There is legal requirement to have a bookkeeper at all, but it does help your business to keep accurate record of all transactions. In most small companies the role of bookkeeper is usually performed by either a family member or a junior employee.

There is an advantage of employing an outside service.

• They have the expertise and experience to assist in keep accurate records and the allocation of expenses.
• This experience would normally include some expertise on statutory submissions as well easing the stress normally associated around record keeping.
• Most services can guide and advise clients on how to improve their systems to become more accurate and efficient.
• With the advent of online accounting programs, the communication and access to information is no mare than a click of a button.

Bookkeeping is the recording, on a regular basis, all the company’s financial transactions to enable management keep track of their performance. This enables management to make informed decisions to improve the efficiency and profitability of the company. For external users, such as the government for statutory returns, or financial institutions the keeping of accurate records will assist them in making informed investment decisions.

Management accounting is the identifying, measuring, analysing, interpreting and communicating financial and supporting information to management for them to make strategic and informed decisions to reach company goals.

• Management accounting is for internal purposes.
• The techniques used are not stipulated by any accounting standard.
• Presentation of information is client specific.
• Includes product costing, forecasting, budgeting, and other analysis.
• The information produced is not for public consumption.

The employment of a management accountant can assist the company in understanding their efficiencies, costs, and financial position with a view of improving the profitability and financial standing of the company.

The annual financial statements are a structured report on the annual financial performance and financial standing of a company at a particular point in time. These statements are produced at the same time every year. The financial statements are presented in a regulated standard format that includes a

• Balance sheet – this shows all the company’s assets and liabilities at a particular time.
• Income statement – this indicates the revenues and expenses with the net profit or loss for the period.
• A cash flow statement – where funds came from and where it went with a net inflow or outflow of cash. How the company generated its cash to settle its obligations.
• Changes in equity – what profits have been retained for future growth or distribution to shareholders.
• Explanation and notes of accounting policies of how items shown in the above statements were developed.

As per The Companies Act all companies are required to produce Annual Financial Statements, the level would normally be dependent on the size of the organisation based on annual turnover, assets held or the public interest score.

Apart from the legal requirements there are other important reasons for annual financial statements.

• Most tax revenue departments do require some form of annual financial statements to substantiate the annual tax declaration.
• When applying for funding the financial institutions would normally request annual financial statements to support the application.
• In the sale of a company the purchaser would certainly require at least the last annual financial statements if not more than one.

The following companies are required to have their financial statements audited.

• A private or personal liability company who holds assets in a fiduciary capacity valued at over R5 million.
• A private or personal liability company who compiles their financial statements internally (not done by an independent party) with a public interest score of more than100.
• A private or personal liability company who have their financial statements compiled by an independent party with a public interest score of more than 350.
• If it is required in the company’s Memorandum of Incorporation.

If a company does not fall into any of the above categories, they may purely be required to have their annual financial statements independently reviewed.

• A private or personal liability company whose public interest score is at least 100 (but less than 350) and were independently compiled,
• A private or personal liability company whose public interest score is less than 100.

If a company is not required to have audited annual financial statements, they may however elect to so.

• A company scores one point for every employee,
• one point for every R1 million in turnover,
• one point for every R1 million in third-party debt and
• one point for every shareholder it has.

For instance if a company has a turnover of R50 million, there are 20 employees, owes R2 million in motor vehicle leases and there are two shareholders.

Employees = 20 points

Turnover = 50 points

Third party debt = 2 points

Shareholders = 2 points

Total points = 74 points

The person conducting the review must not be involved in the preparation of the annual financial statements.

The person conducting the review must be a recognised accounting practitioner.

This is a limited assurance engagement.

The reviewer will perform primary inquiries and analytical procedures to get appropriate evidence for their conclusion with regards to the financial statements as a whole.

If a company is not required to have an independent review, they may still elect to do so.

This form of engagement is a basic level of assurance.

An accounting practitioner uses their expertise to assist management in preparing the financial statements in an appropriate framework base on the information provided by management.

It is compulsory for a person to register for VAT,

• Where the value of taxable supplies made in any consecutive 12 month period exceeded or is likely to exceed R1 million; or
• Where in terms of a written contractual obligation, the value of taxable supplies to be made in a 12 month period will exceed R1 million.

A person may also choose to register voluntary for VAT if the value of taxable supplies made or to be made is less than R1 million but has, under certain circumstances, exceeded R50 000 in the past period of 12 months.

Most small to medium enterprises do not produce monthly management reports mainly due to the lack of expertise.

Management accounts are financial and supporting reports produced internally for the business owners and managers, generally monthly or quarterly.

In principle they are similar to annual financial statements, and these normally include a Profit & Loss report and a Balance Sheet but are less formal and are tailored to the user’s requirements.

They should include additional reports with regards to sales, production cost and detail on profitability.

SARS defines tax-deductible business expenses as “expenses incurred in conducting a business”.

This means that all purchases made for the purposes of running your business are considered as business expenses.

This can be daily expenses or capital cost such as.

Daily expenses

• Equipment and material costs
• Employee costs and administration expenses
• Expenses related to business/office rental
• Office supplies
• Cell Phone costs
• Fuel for business vehicles, including travel cost and transportation for business purposes
• Reselling costs for wholesale goods
• Fees (for example, bank fees) and utility costs
• Professional fees
• Legal and accounting costs
• Insurance costs
• Expenses in relation to marketing, advertising, and promotions

Capital Costs

• Equipment and machinery
• Computers and software
• Office equipment such as photo stat machines and switchboards
• Motor vehicles for the business such as delivery vehicles

The short answer is yes, but there are certain requirements to do so.

• The room must be regularly and exclusively used for the purposes of your trade. i.e you cannot use it as a spare bedroom when necessary it must be set up as an office on a permanent basis.
• If you earn a salary and work from home your duties must be performed mainly in this part of the home, that is more than 50% of your work you do is at home. i.e. you only go into the office once or twice a week.
• If you are a commission earner and more than 50% of your earnings is commission more than 50% of your duties must be performed at the home office,
• Your expense claim is limited to the size of the office as a percentage of the total size of the house. If your office is 15 square meters and the total house is 100 square meters you can claim 15% of the costs.

Expenses that can be incorporated in the calculation.

• Rent or other bond costs (No bond capital cost)
• Insurance premiums
• Rates and taxes
• Cost of repair for the premises
• Utilities
• Cleaning