Vital for SMMEs to accurately report financials

©Andriy Popov via 123RF

Ensuring that your business is fully compliant in terms of SARS’ standards can be a daunting task for any small, medium or micro enterprise (SMME). For any normal business, regardless of whether it is tax season or not, the day-to-day running of the business needs to continue and this means that financial experts such as accountants and auditors cannot always dedicate 100% of their time to ensuring that compliance is obtained for the business.

South Africa has one of the most advanced tax systems in the world and was ranked 20th out of 189 economies in terms of how easy SARS has made it for a small to medium-sized domestic company to do its taxes. According to the tenth annual Paying Taxes 2016 report by the World Bank and PwC, it takes a typical medium-sized company in South Africa approximately 200 hours to comply with its tax obligations.

Research conducted by the aforementioned report shows that not only has the tax rate increased for SMMEs in Africa as a whole, but that the number of SMMEs being fully compliant and the time in which it takes to do so has decreased year, after year. For South Africa this means that SMMEs need to be very diligent in ensuring that they are not only fully compliant, but that this happens within the specified time period.

Penalties for non-compliance

It is imperative for SMMEs to ensure that they are accurately reporting their financials to SARS. Administration penalties for non-compliance varies across the board and could be anything from having to pay a heavy penalty to company liquidation.

In my experience as an SMME and having personally dealt with many finance divisions within these companies, ensuring SARS compliance can be a daunting and a very difficult task. In most cases it is better to call in experts that are not involved in the day-to-day running of the business, because this allows for a deeper sense of interrogation into the financials of the company.

The use of an experienced yet part-time financial executive is often a viable solution for SMMEs as this gives them the expertise they need without the overhead cost of a full time employee.

While many small businesses feel that they can operate below the SARS radar and continue operating without being noticed, it has been proved time and time again that following the law, while it can be a long and tedious task, is better than being caught out and risking losing your entire business.