Most independent business owners start their companies thinking they just need to earn enough money to cover their living costs and forget about tax returns. Frequently the initial growth is so rapid and often unexpected that they find themselves struggling to manage the day-to-day needs of the business as the admin piles up.
It all seems to be going so well that they just soldier on, promising themselves that they’ll get to the admin tomorrow, but never seem to have the time. It’s an approach which can be a recipe for disaster.
“There are too many cases of enthusiastic entrepreneurs who think their business is going well, but have failed to provide for tax. At the end of the financial year, when their provisional tax return has to be submitted, the tax liability can cripple the business,” says Ernest du Toit, chairman of the Direct Selling Association.
He suggests getting the right professional advice from the outset. Ask the company you’re representing, fellow direct sales agents or the Direct Selling Association, if they can recommend an accountant who is registered with SARS as a tax practitioner.
“If your expertise is in health and beauty products rather than tax law, it’s worth making a small investment to ensure your tax affairs are covered. It could prevent a nasty surprise later on. It should also pay dividends as the business grows,” says Du Toit.
Some basic tax tips micro business owners should know:
Ø All businesses need to register at the start of their business for income tax, and need to submit tax returns irrespective of how little profit the business is making or even if it’s incurring losses.
Ø Every business voucher, invoice or receipt needs to be kept
Ø Write details of expenses on the reverse side of the voucher as soon as the expense has been incurred
Ø Maintain a log book for all business travel
Ø All business documents should to be processed regularly
Ø Ensure that the business accounting records are maintained
Ø Understand the financial position of the business through monthly reporting
Ø Plan for any financial requirements the business may have, this needs to be reviewed monthly
Ø Project and plan for any cash requirements the business may need
Ø Be aware that VAT registration is compulsory for a business with a turnover of a million rand or more. A business may voluntarily register for VAT before the turnover reaches this level.
Administrative procedures include things like keeping track of bank deposits and all business-related expenses.
Typically we find that the most successful direct sellers are those who are meticulous about their administration. It’s the attention to detail that sets them apart.