Here are simple business tax tips for SMEs

Navigating through the intricacies of tax as a small business owner can be a headache.

Some Small and Medium Enterprises (SMEs) continue to report on taxable income amounts due to missing out on tax benefits and incentives.

Colin Timmis – Xero Country Manager shares simple tax compliance tips to help SMEs get benefits and incentives.

He says SMEs can also work with a financial adviser or a tax expert to reap more benefits.

SA’s tax landscape

Timmis says even though the overall tax revenue increased from R1 686.7 trillion in 2022/23 to a record net collection of R1.741 trillion in 2023/24, there are still many businesses missing out on tax benefits and incentives due to mistakes that can be avoidable.

“While 1.2 million businesses submit tax returns, only 130,000 registered for Small Business Corporation tax. This is a clear sign that better education is needed to help businesses understand the different tax areas and may also indicate that a lot of small businesses are not working with accountants,” adds Timmis.

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Five tips to help small businesses with tax:  

• Work with an advisor to plan ahead

He says life as an entrepreneur will be easy when one works with an advisor to help plan for the end of the tax year. The advisor will be able to advise on taxes you are liable for, any opportunities or incentives to be aware of, and estimate your taxable income for the year so you are prepared for what is to come. 

“They can help you understand what you need to do throughout the year to prepare and even provide a checklist, so you do not miss any crucial steps or deadlines.” 

• Be aware of changes in legislation

Timmis explains that as tax legislation is constantly changing, it is hard for business owners to keep up with the changes. Another challenge is the changes are usually subject to interpretation, which is where the tax advisor can help.

“It is however a good idea to try and be aware of any changes by reading the news and make sure to keep in regular communication with your accountant so you can ask questions about these changes and stay organised.”

• Create good habits

It is advisable to keep your processes organised for collecting and recording financial information. “It is also a good idea to regularly update your books and keep track of expenses to avoid last-minute scrambles.” 

Another method that people have been using is cloud technology, which makes record keeping easier as it is accessible on your device wherever you are.

“Having all your financial data in a cloud-based system provides small businesses with real-time insights that enable them to make more informed business decisions and collaborate more easily with their accountant.”

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•  Review your numbers regularly

Timmis adds that it is important to always go through your profit and loss statement to track your profit and identify if there is anything that needs to be looked into.

“Reconcile your balance sheet regularly, this includes credit cards, loans, and debtors, amongst others. Looking at it once a year and having to think back to items that may be a year old is difficult and things can be missed.” 

• Monitor cash flow often 

If you want to have a less stressful time during the tax season, it is advisable to always keep an eye on the cash flow. This does not mean the money in your bank account, but also the money that comes in and out, the profit and losses.

“Reviewing this regularly means you can avoid surprises and ensure you have enough funds to cover your tax obligations. You also want to be looking at forecasting your cash flow,” says Timmis.

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