B BANKING ACCOUNTS
The objective of this section is to ensure that proper banking accounts are maintained in compliance with the law and accounting practices.
1. It is imperative to have and maintain separate business and personal banking accounts. Not everything can be claimed in terms of taxes from your business account and it is therefore advisable to have all your business income and expenses running through the business account and everything else running through your personal account. You need to make sure, with your Accountant/Bookkeeper what you can and what can’t claim, in terms of tax, as a business expense. For example, if you were running a pre-school nursery from the same premises that you lived in you could claim, from the business, all the jungle gyms, swings, splash pools, books etc that you purchased, but if you ran your Internal Audit business from home, this would not be accepted as a business expense! So be sure of what you are doing – the tax man is at liberty to check everything and if he thinks that you are doing him out of any money – he will hound you!
2. Keep control of your business – own it with every fibre of your being! Make sure that what is supposed to come in does. Don’t just sit there and think, well I raised the invoice and therefore it will be paid! People hate parting with money, some have cash flow problems, some are waiting for other people to pay them – whatever the reason, very few people do what they say or even what they are supposed to. Make sure, once you have raised the invoice that the money has come in. An easy way to maintain and check this is to have a spread sheet (either manually or on the computer) – this will serve several purposes. Firstly it will assist you in ensuring that your invoices run consecutively and that you don’t miss out any. Missing invoices are always suspicious and if you are being audited by your Head Office or by outside Auditors or even a SARS audit, you may have to “please explain why you have missing invoices”. Again remember the burden of proof is on you to show that the taxes you have paid are in line with the money that you have earned and if you have a missing invoice this cannot be done!
Secondly, it will, at a glance, evidence the date that the invoice was raised. This is useful if you have a query and will circumvent having to look up that particular invoice.
Thirdly, the date that the payment was received into your bank account should be noted. Again this is useful in keeping track of who your bad payers are. You can also see, all in one place, what has been paid and what is outstanding. Your accounts receivable can be managed much more effectively. You can see what is supposed to be coming in and what has come in without actually having to look up each and every invoice and match it back to the bank statement that it actually came in on. If you don’t do proper reconciliations this may be even more time consuming than you originally anticipated as your invoice may only have been paid 6 or 7 months or even longer, from the time that you actually raised the invoice.
Then there are expenses related to your income in the form, for example, Royalties. These can also be calculated once the payments have been received and you are then in a better position to see what you have to pay out and what forms part of your expenses.
It helps you to manage your money – that may sound like stating the obvious – but again, you would really be surprised at the number of people who have no idea what comes into their account and what goes out, or what is due to go out. They call up a statement on the internet or at an ATM and if there is money in the account it gets spent, without any thought to what still has to go through the account and what they still owe.
You can purchase a copy of the spreadsheet that we have just discussed, from me and you will note that all the major details are recorded such as the Client’s name , the amount of the invoice, the invoice #, the date that the invoice was paid into the bank account, expenses such as Royalties and the date that they were paid. You can add to or take from the spreadsheet and adapt it to suit your particular business. Such a simple document and yet is saves so much time and effort and it only takes a few moments to maintain.
3. Under the Banking Accounts comes your VAT again. I know that I have discussed this previously, but I am going to do it yet again! In fact I cannot stress this point enough – make sure that your VAT is paid over every two months – don’t get behind, it is a costly exercise and could end up in you losing your business. Put a repeat message on your cell phone, write it in your diary at the beginning of the year, for the whole year – do whatever it takes, but pay the VAT on time!
4. Year end financial statements – say what? These are statements that the Accountant puts together to show you how much you earned during the course of the year and how much you spent and therefore that’s what your profit is and that is what you also pay tax on! It is therefore important that you have a properly accredited Accountant who knows what he/she is doing as you obviously want to pay as little tax as is legally possible!
It is also another form of control for you as you can see and compare what you paid out last year to what you paid out this year and in this way make an educated guess (with a few more details that is) on what you will probably pay out next year. This helps you to plan, to cut back on unnecessary expenses or perhaps convince you to pay that much more on say – marketing or advertising. It will help you to calculate your invariable expenses for the following year (salaries, rentals etc) and plan and/or control your variables (entertainment, fuel, telephones etc). Perhaps you will see some of the variables spinning out of control and you can do something about and monitor it on a more drastic level.
If you own a business unit and/or Franchise, the Head Office will require a copy of this statement, once the Accountant has signed off to say that all the details contained therein are complete and accurate. In this instance, do yourself a favour and have one less thing to worry about and remember – instruct your Accountant to automatically forward a copy of the Year End Financial Statements to Head Office. This is your confidential information, so I would suggest that it gets marked for the Specific attention of “The Group Accountant” or the title of whomever you want to send it to, rather than just the name of the person. The reason for that is that people change jobs often – here today and gone tomorrow. You don’t want to have to change your instruction to the Accountant every time someone at Head Office leaves (and nor would you probably remember to do so), so make it a generic somebody.
