Financial Accounting

Financial accounting might sound like a lot of numbers and jargon but it is actually the secret sauce that keeps your business running smoothly. At MAS, we turn the complicated world of accounting into something anyone can understand. Here is a quick and easy guide:

Financial accounting reflects the real image of your company, much like a mirror. Keeping a record of all your financial transactions allows all parties to observe how things are progressing. The key is to be truthful and upfront. Imagine operating a vehicle without a dashboard. It sounds scary, right? Financial statements serve as your company's dashboard. They assist you in determining where you are and assisting you in choosing wisely where to go next.

It is important to abide by the rules. Financial accounting ensures that you are following the rules and keeps the tax man from giving you any unpleasant surprises. Are you curious about the state of your company? You get the scorecard from financial accounting. It facilitates future planning and progress monitoring. Do you require a loan? Banks and investors request to view your financial statements. Good accounting procedures improve the way your company appears on paper, which helps you raise the capital you need to expand.

We at Mcusi Accounting Services monitor every penny that enters and leaves the office. It is similar to having a neat, well-organized business wallet. We prepare all of the necessary paperwork, including income statements and balance sheets. See these as report cards that provide information about the performance of your company. While taxes can be complicated, we can help. We make sure you only pay the amount you are supposed to, nothing more. You should not fear if the taxman shows up. We will assist you in organizing everything and address all of the challenging inquiries.

In need of guidance? We are available to assist you in making the best financial choices for your company. Consider us as your financial GPS.

Budgeting 2023

Budgeting for 2023

Things to consider saving up for this new year:

- A vacay

- A fixed asset (car/home,etc.)

- Retirement/pension savings or investments

- Medical or other emergencies

The truth is these will come in handy when you least expect it so it's best to stay prepared and not need it then the opposite, we've seen how that episode goes. Here are some tips on how to go about it:

1. Estimate/project how much you'll need for each of the categories above. You can always shop around to see what the internet has to say about a 35 year-old's pension savings and start from there. Alternatively, speak to professionals in each field.

2. Try the 50/30/20: 50% is for essentials, 30% to discretionary spending and 20% to savings/investments.

3. Become a jack of more than one trade: consider additional streams of income

4. Resist instant gratification but ... you can reward yourself now and then, emphasis on a reward, it needs to be earned!

Lastly, credit... this is not the best or first answer to any challenges you may encounter but it would be prudent to monitor your credit score and keep it on the green scale. You can remain green by:

- Paying all your bills on time

- Avoid using credit to cover your basic needs

- Don't spend your entire credit limit

And many other things you can consider to clean up your credit and get your financial ducks in a row. We wish you all the best for 2023!

Management Accounts

Management Accounts

Also known as the management pack, what is it and how does it help me?

This pack usually includes for profit and loss, statement of financial position and cashflows for the month/period under review. As a value-add we also include and accountant’s letter as the forehead to explain to our clients what happened during the month, what was great and what could be improved to match their business financial goals. This pack is useful for a few things.

1. “Screenshot” of the business finances for the month

Each month is different, and each month has different patterns and attributes to it. The pack details how your finances look as at the end of that month, how much was spent and on what as well as income generated. Based on your accounting policies and procedures, the report in entirety would outline how much value the business was able to create, not only in terms of profit.

2. Tax and cashflow planning

This is more useful for VAT vendors especially as they need to submit and possibly pay the Commissioner every two months or so. To avoid tax surprises, looking at the cashflow statement would explain in what categories is the cash being spent (is it capital in nature) and the total outflow in comparison to inflow. In an ideal scenario, the inflow exceeds the outflow.

Hint: After each management pack meeting with your accountant, save the tax portion in a separate pocket (could be a different account altogether) so you can pay your taxes comfortably. This applies to all the tax types you are registered for.

3. Goal tracking

Remember that budget you set at the beginning of your financial year? This is an ideal time to match actuals to budget. For businesses that want to decrease expenditure by 10% and increase revenue by 20%, the profit and loss statement is a good place to start looking where we can ‘trim the fat.’ Having a second forecast also helps you to re-direct the ship once the wheels are in motion and a few things you hadn’t anticipated has affected your performance.

4. Financing

The reason why some companies come knocking at our door is because they are looking for financing and the lender requires annual financial statements and management accounts. Having a pack ready consistently makes the process go faster as you are always ready and knowledgeable about your business finances.

5. Accounting “guru”

Lastly, going through your accounts makes you more comfortable and upskills your understanding of accounting and how it affects your business. This way you can have more effective meetings with your accountant to steer your business in the right direction.

