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Financial year end. It’s the phrase nobody really wants to hear, right? Started a small business and clueless about accounting? Or perhaps you’ve been running a small biz and are looking for ways to streamline your processes. We speak to different accountants and finance managers to give you the best advice…
So what is FYE anyway?
“The Financial Year End is the closing off of a company’s accounts for its business year. Simply, it is just a 12-month or annual accounting period for a company. It is used to assess the annual profit, loss and performance of the company’s finances,” says Carina Cilliers, Finance Manager at South African payroll and HR software company: hellohr.
“Typically in South Africa, FYEs take place at the end of February, which coincides with the South African tax year, or end of December. Other year-ends are possible (for example, The Foschini Group’s FYE is at the end of March), but these are the most common for small businesses,” explains Carina. “This was the 2022 financial year or tax period,” she explains. “Confusing, I know,” she laughs. “But we start with the 2023 financial year on 1 March 2022.”
Here’s advice from different accountants at different firms across SA about how to get yourself up to scratch for the next financial year.
1. Use The Right Tools
“For the coming financial year try to do things monthly through a reputable accounting firm and a centralised system, such as Xero for accounting or hellohr for payroll, so Financial Year End is a breeze,” says Bakani Ngulani – financial accountant and Managing Director at BN Business Solutions.
2. Choose User-Friendly Software
“Having user-friendly accounting software that assists you in reconciliation of accounts will greatly assist any small business owner in managing their own accounts,” says Carina, Finance Manager at hellohr. “Xero does this really well – your bank account is linked to your Xero account, so all of your transactions appear on your Xero bank feed. This helps you to record all transactions and to easily reconcile and classify bank transactions.”
3. It’s Not About The End Of The Year…
“It’s not about Financial Year End,” says Nimacc Business Lounge MD, Michelle Janse van Rensburg, “but, rather about what you’ve done during the year in terms of automations and efficiencies to ease out your Financial Year End. Daily, weekly and monthly consistency and controls, will make Financial Year End feel like any other day of the week. Planning and tech solves all!”
4. Do Monthly Check-Ins
“Treat every month like it is year-end and ask your accountant to help implement systems and processes that will enable the groundwork to be done monthly, instead of annually,” says Luan van Rhyn, Founder and Group CEO of ThriveCFO. “This way there isn’t this mountain of work for February to close-off accounts,” explains Luan.
5. Open A Separate Bank Account
“Open a separate bank account – an interest-earning investment account – that is exclusively used for managing your taxes. Your accountant should provide a monthly reconciliation of your year-to-date exposure, so that you can make any top-up payments as and when needed,” says Luan van Rhyn, Founder and Group CEO of ThriveCFO.
6. Put The Right Processes In Place
“Planning is the key to any system within our businesses. Having cash on hand for provisional tax payments, having prepared inventory lists that are current and up-to-date, and so on, all will run a lot smoother if FYE is planned and not seen as this ‘big event’,” says Lynette Pretorius, Accountant and Tax Practitioner at Austral Accounting in Durban.
7. Keep Surprises To A Minimum
“For Provisional Taxpayers the ideal is if the amount they owe at the end of the tax year is not a surprise to them,” says Willem Haarhoff, co-founder and CEO of leading accounting tech business, the DoughGetters Group. “The accountant and client need to work closely together throughout the year. Both need to be proactive and look at the numbers regularly, keeping them up-to-date using cloud technology, such as Xero,” says Willem.
8. Sort The Small Stuff
“When you’re preparing for FYE, you don’t want to spend time worrying about all the other little extra things. Having peace of mind about your payroll and employee management goes a long way, as it frees up your time to focus on FYE closing procedures. Cloud software like hellohr offers easy, modern HR and payroll for South Africans, helping small businesses to manage payslips, process payroll, do tax calculations and manage leave with ease,” says Carina, hellohr finance manager.