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 South African Budget Speech 2020

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The Budget Speech – an important time for South Africans and South African businesses in general. Shedding light on where we are as a country in terms of finance and what we can expect to happen during the next financial year.

It is vital information to have so you know how to prepare your business for what is to come in the business sector and make sure you plan accordingly to keep your business up and running fully.

In case you missed it, here is a summary of the events: 

  • The Finance Minister Mr Tito Mboweni announced on Wednesday, 26 February 2020 in the Budget Speech that much intervention is required to address the cost of wages in the public sector and has proposed reducing the public sector compensation bill by R160 billion over 3 years. 

This has been welcomed by many, but the trade unions are not happy.

  • One of the reasons the trade unions are unhappy is that the public sector employee compensation has remained at about 35% or so of the total expenditure over the last decade, wages are not the problem.

Looking closer, it seems that their statement is debatable and that the Minister is in fact accurate. The reason being is that the trade unions are referring to how much wages are as a ratio concerning other public expenditures.

However, the Minister is referring to affordability, which is an expenditure item relative to government revenue. If we had to accept the unions’ argument as a good measure, the government could just spend R200 billion more on goods and services funded through debt and the ratio of wages would, as a result, be corrected.

  • When compared to tax revenue collected over the last 12 years, another reality emerges. The public sector wage bill has not remained constant and has grown from just over 30 percent to over 40 percent. When compared to GDP, it has consistently grown from 10,29% in 2001, to 10,73% in 2011 to 12,3% in 2021.These increases might not appear large, but one must consider that that GDP equates to approximately R5.4 trillion. The wage bill has been tracking government expenditure growth at over 10% per annum.

This represents enormous growth in the affordability of the public sector wage bill as it relates to what government can afford and to what the country can afford.

  • The latter criteria of productivity are a lot more difficult to address given the lack of effective and transparent productivity measures in the public sector. Some have tried to analyse productivity like ‘Prophet Analytics’ in their 2012 quarterly Labour Market Navigator found that private sector employee productivity was 450% higher than in the public sector employees. In 2015 the Financial and Fiscal Commission found that the government was not doing enough to provide services “efficiently, effectively and economically”.

The Minister, in 2019, and this year in 2020 concedes as much, stating this year that civil servant’s salaries have grown by 40% in real terms but without the equivalent increase in productivity. These may all be persuasive rather than conclusive factual findings as it relates to productivity but seems to affirm what the public is experiencing daily.

In conclusion, South Africa cannot afford its public sector at the current level of stagnation and budget cuts for compensation and benefits are required. The second economic reality is that compensation only becomes problematic if it lacks concomitant productivity.

We hope this has been informative and helps you prepare your business for the upcoming year.

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Understanding Financial Year-End

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One of the biggest parts of a smooth and successful financial year-end is understanding it. We are going to dive right into what a financial year-end is and the importance of it.

A financial year, also known as a fiscal year, is the period used by governments for accounting and budget purposes. It is different from your normal year that begins on 1st January and ends on 31st December. A financial year is often very different to this. It also consists of a twelve-month period, except it generally runs anywhere in between February and March – although there are some exceptions.

What is important?

It forms the period over which a company is taxed. It also is a method of measuring the profitability over a set period and thus provides the ability to compare to previous financial years.

What is involved?

The Annual Financial Statements (AFS) reports need to be prepared and extracted. Accountants assist in preparing the AFS of a business. In order to make sure that the figures in the reports are correct there are certain accounting procedures that need to be undertaken. These are mostly reconciliations and certain year-end adjustments.

At the start of a new financial year, accounts will have a zero balance and the Balance Sheet account will all contain the carried forward figure (which includes the accumulated profits or losses) from the previous financial year.

How can an Accounting Software System help?

Having an accounting software system will mean that information from all the different areas of the business are captured on a real-time basis during the course of the financial year.

This is all because the system is fully integrated, all the information will automatically update all the necessary accounts so that the bulk of the information is already there to be extracted.

We can help here: Quick Payroll.

Once the year-end process is complete and all adjusting entries have been processed, it is important to be able to “close off” the previous financial year. It is important to close off the prior in order to ensure that the accounting system continues to reflect the correct balances.

We hope this breakdown has given you some insight if you are new to financial year-end, that it helps you understand the importance of it, as well as making sure you are organised throughout the year. If you have any questions on how our accounting software can assist you during financial year-end, give us a call here: 0861 726 657.

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Tips for Financial Year-End

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For a lot of businesses, it’s nearing financial year-end again. We know how tough it can be, therefore we found eight tips to get you through and make it a successful time.

