Archive for year: 2024

Cash is king, said one anonymous business genius. At the end of the day, it’s having money in the bank that keeps a company running smoothly. According to a recent study by Sibongiseni Selby Myeni at the Walden University, the majority of SA’s small to medium enterprises are destined for the scrap heap and the majority of these cases will be due to a lack of cash flow. In an era where more invoices are going unpaid, how can your invoicing process help to make sure you are one of the lucky ones?

• Send the invoice immediately

  The best time to send an invoice is when you and your relationship with a client is still fresh in everyone’s minds. Ask for the invoicing details up front, so you can send the invoice with the final deliverable.

• Invoice for immediate payment

  The invoice should request payment immediately, or failing that, at the end of the month and not only when you need the money. Smaller businesses are likely to comply, and bigger companies may rush faster to ensure you get paid promptly within their next payment cycle.  Making the assumption that your client needs leeway or payment time scales well into the future only guarantees your invoice loses priority.

• Check your clients

  If you are going into a large contract, it’s wise to do some groundwork on your client. One of the biggest reasons for non-payment is the client’s own cash flow worries. Getting some intelligence from other clients, or if possible, running a background check on them, will ensure you don’t invest huge amounts of time and resources into defaulting clients. If you do establish a client might default, you don’t have to cut them off, simply invoice with the intention of being paid up front, or at least request a deposit and include a punitive “late payers’ fee” or interest on non-payment to encourage them to prioritise you.

• Never miss the payment cycle

  Your larger clients are going to be fanatical about their payment cycles. Ask them upfront when they need to receive invoices and make sure you get the invoice in before that date. Failure to do so will often mean a 30 or even 60 day delay in payment.

• Request Debit orders
  
  If you have a client who uses the same service regularly, don’t be afraid to ask for retainers and other contracts, to be paid by debit order, to cover the costs rather than invoicing each month. Be sure to offer perks to encourage your clients to take you up on these offers.
• Build relationships

  When it comes time to pay, even struggling companies will want to pay the people they know and like first, over the anonymous supplier. Knowing who at your client is responsible for the invoice and following up politely with them is a great way to ensure your invoices are treated with priority.

Businesses are often required to share their tax compliance status, for example for a tender application, bidding process or prequalification as a supplier; to confirm that their tax affairs are in order with SARS; to receive payment; or for foreign investment allowances.

This is because proof of tax compliance is accepted as an indicator of how well a company is managed and its good standing in terms of its legal obligations. Tax compliance also saves time and money.

SARS provides clear advice to owners of small, micro and medium enterprises (SMMEs) on how to achieve tax compliance, both in the business and in their personal capacity, including a recommendation to seek the advice of an accountant.

Which tax types apply to you and your business?

This handy table from SARS details the tax types that generally apply to SMME businesses and their owners.

Source: SARS

Compliance life cycle

The “compliance life cycle” as SARS calls it, applies to each one of the tax types for which the business and the owner are liable.

It involves completing these steps in your tax relationship with SARS from beginning to end: 

• Registration on SARS’ system for each tax type applicable;

• Timely and correct declarations or returns for each tax type, including submitting relevant supporting documents;

• Timely payments where a tax liability exists; and

• Deregistration from tax types if the business is liquidated or closed.

To meet these requirements consistently across all the relevant tax types over the tax year, in an always-changing tax landscape, taxpayers should consider professional assistance.

Consequences of non-compliance

Non-compliance is a costly choice, generally involving penalties and interest, as well as additional fees to rectify, and potentially further losses, such as losing a business opportunity or the confidence of clients, stakeholders and investors, or suffering reputational damage.

In addition, not registering for a tax type to evade paying taxes, as well as the non-submission of tax returns are criminal offences, which may result in a fine, imprisonment or both.

 

Outstanding returns will also negatively affect tax compliance status, and administrative penalties that will attract interest may be incurred for non-submission.

Where tax liabilities have not been paid, and no payment arrangement has been made, penalties and interest will also apply, tax compliance status will be affected, and SARS may appoint third parties, such as a registered bank, to recover the outstanding tax. 

Ensuring compliance

Human errors and simple mistakes are common given the complex tax types, rules and strict deadlines. Nevertheless, a taxpayer can be found guilty of an offence without SARS having to show that the taxpayer committed it wilfully, deliberately and knowingly. It means that even unintentional or administrative errors can be penalised with a maximum penalty and, in some cases, criminal sanctions.

This makes it essential to rely on your accountant, who is not only well-versed in the requirements and deadlines of the various tax types applicable to your business but is also up to date with the latest rules and processes, and how it affects your tax compliance.

“Employing an accountant, tax practitioner, or other tax professional to complete returns, or from whom to obtain advice before completing a return with entries that are not understood or adopting a position with tax implications” is among SARS’ recommended ways to ensure reasonable care has been taken by a taxpayer.

It is our best advice too for tax compliance throughout 2024.