With that being said, your accountant is your friend and not the auditor whose door you need to knock on only when you are in hot water. Speak to us, we are always ready to listen 😊

Private Company Compliance

Private Company Basic Compliance

So now you own a business, a registered business, congratulations!

What do you need to know about the decision you have just made? The Companies and Intellectual Property Commission popularly known as CIPC and the South African Revenue Service expect you to file a few returns in order to run a compliant entity.

CIPC:

First step is to register your company on www.cipc.co.za and fill in all the applicable details. The certificate generated called a COR 14.3 tells you when your financial year end is and your anniversary date. What this means is that once your financial year (not necessarily the same as a calendar year) is over, you need to declare how much the company generated. Depending on your revenue and profit level, you may need to submit a Financial Accountability Supplement (FAS) or Annual Financial Statement (AFS). If the company does not require an audit, a FAS should be submitted with your annual return.

SARS:

There are more returns required by this entity, two provisional tax returns and one annual return (assuming this is the only tax type registered for). A provisional tax return (IRP6) is submitted 6 months into the financial year and again on the last day of the financial year. These returns are based on financial projections that are prepared by the company (this is where budgeting and planning comes in). The last return is called an Income Tax Return (ITR14). This return is more technical and requires a sound knowledge of tax and accounting principles based on the company's performance for the full financial year.

Submitting these 4 returns on time annually will ensure your company is compliant and good to operate. Other tax types may be registered for and each has it's own tax implications, speak to your accountant first before opting for those taxes and they can advise you on what's best for your company.

Congratulations on your new company and welcome to the economy!

Business Budgeting – The SME edition

Business Budgeting - The SME edition

For many entrepreneurs the finances are just ‘not their thing.’ When it comes to the core trade of the business, they are doing an amazing job but the finance and compliance bit gets a bit tricky. There are various ways to budget but we’ll go through two popular ones, zero-based and historical:

1. Zero-based Budgeting

This is the budget you draw up as part of your business plan (if you have one). The

figures are based on your research and feasibility tests, etc. It’s called zero-based because it’s based from zero ‘factual’ experience of the business. To ensure this type works for you, it’s best to study similar entities and set realistic targets. If your type of business mandates you to rent facilities, gather quotations from ideal commercial offices (including utilities and parking fees) and include them; the same would go with other general expenses and payroll. The advantage with the option is that you get a wholistic and current expectation of your company’s finances. The disadvantage is that there can be a major variance to actuals if your research was inaccurate, possibly dipping into the red now and then. NB: This approach can also be used by entities with trading history should they wish to start from scratch.

2. Historical-based Budgeting

This is the easier one; extract reports from previous financial years, analyze it and make adjustments to cater for the new year. The tricky portion being an accurate analysis to make sound judgements for the changes to be implemented. The advantage of this type is that it’s tried and tested; your objective is to improve from the previous financial year. The disadvantage however lies in the amendments, should this be in bad judgement, the entity will suffer material variances.

With both types, it’s important to continuously evaluate your performance. Diarize quarterly financial analysis and report sessions to see what happened versus what was budgeted, implementing a second forecast mid-year can also contribute to the success of budgeting.

Long story short, you know your business, the ins and outs of it and what it needs to thrive, your numbers should reflect exactly that. Tag a professional to assist you if you are still unsure. MAS is available and able to help you grow your business.

Happy business budgeting!

#newyearnewme #budgeting #businessfinance

Financial Health

Solvency or liquidity, which is best?

Well it depends on your objective but overall we vouch for solvency overall, here is the difference:

1. Solvency: Solvency is the ability of a company to meet its long-term debts (long term being more than 12 months) and other financial obligations.

2. Liquidity: Liquidity refers to the ease with which an asset, or security, can be converted into cash.

Cash is king remains a true proverb; this is the reason why you are able to pay your staff, rent and other ops costs but let’s talk about this a little more.

Being solvent means even if the business were to shut down tomorrow for whatever reason, all your debts and financial commitments would be settled using the company’s assets. You may be the sole director but the company is a separate juristic person and should be able to handle it’s own debts. On the other hand, being liquid means you can pay your rent and buy trading stock to keep operations going on in the near future using current assets that are easily convertible into cash; i.e. not selling fixed assets (e.g. company car) to do so.

NB: The two are not mutually exclusive!

Before you sign that contract for a new house or a new car, take time to consider this and evaluate your financials; your lender will ask you for annual financial statements for this same reason to determine what you can afford. If anything choose to be liquid and solvent.