  1. Pay and clean up anything owing

Businesses need to make sure that at the end of the financial year, there is nothing outstanding. Everything needs to be closed off. This includes payments that have not been made or received. Once done, it needs to be cleaned up and cleared.

  1. Be aware of relevant tax changes

It is critical that you are aware of any relevant tax changes which typically come into effect at the start of a new financial year. This will ensure that you are well-positioned to either capitalise on a positive change or are prepared for an adverse change for the next financial year-end season.

  1. Get your tax-deductible expenses in order

An easy way for SMEs to claim tax deductions is to pre-pay relevant services and supplies. By bringing forward tax-deductible expenses and deferring income, you can reduce your taxable income for the financial year.

  1. Keep your income-producing assets up to date

You can reduce operating costs, increase productivity and free up money by structuring your financing and repayments to suit your tax and cash flow needs. Make an effort to keep your income-producing assets up to date.

  1. Write off bad debt

The average number of days that business-to-business payments are being made has increased and now sit at an average of 56 days. If you’re still chasing invoices from the last financial year, now is the time to write them off. Bad debts are tax-deductible and can be used to offset your taxable income.

  1. Reassess your cash position

Starting the year with a healthy financial position is crucial. Ensure you review your money management processes and consider the most appropriate funding solutions. There are a number of cash flow finance tools to help you better manage cash flow.

  1. Have an accounting spring clean

Make sure you review and update your accounting systems to include tax and other changes; as you do not want to have to back-pay items such as missed contributions or lose other potential tax-saving opportunities at the end of your next financial year.

  1. Reward your staff and plan for the next financial year-end

The end of the financial year is always a good time to reward your hard-working staff and thank them for their contribution to your business. It may also be a good time of year to review their KPIs. Work on your refreshed business and marketing strategy, as well as a plan for the new financial year-end.

We hope you find these tips helpful and remember to have a look at the products QuickBooks and EasyBiz offer to make this time of year a little less stressful: EasyBiz Tech

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Do’s and Don’ts of Financial Year-End

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Financial year-end can be a headache for any person working in finance. There is so much to have prepared and ready for when the time comes.

Regardless of when it is, thinking about Do’s and Don’ts is imperative to a smooth financial year-end. We’ve found some of the best do’s and don’ts that should help you out and make this time less stressful!

The Do’s

  1. Training

Training is always a good place to start. Financial year-end training is a good way to refresh yourself on the process and get up to date with any legislative changes that need to be incorporated. It’s also important for new team members to understand the preparation plan in place so that the team can hit the ground running and complete all requirements before the cut-off time.

  1. Communication

Financial year-end is a team effort, and this extends outside of your HR and Payroll teams. Let your leaders and support teams know what your plan is ahead of time so that they can assist you where needed.

For outsourced payroll, teams should start communicating with their customers early on, in order to ensure that all involved know what to do well ahead of time. With everyone briefed in with plenty of time, any misunderstandings or issues can be dealt with early on, whilst also allowing ample time to gather payroll data.

  1. Review Everything

End of the financial year means going through 12 (sometimes 13) months of payroll data, so it’s crucial that any of the information being handled doesn’t get missed. Go through your payroll calendar to ensure all payments required to be reported within the current financial year are processed on time. Review overpayments, pay codes, tax numbers, and employee information so that the payment summaries and files are correct.

The Don’ts

  1. Don’t Procrastinate

Reporting needs to be done at the same time as your organisation’s regular pay run, so it’s vital that you stay on top of competing priorities for this time of year.

 

  1. Take Note of Legislative Updates

Ensure that you and your team are remaining compliant with legislative requirements. It’s important to check if there is any new legislation that might impact your end of financial year payroll and HR reporting.

  1. Team’s Leave

Every person in the team needs to work together to get through the end of the financial year successfully, so it’s important to be aware of everyone’s schedule. It’s best not to have any key payroll people on leave at this time, but things can still happen or get in the way, so don’t forget to have a contingency plan in place as a backup.

By keeping these tips in mind, you can have a smooth and successful financial year-end with a 100% chance of fewer headaches or mistakes. Financial year-end is a tough time for anyone, just take a breath, make sure you have all the data you need and everything should be fine.

For any payroll assistance or software, check out Quick Payroll to see how EasyBiz can make your financial year-end that much smoother.

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Staying afloat in the quiet months of the new year

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With the festive season over, we now enter the quiet months of the year. It happens every year with every business. Consumers generally use up most of their money during the holiday “silly” season and therefore aren’t as active with businesses the month after. Some businesses also feel the strain of the festive season and therefore engage less with other businesses as well.

The good news is that you can turn your slowest months into your best months with these tips.

