As the end of the 2023 tax year draws closer, many companies and individuals scramble to get their affairs in order before the closing date. Ensuring that everything is ready for submission can be an overwhelming task in itself, but it becomes a lot more time-consuming if financial records were not properly maintained throughout the year. Navigating this process can be difficult if you are not well-versed in the procedure and if you are unsure about the required documentation. If you are one of the many South Africans that find yourself stressed out at the end of every tax year, this could be the perfect time to try a new approach!
When is the Financial Year End?
The 2023 tax year started on the 1st of March 2022 and ends on the 28th of February 2023. However, we need to make a distinction between the financial year of companies and the official tax year as declared by the government. Companies are able to choose their financial year-end closing date, provided that it remains consistent. This means that a company’s fiscal year might not correspond with the tax year, although many companies do tend to align their financial year end with that of SARS’s tax year. Essentially, the process and the purpose remain the same, but individuals do not have the option to choose their financial year end and must comply with the dates provided by the government.
The Purpose of a Financial Year End
The purpose of the financial year end is to close the book on the previous fiscal year and to prepare a final financial statement specifically for tax purposes. Companies and individuals are required to verify and review all the transactions from the year and perform the necessary reconciliation. Companies also use the information compiled during this time to ascertain their annual profit or loss and to get an overview of the year’s performance. The final statement is used to determine the amount of tax that is owed to SARS after deductions have been taken into account and is also used if an external audit is conducted. These financial statements are also published to investors if the business is a public company.
Challenges During the Financial Year End
Most of the challenges faced at the end of the financial year stem from improper record-keeping throughout the year. Compiling all of the data close to the deadline will often lead to mistakes and you might find yourself looking for receipts and invoices for transactions that took place long ago. If an error is detected while compiling the final statement, you might have to look through the entire year’s transactions to trace the source of the error.
Many business owners and individuals get into the habit of ineffective record-keeping throughout the year. They believe that keeping track of their income and expenses is sufficient and that everything can be consolidated at the end of the financial year. This can lead to a great deal of stress when problems are discovered close to the deadline. Businesses that do not know the ins and outs of their finances are also at a distinct disadvantage when compared to those that keep their financial records up to date.
Benefits of Keeping Your Financial Records Up to Date
Businesses are legally required to finalise their financial data and to provide accurate reports at the end of the financial year. Those who have been thorough with record-keeping throughout the year will have less trouble compiling a final statement as all the info has already been captured in detail. Having your financial records up to date also allows you to deal better with sudden changes and helps you identify possible trends in the business more quickly. On top of this, accurate bookkeeping plays a key role in budgeting and forecasting.
Put an end to the cycle of uncertainty and avoid that year-end rush by trusting a professional accountant to handle your financial affairs throughout the year. Record keeping has never been this easy! The use of specialised systems has enabled us to save our clients a lot of time and provide them with more peace of mind, knowing that they are always compliant with SARS and that their financial affairs are up to date. Contact Booysen Accountants today to find out how we can assist you at the end of the tax year and going forward into the next.