It is an unfortunate fact that many small business owners have no idea what taxes they will owe SARS until it is time to pay them. Daily transaction allocations are critical to enable this, something which we at Diga pride ourselves in achieving for our clients.
Come tax season companies are often blindsided with taxes that they know they will struggle to pay. This creates undue stress and increased pressure on the business owner. However, managing your cash flow, or the amount of money that flows in and out of a business, will alleviate some of this stress.
Here are four tax planning steps you can take:
1. Understand your tax obligations.
As a small business owner, there are three kinds of tax that you will need to pay:
- Income Tax
- Employee taxes (PAYE, UIF and SDL)
- VAT (value-added tax)
2. Set aside tax money every month.
It is tempting to use all your available funds to run and grow your business. But doing so means that you will probably not have enough money in the bank when taxes are due, causing a cash flow challenge. Instead, if you practice good cash flow management, you could, as an example, set aside a percentage of your revenue every month into a separate account for when you need to pay your taxes.
3. Regularly check your projections.
The forecasts you set in place at the beginning of the year, need to be evaluated and re-evaluated constantly. If you experienced a better-than-expected year, you may find yourself with a cash flow surprise, and you can still end up owing more to SARS than originally planned. The more often you review your business’s performance, the more accurate the tax liability forecast will be, and the less likely it is you will be caught off guard.
4. Get outside help.
We’ve spoken before about the need for small business owners to think they need to wear many hats, including keeping the books and managing all the tax obligations. BUT, the continuous changes in tax laws and by-laws is hard enough for professionals to keep up with, and is something that you, as a business owner, do not need to waste time on. Your time is best spent doing what you do best – running and building their business.
Tax season is a stressful season for everyone, but with correct cash flow management and outside help, you do not have to be blindsided by unanticipated taxes.
If you need further assistance in cash flow management or calculating your taxes, contact us at firstname.lastname@example.org.