There’s no doubt that financial year-end (FYE) can be a stressful time for businesses of every size. This is particularly true in South Africa, where many companies align their financial year-end with the South African Revenue Service’s (SARS) personal tax year dates, which sees their financial year-end fall on the last day of February.
At this time, the new year has barely begun, yet many companies need to start to finalise their year-end numbers to enable them to submit their provisional taxes.
Business owners can select an annual year-end closing date that works for their industry, as long as it remains consistent. And, regardless in which month your financial year ends, being prepared and consistent with your financial records throughout the year makes life infinitely easier.
FYE, in a nutshell, is the annual accounting period where a business needs to close its ledgers from the past fiscal year by balancing, reconciling, and reviewing the business ledgers.
The aim is to produce a set of annual financial statements (AFS) which reflect the financial position of the business on a specific date and show the profit or loss for a specific period (usually 12months). This set of AFS ultimately shows the performance of the organisation to all the internal and external stakeholders.
A complex process
For many companies, this process can be complex and onerous if financial records are not properly kept or maintained. There are several challenges that can cause this process to be unnecessarily tricky.
Financial records that are not properly kept or maintained during the course of the year
Not keeping track of, or misplacing key documents such as invoices and receipts
Entries being loaded inaccurately
Manual data entry that is prone to errors and is time-consuming
Not enough communication between the various stakeholders in the business
A lack of financial skills needed to maintain the necessary documentation and monthly or annual processes
Tips to help you prepare
Here are four ways in which companies can streamline the process and make financial year-end easy and stress-free.
Ensure that all financial records are kept up to date during the year. Updating records regularly will ensure that most records have been balanced and reconciled by the time year-end comes around, so that time can be spent on more high-level tasks such as preparing for audits and collating financial reports.
Keep a calendar of all the important deadlines and the various SARS submissions such as employee taxes (PAYE), VAT and provisional tax and ensure that all these are prepared for in advance.
Keep track of all invoices and receipts that are outstanding. Let the relevant staff members know what is needed by when and leave some leeway for delays. There is software available on the market that is designed to capture bank transactions digitally, which helps workers keep on top of their payable and receivable ledgers.
Stay on top of the receivable and payable ledgers to ensure cashflow is managed properly.
Naturally, part of the FYE process is to calculate the amount of tax your business needs to pay SARS. Effective tax planning and adequate knowledge enables the business to pay the correct amount of tax to SARS and not overpay which can cause strain on cashflow.
Making life easier
Companies who really want to make their lives easier should also look at bringing a trusted partner on board, one that can advise on an online accounting software system that can make FYE preparation far less overwhelming.
At Tarsus Distribution, we have been supplying high-quality data storage to our partners for many years. All our solutions help them to help their customers keep up with the fast pace of technological development, by providing them with the best devices and solutions across a variety of scales.