A new year is a fantastic opportunity to kickstart good habits that keep your business finances running smoothly. This is especially beneficial in the lead-up to tax season. In addition to keeping good records, tracking your spending, and regularly checking stock, it’s vital to keep track of deadlines, especially due dates for SARS payments. Lean on Genfin’s fast and flexible business funding solutions to help you stay ahead.
The start of a brand new year is an almost irresistible opportunity to turn over a new leaf – to be more present, to take better care, and to do better than last time. But every big shift starts with a small one. And without those micro steps in between, large leaps – however well-meaning – often fall short. So before that box-fresh feeling of a new year loses its shine, turn your focus to the little things that make a big difference over time.
Small financial or operating tweaks are easy to implement, quick to become habits, and fast to culminate in effortless results. This is especially pertinent in the lead-up to tax season when business owners have to answer for every cent earned and spent. Holding yourself accountable through smaller, more manageable daily tasks also goes a long way toward reducing errors that negatively affect your bottom line. What’s more, it creates a culture of financial transparency that ultimately leads to better decision-making.
Here are four easy habits that will simplify your tax season, ensuring you stay organised, informed, and ready to tackle your taxes with confidence.
While it’s easy to defer financial admin in lieu of more urgent tasks, it quickly adds up to a more arduous job that invites errors. File and categorise every day’s expenses, bills, and invoices to maintain accurate and up-to-date records of all financial transactions or billable units that affect your proceeds. Digitise any paper receipts, invoices, or records without delay. If you don’t have accounting software, now is the time to research and invest in a system that streamlines this ‘preaccounting’ process, especially if you can do it on the go via a mobile app.
An excellent guide is the five-minute rule: If it takes you less than five minutes to do, do it right away. Alternatively, schedule 15 minutes at the end of each day to complete your financial filing. While you might have to work through a large backlog for tax season this year, you will build up a head of steam in no time at all. And gone will be the days of hunting for receipts when tax season looms.
Use tools like digital folders or apps such as Evernote or Google Drive to keep everything in one place. By digitising your documents, you can easily access and organise them throughout the year.
Monitor your finances closely. Regularly review your bank statements and other financial documents to keep tabs on your company’s financial health. Depending on the volume of transactions at play, set time aside every day or every week to understand where every cent goes. The closer you are to your company’s finances, the easier it becomes to avoid overspending and cut expenses that no longer serve your business.
Don’t forget to maintain a cash tracker. Failing to keep a handle on your cash transactions and petty cash can lead to frustrating discrepancies during your tax audit.
Keeping detailed records of your expenses can help you identify deductible expenses and ensure you maximise your tax refund.
There are several methods to track your expenses:
Apps like Mint, Expensify, and QuickBooks are great for keeping track of your expenses. They can categorise expenses, track receipts, and even generate reports to simplify your tax preparation.
To make the most of your tax return, it’s crucial to understand the difference between deductions and credits, and which ones you qualify for. Knowing these can significantly reduce your tax liability and improve your overall financial health.
Deductions reduce your taxable income, which lowers the amount of income subject to tax. This can result in a lower overall tax bill. For instance, if your business earns R500,000 and you have R50,000 in deductions, you will only be taxed on R450,000.
Credits, on the other hand, directly reduce the amount of tax you owe. They provide a dollar-for-dollar reduction of your tax liability. For example, if you owe R20,000 in taxes and qualify for R5,000 in tax credits, your tax bill will be reduced to R15,000. Credits generally offer a greater financial benefit than deductions because they reduce the tax due, not just the taxable income.
Office Expenses:
This includes costs related to running your office, such as rent, utilities, and office supplies.
Employee Salaries and Benefits:
Wages paid to employees, as well as benefits such as health insurance and retirement contributions, are deductible.
Business Travel and Meals:
Expenses for business-related travel, lodging, and meals can be deducted. Note that entertainment expenses are no longer deductible.
Equipment and Machinery:
The cost of business equipment and machinery can be deducted, either through depreciation over several years or immediate expense under Section 179.
Professional Services:
Fees paid to lawyers, accountants, consultants, and other professionals who provide services to your business are deductible.
Advertising and Marketing:
Costs associated with promoting your business, including online advertising, print ads, and marketing campaigns, are deductible.
Insurance:
Premiums for business insurance policies, such as liability, property, and workers’ compensation insurance, are deductible.
Office Deduction:
If you run your business from home, you may be able to deduct a portion of your home expenses, such as mortgage interest, property taxes, utilities, and repairs, based on the percentage of your home used for business.
Interest on Business Loans:
Interest paid on business loans is deductible, including credit card interest and loan fees.
Research and Development (R&D) Tax Credit:
This credit is available to businesses that incur expenses for research and development activities. It’s designed to encourage innovation and technological advancement.
Work Opportunity Tax Credit (WOTC):
This credit is available to employers who hire individuals from certain target groups, such as veterans, ex-felons, and long-term unemployed individuals.
Small Business Health Care Tax Credit:
This credit is available to small businesses that provide health insurance to their employees. It can cover up to 50% of the premiums paid.
Employer-Provided Child Care Credit:
Businesses that provide childcare facilities for their employees can receive a credit of up to 25% of qualified expenses.
Disabled Access Credit:
This credit is available to small businesses that incur expenses for providing access to persons with disabilities.
Energy Efficiency Credits:
Businesses that invest in energy-efficient property or equipment may qualify for credits to offset the cost of these improvements.
Employee Retention Credit:
This credit was introduced to encourage businesses to keep employees on their payroll during periods of economic hardship, such as the COVID-19 pandemic.
Keep a calendar of your tax deadlines and other payments due to avoid fines, excessive paperwork, and interest. Regularly review your calendar to ensure you are prepared to meet your obligations. It certainly softens those heart-stopping moments when a deadline catches you by surprise.
The same goes for accounts receivable. Keep track of when outstanding invoices are due for payment and ensure you follow up when deadlines are missed. Entice customers to pay before the due date by offering early payment incentives.
Physically count your stock at regular intervals to ensure your records match what is actually in stock. Staying on top of your stock not only prevents financial loss from damage or theft but also ensures your inventory management system is up to date. Counting stock is a very time-consuming process, but the benefits are undeniable. Physically watching your stock come and go gives business owners a very good handle on stock levels, inventory waste, and opportunities for sales growth.
GENFIN’s business bridge loan product, Opportunity Bridge Loan, is the perfect vehicle to cover large payments with no obligations for three months. Apply online to release up to R5 million with a 90-day repayment grace period. Our automated credit risk model means we require no collateral but instead make faster decisions based on the performance of your company. Get started with only 12 months’ bank statements and receive an offer within 24 hours.
Visit our applications to start your journey towards securing the funding your business needs. For more information on how to prepare your business for funding and to discuss your unique business needs, contact us.
Call: 0800 436346
Email: info@GENFIN.co.za
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