  1. Analyse your sales

Have a look at your figures and identify what the quiet months are, how long they last and track your numbers. This is where knowing your numbers can make or break you. As an entrepreneur, the most important things to keep track of are:

  • Monthly sales and expenses
  • Cost of sales
  • Profit margins
  • Quarterly sales
  • Year to date sales

You cannot manage what you cannot measure and know your figures and where your company stands are the first steps to making sure you flourish even in the quiet months.

Check out some of our products that can help you in this stage: EasyBiz Tech

  1. Strategize and Execute

While in the quiet months, you should use this time to plan and strategize for the next busy season. This is the perfect time for it because when that busy season does hit again you may not have the time to strategize, putting yourself and your business under unnecessary pressure.

It will be all hands-on to fulfill and maintain sales during your busy months. Use the slow periods to strategize, so that you can optimize the busy season.

  1. Train Your Team

This is the ideal time to invest in your employees. Remember, systems don’t build businesses, people do and the more they know, the more they can accomplish.

  1. Build Up A Strong Online Presence

Use the quiet time to increase your online presence. This includes social as well as your online visibility. Engage with your clients on your social platforms, look for potential new business and see what your competitors are doing. Keeping on top of your game and trends is key.

With regards to your online visibility – for anyone unfamiliar with the term SEO, this stands for Search Engine Optimisation. This includes increasing traffic to your website, upping your ranking with Google and other search engines as well as monitoring what consumers are searching for via targeted keywords, which you can use to your advantage. People will find you when they are Googling anything that relates to your product or services.

The most important aspect of a business is online traffic – without it, you won’t gain leads, clients or sales.

Remember, nothing that is worthwhile is easy. The key is to take action. The only way a problem will go away is when it is defeated by a solution. Now you have your solutions and the quiet months, won’t be so quiet after all 😉

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Getting your finances back on track after the holidays

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That’s a wrap – 2019 is officially done and we welcome 2020!  The festive season is generally filled with a lot of great aspects like taking that well-deserved break, spending time with family and just being festive… with that being said, it does come with a price.

The festive season can put a serious dent in your finances. So, we have found some ways of getting your finances back on track!

  1. Set Financial Goals

Figure out what it is that you want to accomplish in the new year. Be it paying off debt, paying off your car or buying a house. Whatever it is, create a goal for yourself by creating a budget to help you stick to good financial habits and then reach that goal.

  1. Pay Off Debt

If you used a credit card, or even a personal loan during the holidays, it’s important to try to pay that off as soon as possible, because being in debt is not fun and it takes time and commitment to pay it off – lets also not forget the interest that normally gets added each month! Once you have paid it off, close your account or cut up your credit card. It just isn’t worth the stress!

  1. Be Frugal

Be careful with your money and how you spend it. Yes, getting home from work and having to prepare dinner can be a mission sometimes, especially after a long day and take-out might seem like the easiest route – but it’s not. It’s wasting money. Only spend money on the things you need, not what you want. This is the easiest way to save money and get back on track.

  1. Try Use Cash Only

Literally seeing the money leave your wallet will affect you more than just mindlessly swiping your card. Purely because you can actually see it and keep track of how much money you have left and making sure you are not spending money on the things you don’t need.

Unless you are a guru with your money, it’s one of the quickest ways people get into debt – not monitoring what gets spent using their debit cards.

  1. Find Ways To Earn Some Extra Money

Sometimes it’s not enough to just cut down your spending after the holidays. Sometimes, you need to increase your income as well. Find something that you can do on the sidelines that could bring in extra money to just help you that little bit extra.

  1. Don’t feel guilty

We all know that the festive season comes around the same time each year. We all know the New Year is filled with new beginnings. The year has passed so dust yourself off, stop dwelling over the fact that you overspent, and just promise yourself to do better next year.

  1. Work On A Budget For Next Christmas

As soon as you have gotten your finances on track – start planning for the next holiday season! That way you know throughout the year what you are working towards and how much you’ll need come the next festive season. You’ll be able to save money and make sure that your finances make it out alive afterward and you are not in the same boat as you are in now. Preplanning does wonders for creating good financial habits!

While the holidays are supposed to be fun and festive, you shouldn’t have to stress about money to make them fun. Take the measures and tips you need to make sure money is not something you need to stress about.

Check out some of our products and you can find one to help you manage your finances, for yourself and your business: EasyBiz Tech

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Time is Money

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“Time is money – It means time is a valuable resource because our time in this world is finite, so it’s better to do things as quickly as possible and get more done in a shorter amount of time…”

However, the idea that time is money has a long history.

