4 Key Financial Management Requirements and Documents Your Business Needs to Operate Efficiently

So if you’re a business owner and need an active registered company, a valid Tax Clearance Certificate, a valid BBBEE Certificate or Affidavit and a valid CSD report, in order to generate sales/ apply for tenders/ register on your customer portal/ get a loan or any other finance and cannot prepare these documents by yourself and are willing to pay someone else at the price they charge to help you, then you are the ideal client, you need to read this.

In this blog, I will explain in more detail how these documents are put together or what it takes to obtain all these and how they are all interrelated.

It is not just a matter of calling in and saying “hey, I need a Tax Clearance urgently” and boom, you have one in your hands. Although in most cases we and other accountants in the market deliver at most urgent requests, sometimes compromising a large percentage of statutory requirements and creating greater future problems compared to the immediate solutions. Click any of the links below if you need assistance getting any of these for your business.

Here are 4 key documents and compliance requirements every Company needs to adhere to in order to operate efficiently:

1. A Valid Company Registration Certificate: To always have an active and valid business registration certificate, every company is to submit an annual return at the Companies and Intellectual Property Commission (CIPC). Annual return states the turnover(sales) a company has made for that Financial year and then an amount is calculated and payable. (This takes place annually from the anniversary date of your company).

- To know your annual revenue, you need to have a set of Annual Financial Statements prepared for you. To have annual financial statements prepared for you, all your daily transactions (income and expenditure) need to be recorded into an accounting system, which summarises all the information and this is done by yourself if you have the know-how and time or by a skilled Bookkeeper and Accountant hired by you.

2. A Valid Tax Clearance Certificate: You need to have all your business Tax returns submitted to SARS at the prescribed times. These can be twice a year, bi-monthly or every month depending on the specific requirements of your business.

2.1 Tax returns may include the following:

- VAT returns (VAT 201) - If your company is registered for VAT, a VAT report needs to be prepared and a VAT return submitted on the SARS efiling profile. To prepare a VAT report, your business daily transactions (income and expenses) need to be recorded into an accounting system that summarises this information into a reportable manner, by a person that understands accounting/bookkeeping and the VAT Act.

- Payroll Returns (EMP201). These are returns required to be submitted monthly by all businesses employing people that are required to pay PAYE, UIF and or SDL. To calculate PAYE, UIF and or SDL, you need to have a payroll system, that allows the salary transactions to be recorded and then a report is produced through this system.

- Income Tax and Provisional Tax returns (IT14 AND IRP6). The Income tax return is required for submission on an annual basis from all registered companies in South Africa. The Provisional Tax return is a return required to be submitted every 6 months. Basically, this is a 50% estimate of what annual tax you anticipate will be due by your business at the end of the year. This is submitted and payable twice a year. Therefore, by the time you submit the annual Tax return, you would have either already paid off your annual tax or have little left to pay. If you overestimated, then SARS will pay you back a refund.

- To submit these Tax returns, you need 6 months’ of management statements and annual financial statements.

These are the basic Tax returns that need to be always up to date on a monthly, 2-month, 6-month and annual basis for your business to always have a valid Tax Compliance Certificate. If your company does not trade at all, all these returns with zero figures still need to be submitted. However as soon as your company is transacting, even if it is R1, then that R1 must be declared to SARS.

3. A Valid BEE Certificate: You need to know your business annual turnover which informs whether your company is an Exempt Micro Enterprise (EME) or Qualifying Small Enterprise QSE, or requires a BBBEE Certificate full audit to be done by a qualified BBBEE Verification agent. To get to know your annual turnover(revenue)(sales) you need to have annual financial statements prepared. This annual turnover is then entered into a form (annual return) that is complete on the CIPC website. CIPC then calculates an amount payable for that year.

4. Lastly is the Central Supplier Database (CSD) validity and update. This is a system designed by the government to facilitate the tendering system and to ensure companies they deal with are compliant. Usually, if not always, buyers from state entities require your company to have a valid and up-to-date status of this before they can issue a purchase order or payment for your business or even be awarded a tender. Your company CSD Status is up to date when the following are up to date on your profile.

· A valid Company Registration certificate (CSD system is linked to CIPC system, as soon as your annual returns are overdue, CSD automatically detects this, and this offsets your CSD status.)

· A valid Tax Compliance Certificate (CSD system is linked to the SARS system, as soon as one return is past due or you owe SARS, your Tax Compliance Certificate becomes invalid and CSD detects this, and it then offsets your CSD status)

· A Valid BBBEE Affidavit or Certificate. (CSD system detects the expiration date on your BBBEE Certificate and as soon as it is past due, it is the offset)

· A valid Bank Account. (CSD system is linked to the banking system, as soon as your bank account becomes invalid, this is also detected and sets off your CSD profile)

· Then every other section of the CSD profile must be completed.

If, for some reason, you do not trade with any state entity or any companies that require your compliance documents as explained above, which is rare in South Africa, you are still not off the hook, you are still required by law to keep records of your transactions and compliance in order.

The companies Act requires this. Although we do not have Companies Act police knocking down our doors to check if we are following it, we do have the SARS police. Yes, the TAX MEN and WOMEN can shut your business down and leave you with hefty fines if you do not comply with these tax requirements.

As business owners we need to become accustomed to the above requirements and get ourselves to a position where we are practising these easily, small, or big company it matters not. I always say the sooner you start setting up a system of compliance for yourself, the better.

This is our mission at Dispersive Consulting, is to help business owners keep the above in place. This is why many other accounting firms exist, to help many other business owners keep the above in place. As a company, we also must keep the above in place.

All the above can be done for business owners as a monthly bundle and billed as a monthly retainer or done individually and billed individually. Whatever suits your business and budget, it is important that you keep up with all your compliance requirements. Click here to set up a Free Discovery Session and get the Financial Management package that suits your business needs.

Therefore, when you pick up the phone and call or text or email and ask for a tax clearance for a job you want to get or a payment you need, or you need a CSD certificate we are likely to ask you the following in order to satisfy the above explained and to be able to help you.

1. Is your business actively trading/transacting?

2. Do You have a SARS efiling profile? -(So we can check what tax types you are registered for and what returns are due). Depending on what we find here, more questions may follow.

3. If trading, do you have financial statements?

4. Send us a copy of your registration certificate. If you don’t have, your company name will just do. We run this through the CIPC system and check what Annual returns are due.

So you may know that you just need a Tax Compliance Certificate or your CSD report, however in order for you to get one legally, all these other connected areas need to be addressed, prepared and submitted and sometimes even paid for before you can get that one document.

Dispersive Consulting is an accounting, tax and advisory firm whose mission is to help business owners operate profitable businesses. Sound financial management and a good understanding of business finance empowers business owners to make smarter, more informed decisions about their businesses.

Contact us Today to get your Business Finances in Order!