Tax Tips For SMEs
Taxpayer education and the cost of tax compliance remains a significant challenge for small to medium sized enterprises (SMEs), who in their early stages of business often survive month-to-month. With tax season currently underway, small businesses need to ensure they have sufficient cash flow to make the necessary provisional tax and assessed tax payments.
“Not having enough working capital is the biggest concern for small businesses wanting to remain tax compliant. It is tempting to use money owed to SARS to bridge shortfalls between invoicing clients and receiving payments, but this is not advised. Proper financial preparation needs to be put in place,” says Daniel Goldberg, co-founder of Bridgement, a Fintech company which offers short-term financing to SMEs.
SMEs, like all businesses, need to fully comply with their tax obligations; “Fintech can improve SME tax compliance. By automating the administrative work needed for tax returns, businesses find it easier to stay on top of requirements put forward by SARS,” says Goldberg.
Goldberg offers advice to SME owners to help them stay tax compliant:
Register your business – failing to register with SARS can have a negative impact on obtaining financing, overdraft facilities or business credit. Failing to register your business can have severe legal implications. It is best to stay on the right side of the law.
Know your deadlines – to avoid penalties, small businesses need to ensure that their tax payments and tax returns are submitted on time. SARS charges a 10% penalty on late payments, this adds up over time.
Type of tax – the size of your company and annual turnover determines whether you are liable for VAT, income tax, PAYE. The SARS website has a comprehensive breakdown of what types of tax SMEs are accountable for.
Supporting documents – collate all supporting documents for income earned and expenses claimed. It is recommended that SMEs keep hard copies and electronic versions of all documentation for a minimum of five years.
Know what you can deduct – be aware of the rebates available to your business. This is company and industry specific and ensures that you don’t pay more tax than you need to.
Account for VAT – SMEs with an annual turnover of R1-million or more are required to pay VAT over to SARS on a monthly or bi-monthly basis. Companies should consider using short term financing from digital lenders such as Bridgement, when cash flow is a concern to settle VAT bills.
Introduce cloud accounting – there are many apps and tools that simplify and automate tax compliance. Payroll apps manage PAYE for your employees and receipt management apps are available for tracking expenses and obtaining VAT refunds.
Using machine learning for credit analysis and decisioning to speed up their application process, Bridgement offers SMEs instant advances on expected income. Accessing customer’s financial data directly from their accounting software, such as Xero, Quickbooks and SageOne, credit facilities from R10 000 to R5-million are available to registered companies who have been trading for longer than six months and have an annual turnover of more than R500 000. Interested businesses can apply in under two minutes on their website, www.bridgement.com.
The content in this article was provided by Bridgement – a FinTech company that offers simple finance to small businesses across South Africa, enabling them to expand their operations, take on bigger projects and bridge gaps in cash flow.
For more information, contact:
Website: https://www.bridgement.com/
Tel: 087 551 0513
Email: info@bridgement.com