Originally, this phrase can be linked back to Benjamin Franklin, who wrote in his 1748 essay, “Advice to a Young Tradesman”, “Remember that time is money,” he then goes on to remind his reader of the cost of laziness. When you’re not working, he says, you’re just throwing potential earnings away.

“Time is money” isn’t something we can trace to any one individual; rather it’s a formula that seems to float in humanity’s subconscious and pop up every so often. Be it in literature or conversation with someone. The phrase embodies a wish for success and a need for a foolproof way to achieve it. Simply put, if you put in enough time…the money will come.

Not working as hard as possible could mean, as Franklin once suggested, an opportunity cost. However, it could be deemed worth it if how hard you work seems to be interfering with your ability to enjoy life.

One of the great laws of labour is that time equals money: The less time you waste, the more you can get done and the more money you can make.

How can you save time?

One way of saving time which could make you extra money is having the right software or systems in place to assist you. Making your day to day tasks that much easier and efficient. Technology has come a long way, almost keeping the idea of “time is money” in mind. Every day things are improving to make sure we can get as much done as possible in the shortest amount of time, because at the end of the day, who has enough time in a day?

EasyBiz has a lot of products and services to assist you in protecting your time – from local support to Quick Payroll, Online software packages, to training courses – we want to make sure that you stay on top of your game at all times, making the most out of your time.

See for yourself here: EasyBiz Tech

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A look at 2019’s Financial growth and how it could impact 2020

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2020 is right around the corner (we know, we can’t believe it either). With that being said, it’s always good to have a jump start on the new financial year and prepare for the new financial year to keep your business succeeding.

Let’s dive into what happened this year.

  1. The International Monetary Fund is the latest key institution to slash its growth forecast for Africa’s most-industrialised economy, which may have fallen into its second recession. It was expected that the economy would expand by 0.7% in 2019, half of what was estimated in January, and similar to forecasts by the South African Reserve Bank and Bloomberg Economics. The same can be expected for 2020.
  1. The economy shrank the most in a decade in the first quarter of this year as the nation suffered the worst power outages since 2008.
  1. Looking at prospects for 2020, GDP growth is to be marginally negative at -0.1% in 2019, rising to 1.3% in 2020. As far as other GDP components go, government consumption expenditure growth should decelerate to -0.8% compared with 1.9% recorded in 2018. Unfortunately, negative fixed capital formation growth is likely to accelerate.
  1. South Africa recorded a trade surplus of ZAR 6.84 billion in August of 2019 compared to an upwardly revised ZAR 3.72 billion deficit in the prior month, easily beating market expectations of a ZAR 2 billion surplus. It was the largest trade surplus since last December, as exports surged 8.4 percent from a month earlier to an all-time high while imports fell 1%. Which could mean a lot if you are in exports/imports as well as for consumers. For all we know; we may have some price decreases in 2020.

Increases:

Exports soared 8.4 percent month-over-month to a record high of ZAR 122.02 billion in August. Driven by:

  • Shipments of mineral products (18%)
  • Precious & metal stones (10%)
  • Machinery & electronics (11%)
  • Vegetable products (6%)
  • Vehicles & transport equipment (4%).

Decreases:

Imports declined 1.0 percent from a month earlier to ZAR 115.18 billion, dragged down by:

  • Mineral products (-12%)
  • Vehicles & transport equipment (-11%)
  • Original equipment components (-6%).

In contrast, increases were seen in purchases of chemicals (14%) and vegetable products (31%).

Considering the first eight months of the year, the country’s trade deficit shifted to a ZAR 0.85 billion deficit compared to a ZAR 4.67 billion surplus, as imports grew at a faster 7.6% to ZAR 848.78 billion while exports advanced 6.9% to ZAR 847.93 billion.

Excluding trade with neighboring Botswana, Lesotho, Namibia, and Swaziland, the country’s trade shortfall narrowed to USD 4.14 billion in August 2019 from an upwardly revised ZAR 12.87 billion in a month earlier.

Even though 2019 was in some ways a good and bad year, it seems 2020 might be quite similar. With rises and falls in a lot of different sectors. Make sure you plan appropriately to keep yourself and your business in the know and on top of things. That way, you will take 2020 head-on with a plan and know what you can do to keep your business thriving.

We have multiple blogs you can read to help you manage your finances; giving you the head start you need: https://easybiztech.co.za/article/

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What will happen if you don’t file your tax returns

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Tax evasion is not something you want to be a part of, and yes, it is a real thing and there are a few repercussions you should be aware of. Below we have listed five things that could happen should you miss filing your tax return.

