Financial advisers love to use the analogy of a journey, or a map, when helping their clients craft, build and stick to their financial plan. One of the key elements of this journey is knowing your current position. Terry Pratchet once said:
“If you do not know where you come from, then you don’t know where you are, and if you don’t know where you are, then you don’t know where you’re going. And if you don’t know where you’re going, you’re probably going wrong.”
Financials are a crucial tool for every business to know where you are and financial statements are the tools investors, banks and other lenders use to assess risk. These ensure you know your business’s financial position and can make sound, well-informed business decisions.
You must produce your yearly financial statements and submit them to SARS at the end of the fiscal year in accordance with the Income Tax Act and the Tax Administration Act. You file your income tax return using the data from your financial statements. If you get it wrong, you may either underpay your taxes and incur penalties, or you could pay too much and strain your cash flow needlessly.
So, what do you need to know right now:
- If the business employs people, it must also comply with additional labor-related reporting requirements. These criteria will be met with the help of financial statements.
- If your company is registered as a vendor for value-added tax, the financial statements will help you with the information you need to submit your VAT returns on a regular basis.
Financials must be submitted 4 months after your financial year end date (Financial Year End was 28/02 meaning 4 months later is 30/06). The attached Annexure A (FAIS Notice 82 of 2015) must accompany your financials should they not be audited. Extension Requests must be submitted by the 15th of the applicable month of submission and a fee of R605 is payable to the FSCA.
Another requirement is that these financials, once generated, be retained for a certain number of years. The Tax Acts oblige taxpayers to keep these documents and allow SARS to seek them for review or audit purposes.
Financial statements present the business’ financial information in a structured and unbiased way that’s easy to understand. It’s natural that you will want to know whether your business has made a profit or not and you will be able to extract this and other useful information from your financial records.
The financial accounts of a company are critical to its future development and success, and they should be one of your top concerns for running a fit and proper business.