork up to date
In this digital age, it’s tempting to think that tax paperwork has fallen by the wayside. Unfortunately, to stay tax compliant, there are still certain forms of paperwork that you need to stay on top of – even if these are digitally submitted. For example, you’ll need to submit an EMP201 every month which can be done via eFiling, as well as a VAT return every two months (if your business is VAT registered). And then for every expense you want to claim against your small business, you’ll need to keep a corresponding paper slip to prove that this expense actually happened (for example petrol slips, a receipt for buying a new printer cartridge or your monthly cellphone bill).
5. Have a proper invoicing system
Being able to plan your projected revenue and expenses will go a long way to helping you plan for the tax your small business will need to pay. The best way to keep track of the money coming in and going out of your business is to have a proper invoicing system. These days, you can choose from a range of inexpensive or free web-based accounting tools – such as Freshbooks, Xero and Zoho. In addition to keeping all your invoices in one place, most of these tools also let you record things like credit notes, as well as pulling reports about your business’s cash flow projections.
Tax is just one side of your business you need to keep on top of as a small business owner, in order to run a healthy company. But the health and happiness of your employees is another huge priority that you’re responsible for. With Simply Insurance, you can do this quickly and easily online - contact us today about our life, occupational disability and funeral cover.