Article by Midrand Accountant: Peter Masegare
SOLVING MANY CHALLENGES FACED BY SMALL BUSINESSES WITH RESPECT TO ACCOUNTING, TAX, FORENSICS, AUDITING, AND ADVISORY
Masegare & Associates Incorporated is there for you. It's the end of the month, and you're side-eyeing the ramshackle stack of receipts and loose papers on your desk, just waiting to be recorded. Whether you keep your books yourself or use an accountant, the challenges of small business accounting may seem overwhelming, especially when you have so many other demands.
The reality is that keeping accurate financial records is non-negotiable, “it’s all about the numbers. If you're looking for ways to ensure your books are in order and keep pace with the ever-evolving demands of running a small business, you've come to the right place at Masegare. Our strategic approach to addressing these challenges involves strategic planning, effective resource management, and ongoing adaptation to changing market conditions. Business Accounting- What It Is?
In its broadest terms, business accounting is a financial process and systems used to measure, report and analyse the performance of your business. This includes tracking income, expenses, assets, liabilities, and other important financial information required for decision-making by various stakeholders.
Challenges faced by businesses with respect to accounting
Our practical experience regarding accounting challenges faced by many small business owners can be summarised as; Irregular Cash Flow, Limited Financial and Accounting Knowledge, Payroll Management, Tracking Business Expenses, Bank Reconciliation, Inadequate Use of Business Accounting Software, Access to Funding, Regulatory Compliance, just to mention a few.
Irregular Cash Flow - In small businesses, irregular cash flow can be a significant challenge. Cash flow is the lifeblood of home service providers; without it, you won’t have enough money to cover expenses like payroll and supplies. To make matters worse, local service businesses experience uneven cash flows due to seasonal fluctuations in demand or unexpected slow periods. Managing irregular cash flow can be difficult, but some of our strategies can help ensure your company stays afloat during lean times.
One of our key strategy interventions will be to assist your business in developing a robust system for managing budgets and forecasting both short-term and long-term financial needs. We will also advise on establishing an emergency fund and planning for slow periods, which can help you remain financially stable and keep cash flow positive even during tough times.
Limited Financial and Accounting Knowledge - concerning this aspect, many small business owners-operators struggle with accounting and financial management. After all, for many home service providers like handymen or plumbers, etc, accounting isn’t their primary focus. Whether you’re just starting or have been serving your community for some time, there are a few fundamental principles to know about financial and accounting best practices.
Cash vs Accrual accounting - one of the biggest challenges for home service operators is understanding the difference between cash and accrual accounting.
Cash accounting - is the simplest form of accounting and is best suited for small businesses with low transaction volumes (like handymen or local service businesses, etc). With cash accounting, income and expenses are recorded when cash is received or paid out, which keeps things simple.
Accrual accounting – on the other hand, is a more complex accounting system best suited for larger businesses with high transaction volumes. With accrual accounting, income and expenses are recorded when they are earned or incurred, regardless of when the cash is received or paid. It is very important to consider the legislation, in particular, Section 30 (1) of the Companies Act, which dictates that a company must prepare annual financial statements (AFS) each year within six months after the end of its financial year. Within the same six-month period, the annual financial statements must be audited or independently reviewed depending on the public interest score determination, as well as regulations 26 of the Act, which provide a clear guide in terms of the financial reporting framework.
Payroll Management - Payroll management, which forms your major expenditure line item, is essential in keeping your finances organized and compliant with applicable laws. It involves tracking hours worked, calculating wages, withholding taxes, and issuing paychecks or direct deposits.
We will assist your business in establishing efficient payroll processes to ensure that your employees are paid accurately, on time, and in full compliance with relevant legislation, updated Acts, and benefits. By doing so, helps foster trust between employers and employees while protecting your company from costly lawsuits due to wage or employment law violations. Naturally, managing payroll can be complex and time-consuming, which is why many businesses choose Masegare for their payroll management. Onboarding the right payroll service provider can save you a lot of time, money, and stress while also gaining access to a range of features and benefits that streamline operations and improve the overall efficiency of your business.
Tracking Business Expenses - Tracking your business expenses is crucial to running your small business. Business owners need to understand their income and expenses to effectively manage their finances and make informed decisions about the future of their company. Therefore, keeping track of all your transactions allows you to accurately calculate taxes for filing purposes and determine profitability or areas in which you may be overspending. It can be difficult for small business owners to get into the habit of recording every expense, which is why staying organized from the start is essential.
Bank Reconciliation - Bank reconciliation matches transactions on a business's bank statement to those in its accounting system (i.e. SAGE Pastel accounting, etc.) This helps ensure that all cash inflows and outflows are accurately recorded and accounted for.
Our firm’s team of experts will assist you with this function to ensure the accuracy of your financials, which is crucial for small business owners-operators who might need more resources or time to monitor their finances closely. Without reconciling your transactions between your bank statements and accounting/bookkeeping software, you could miss a large expense come tax season, overdraw your account, or worse.
Inadequate Use of Business Accounting Software - First off, we strongly encourage you to use accounting software if you’re not already doing so. Tracking your transactions manually is simply way too much of a burden if you hope to have enough time to focus and serve your customers and grow your business.
Everywhere you look online, you will see ads for software designed to care for all your accounting needs. But there's a catch, you must know how to use it. And while most owner-operators can figure the basics out on their own, it’s important to invest some time to get comfortable with the technology you chose. We believe that’s where our firm comes in, to invest on your behalf in the latest accounting software that suits your business transactions and to help you keep track of your finances, automate the financial process, and provide accurate records for tax purposes, and also to understand your cash flow, budgeting, forecasting, managing invoices, payroll processing, and reporting.
How can Masegare & Associates Inc. can help you?
Masegare & Associates Inc. can work with you to solve any technical accounting, tax, audit, forensic, and business advisory matters, as we have the resources and tools to provide you with the necessary support to complement your in-house resources. Our specialist services include a review and provision of, inter alia, technical bookkeeping/accounting, tax, audit, forensic and advisory, etc
For more information, please visit our website www.maseegare.co.za or give us a call on 011 420 0445