Now on to our list:

  1. You won’t get money owed to you

A refund is money you overpaid on your taxes and it is ultimately yours – but you can only get a refund if you file a return. Something as simple as claiming Medical expenses or working for less than 12 months of the tax year can trigger a tax refund, depending on your situation. Why let someone else keep money that is owed to you?

  1. You may not be able to take a loan

If you want to take out a loan for a mortgage for a home, or a long-term loan of any kind in future, you may need a Tax Clearance Certificate. This can only be obtained if all your returns are up to date and filed properly.

  1. SARS could change their mind

If you are normally on top of your filing, but this year you aren’t, SARS could administer administrative penalties later on for not being compliant – which may cost you a fortune and be an unnecessary waste of money.

  1. ‎You may not be able to access your retirement fund

Filing a tax return each and every year means that, should you receive a payout from a fund, you should not have any hassle withdrawing the money when you need to. If you retire or are retrenched, or just need to take money out of your fund early, you will need to be tax compliant.

  1. Having a complete record helps in so many ways

Having a complete filing record leaves SARS with no reason to give you any hassles. Filing a tax return means you are being a good citizen and keeping up to date with legal things that just need to be done.

However, there are some exceptions. For example; SARS announced that if you earn less than R500 000 annually and fulfill a series of complicated criteria – happy days – you may not need to file a return. But you are urged to take GREAT CARE here as if this is not done correctly, you may suffer later on.

We hope this article has been a good reminder to keep your tax returns in order and up to date! With eFiling right at your fingertips, it also makes the procedure so simple and easy. Take a few minutes out of your day, complete your filing and you will never need to worry about any of the tips we mentioned above.

If you are new to tax returns or are needing some insight into the Tax Season, have a look at our previous blogs we wrote to help you out:

Tax Season Tips

Tax Season For Beginners

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Top Tax Season Tips for Accountants and SMEs

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It’s that time of year again… Tax Season! We are here to help relieve the stress that comes with returns, IRP5s and the list goes on. Here we have a few tips that may assist you with the whole process – and by the time you’ve finished, tax won’t be as dreaded as it was before!

  1. Record every cent earned or spent

Whilst it may sound like an absolute admin headache, keeping a record of your business’s income and expenses is critical to ensuring a smooth tax return. The nature and size of your business will determine whether you’d want to look at getting an accounting software or package to assist you. We can help there. Have a look at the products we offer here: EasyBiz Tech

  1. Keep every slip and receipt

Keep all documents relating to income and expenses, such as invoices and receipts. Should SARS request verification on your business’s tax return, you’ll easily be able to supply these. No one wants to be rummaging through slips and papers from the past year – that takes up unnecessary time. Also, be sure to make copies of all your documents and receipts. You can either file them or keep them on cloud-based software.

  1. Store documents for five years

Don’t toss away your documents once you’ve filed your business tax return. Legislation requires that SMEs keep all relevant documents for a minimum of five years. SARS may request a review of previous tax returns and you don’t want to be missing vital documents that impact your business’ tax liability.

  1. Use the correct rates for depreciation

If your business owns assets that devalue over time, be sure to use the correct wear and tear rate from SARS’ list of different asset types (see here: SARS). For example, computers depreciate at a different rate to vehicles. Be sure to also check whether your business qualifies for the Small Business Corporation or Section 12C Manufacturing Assets special wear and tear allowance.

  1. Know all the allowed deductions

There are numerous deductions and allowances available to SMEs. It is advisable to familiarise yourself with them in order to ensure you never pay more tax for your business than necessary. Also, bear in mind, that accounting provisions are treated differently for tax purposes. Ensure you reverse the Provision for Leave Pay and Provision for Employee Bonuses in your business’s tax calculation as these are only deductible for tax once they’ve been paid.

Keeping these tips in mind should make tax season a breeze for you and your company. Just make sure you are organised, keep everything throughout the year and make sure that you understand the SARS requirements and legislation – and you’re good to go!

If you need some tips for your individual tax returns or need a better understanding of the tax season, have a look at our previous blog: Tax Season For Beginners

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Personal Information
Where a party receives any personal information (“PI”) related to the other party, the party who receives the PI, will comply with and have adequate measures in place to ensure that its employees, agents, subsidiaries and representatives comply with the provisions and obligations contained in the Protection of Personal Information Act, No. 4 of 2013. Any PI pertaining to one party which is required by the other party, will only be used by that other party for the purposes of this contract and will not be further processed or disclosed without the written consent of the latter and the recipient of that PI will take all reasonable precautions to preserve the integrity and prevent any corruption or loss, damage or destruction of the PI. If and when the contract is terminated, each party will, save to the extent that it is required to do otherwise by any applicable law, erase or cause to be erased, all PI and all copies of any part of the PI relating to the other party”.