Ask The QuickBooks Online Accountant- Series 2, January 2023

Ask the QuickBooks Online Accountant

Meet Lauren, a QuickBooks Online certified accountant who runs a family practice in South Africa, Rae and Associates.

“I have been in the accounting industry for more than 14 years, with a specific focus on bookkeeping services and Cloud accounting implementation and sales.  

I am extremely passionate about helping SME’s and owner managed businesses so we can relieve their financial pressures and let them focus on their businesses. 

I am very client experience focused and have a hands-on approach with all our projects  

Some fun facts, I devour books at an alarming rate so my kindle is my best friend. I have a crazy, loud and fun family, thank goodness we all like each other as we work together every day. I love being a mom to a firecracker 11 yr old daughter. I'm obsessed with animals so I have a mini zoo at home and have a sort of Dr Dolittle vibe going on around me.”

In this series we ask Lauren: 

What are my responsibilities as a business owner to my employees and for my company?

“The thing I love the most about South Africans is the entrepreneur drive we have, new businesses are popping up every hour and people have the most incredible ideas of what would work and be successful. We have seen that new business owners and Entrepreneurs are sometimes not aware of the compliance side of the business and what responsibilities you have as business owners. 

At Rae & Associates we specialise in SME and help business owners setup their companies to remain 100% compliant which gives business owners tremendous relief. No one wants to have sleepless nights worrying about owing SARS money.” 

There are some high level items that need to be addressed in order to run an efficient business: 

Responsibilities as an Employee 

1. Payroll System: You need to have an electronic payroll system that will present payslips monthly to your employees. The cloud payroll systems that are available locally are brilliant, easy to run and put information in the hands of the employees as they need it. These systems also help you make sure that the correct deductions are taken off each month and will give you excellent reports to submit to 3rd Parties like SARS

2. SARS returns: There are monthly PAYE returns which will show SARS the amount due to them for PAYE, UIF & SDL. 

"Then, there are Biannual returns called EMP501's. This is a 6 month recon from your payroll system to what was submitted to SARS and gives you an opportunity to make sure all monies due to SARS have been paid. Lastly for SARS there are employees IRP5’s. These are certificates sent to SARS for each individual that was employed by your company for the financial year, it gives a breakdown of the earnings per employee and your employees will also use this for their personal tax returns."

3. COIDA: Department of labour. Every company in South Africa is responsible to pay a % of their annual payroll expense to the department of labour to cover the Workman's compensation insurance. The % depends on the industry your business is in. There is a recon from your payroll system that will be used to submit these figures online annually 

Responsibilities as a business Owner 

1. Tax Submission: As soon as you register a new business on CIPC you are then automatically registered for business tax with SARS. There are 3 tax returns that need to be done Annually. Two Provisional returns throughout the year which estimate how much tax is due to SARS for the year and then once your financials are completed the final Income Tax return is submitted. There are different kinds of company tax based on company structure / turnover / shareholder and directors. Make sure you are working with a Tax consultant to get the best tax benefit available 

2. VAT registration and returns: For any business that has a turn over of more than one million rand you have to be registered for VAT with SARS. Most businesses  will submit VAT on a bi monthly basis. For a business that has more than a R30 Million turnover annually they would need to submit returns monthly. 

3. Compliance: Due to the 2 items above it is imperative that any business has a system to run accurate accounting records. Having an accounting system in place like Quickbooks online makes these kinds of submissions seamless as it keeps your records up to date and compliant. If SARS ever audits you and want copies of your records they expect them to be presentable and compliant 

4. CIPC annual submission: Each year you need to submit turnover figures to CIPC and pay a small ongoing registration fee to keep your company active with them. This fee is based on your turn over 

5. Annual financial statements: These need to be prepared and submitted to SARS. There are 3 types of Financial statements you can produce for a company. It will be dependent on certain criteria. The 3 options are - Compilation, Review & Audit. 

Comparing an Audit, Review, and Compilation - In short, the differences between an audit, a review, and a compilation are as follows: 

• Level of assurance. The level of assurance that the financial statements of a client are fairly presented is at its highest for an audit and at its lowest (none at all) for a compilation, with a review somewhere in between.
• Reliance on management. In all three cases, the auditor begins with the account balances provided by management, but an audit requires a significant amount of corroboration of this information. A review requires some testing of the information, while a compilation almost entirely relies on the presented information.
• Understanding of internal control. The auditor only tests the internal controls of the client in an audit; no testing is conducted for a review or a compilation.
• Work performed. An audit requires a significant number of hours to complete, since there are many audit procedures to be performed. A review requires substantially fewer hours, while the effort associated with a compilation is relatively minor.
• Price. It requires vastly more effort for an auditor to complete an audit, so audits are much more expensive than a review, which in turn is more expensive than a compilation.
• Level of demand for each of these services. The users of financial statements, such as investors and lenders, nearly always demand an audit, since it provides the greatest assurance that what they are reading is a fair representation of the financial results, financial position, and cash flows of the reporting entity. “

“I am wondering if some business owners felt there pulse quicken and blood pressure rise as they started reading this. The best news is that this is what Accountants are trained to do for you! Make sure you are partnered with an accountant rockstar and they will relieve the pressure of you staying compliant and especially help you save unnecessary tax and vat liabilities to SARS by giving you advice on how to structure your expenditure for the most tax and vat benefit. I have always said that running a business can be really lonely but if you have the right team supporting you and you using the right tools in your business, then the sky's the limit.”

For more information about VAT, visit our VAT help hub.