The objective of this section is to ensure that proper banking accounts are maintained in compliance with the law and accounting practices.
1. It is imperative to have and maintain separate business and personal banking accounts. Not everything can be claimed in terms of taxes from your business account and it is therefore advisable to have all your business income and expenses running through the business account and everything else running through your personal account. You need to make sure, with your Accountant/Bookkeeper what you can and what can’t claim, in terms of tax, as a business expense. For example, if you were running a pre-school nursery from the same premises that you lived in you could claim, from the business, all the jungle gyms, swings, splash pools, books etc that you purchased, but if you ran your Internal Audit business from home, this would not be accepted as a business expense! So be sure of what you are doing – the tax man is at liberty to check everything and if he thinks that you are doing him out of any money – he will hound you!
2. Keep control of your business – own it with every fibre of your being! Make sure that what is supposed to come in does. Don’t just sit there and think, well I raised the invoice and therefore it will be paid! People hate parting with money, some have cash flow problems, some are waiting for other people to pay them – whatever the reason, very few people do what they say or even what they are supposed to. Make sure, once you have raised the invoice that the money has come in. An easy way to maintain and check this is to have a spread sheet (either manually or on the computer) – this will serve several purposes. Firstly it will assist you in ensuring that your invoices run consecutively and that you don’t miss out any. Missing invoices are always suspicious and if you are being audited by your Head Office or by outside Auditors or even a SARS audit, you may have to “please explain why you have missing invoices”. Again remember the burden of proof is on you to show that the taxes you have paid are in line with the money that you have earned and if you have a missing invoice this cannot be done!
Secondly, it will, at a glance, evidence the date that the invoice was raised. This is useful if you have a query and will circumvent having to look up that particular invoice.
Thirdly, the date that the payment was received into your bank account should be noted. Again this is useful in keeping track of who your bad payers are. You can also see, all in one place, what has been paid and what is outstanding. Your accounts receivable can be managed much more effectively. You can see what is supposed to be coming in and what has come in without actually having to look up each and every invoice and match it back to the bank statement that it actually came in on. If you don’t do proper reconciliations this may be even more time consuming than you originally anticipated as your invoice may only have been paid 6 or 7 months or even longer, from the time that you actually raised the invoice.
Then there are expenses related to your income in the form, for example, Royalties. These can also be calculated once the payments have been received and you are then in a better position to see what you have to pay out and what forms part of your expenses.
It helps you to manage your money – that may sound like stating the obvious – but again, you would really be surprised at the number of people who have no idea what comes into their account and what goes out, or what is due to go out. They call up a statement on the internet or at an ATM and if there is money in the account it gets spent, without any thought to what still has to go through the account and what they still owe.
You can purchase a copy of the spreadsheet that we have just discussed, from me and you will note that all the major details are recorded such as the Client’s name , the amount of the invoice, the invoice #, the date that the invoice was paid into the bank account, expenses such as Royalties and the date that they were paid. You can add to or take from the spreadsheet and adapt it to suit your particular business. Such a simple document and yet is saves so much time and effort and it only takes a few moments to maintain.
3. Under the Banking Accounts comes your VAT again. I know that I have discussed this previously, but I am going to do it yet again! In fact I cannot stress this point enough – make sure that your VAT is paid over every two months – don’t get behind, it is a costly exercise and could end up in you losing your business. Put a repeat message on your cell phone, write it in your diary at the beginning of the year, for the whole year – do whatever it takes, but pay the VAT on time!
4. Year end financial statements – say what? These are statements that the Accountant puts together to show you how much you earned during the course of the year and how much you spent and therefore that’s what your profit is and that is what you also pay tax on! It is therefore important that you have a properly accredited Accountant who knows what he/she is doing as you obviously want to pay as little tax as is legally possible!
It is also another form of control for you as you can see and compare what you paid out last year to what you paid out this year and in this way make an educated guess (with a few more details that is) on what you will probably pay out next year. This helps you to plan, to cut back on unnecessary expenses or perhaps convince you to pay that much more on say – marketing or advertising. It will help you to calculate your invariable expenses for the following year (salaries, rentals etc) and plan and/or control your variables (entertainment, fuel, telephones etc). Perhaps you will see some of the variables spinning out of control and you can do something about and monitor it on a more drastic level.
If you own a business unit and/or Franchise, the Head Office will require a copy of this statement, once the Accountant has signed off to say that all the details contained therein are complete and accurate. In this instance, do yourself a favour and have one less thing to worry about and remember – instruct your Accountant to automatically forward a copy of the Year End Financial Statements to Head Office. This is your confidential information, so I would suggest that it gets marked for the Specific attention of “The Group Accountant” or the title of whomever you want to send it to, rather than just the name of the person. The reason for that is that people change jobs often – here today and gone tomorrow. You don’t want to have to change your instruction to the Accountant every time someone at Head Office leaves (and nor would you probably remember to do so), so make it a generic somebody.
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