While few small businesses will warrant employing a full-time accountant, you will often need to use the services of an outside accountant or accountancy firm to help compile your accounts or check that financial records are in order and up to date. Accountants can also help a business to manage its tax payments, its payroll and a variety of administrative and regulatory duties.
When will you need an accountant?
- If your business is a limited company, then you are required by law to have your accounts audited annually by a qualified accountant. However, small businesses that are registered as close corporations still need an accounting officer - and accountants can perform this service.
- Having your accounts audited, however, only needs to be done once a year - and you can hold these costs down by keeping your records in good order during the year. (The longer the auditor has to spend finding missing invoices and tracking down lost or confusing payments, the more you will get charged.) So there is good reason to spend a regular hour or two each week making sure that your invoices are filed properly and that all receipts for expenses can be easily located. If you have an administration clerk, they can easily look after the filing of important documents.
What about basic book-keeping?
- Keeping your business's books (that is, putting all income and expenditure in a ledger or on the computer) may not be something that you are capable of doing. If it's not, make sure you pay someone to do it for you. Book-keeping skills are not difficult to find, and can be hired at a reasonable cost. Many book-keepers work on a freelance basis, so they can come into the office just once a week, for instance.
- Book-keepers should also be able to handle your payroll functions, such as calculating and deducting PAYE and UIF before paying wages, and preparing VAT returns. They should also be able to generate income statements and balance sheets on a monthly basis.
- If you do need an accounting firm to do your annual audit, ask them if to give you a quote on your book-keeping. Many accountants retain staff who are not accountants but who can perform the daily, lower-level tasks for a lower fee.
What are the different 'grades' of accountants?
Accountants are registered with the SA Institute of Chartered Accountants, but there is more than one 'grade' or level of qualification. Many of the accounting tasks required in your business do not require a Chartered Accountant, for instance, whose fees will be relatively high. Rather, the other grades of accountant can do the job, but still in a professional and regulated environment.
For instance, an Associate Accounting Technician (this is someone who has passed an examination after two years of a training contract) can help you with tasks such as:
- Recording and accounting for cash, credit and inventory transactions;
- Recording payroll transactions;
- Inputting information from source documents into a computer system;
- Retrieving items from a computer system and generating standard reports;
- Preparing financial accounts;
- Preparing VAT returns;
- Producing spreadsheets for the analysis of numerical information;
- Drafting basic financial statements;
- Preparing basic taxation computations; and
- Prepare information for cost analysis and control.
At the next level up, there is the Associate General Accountant (who has a three-year degree in accounting, taxation and auditing, and has completed a three-year training contract). They can:
- Act as an accounting officer for your close corporation;
- Prepare financial statements in accordance with generally accepted accounting practice;
- Design and operate internal accounting systems;
- Provide you with information to help plan, monitor and control your business; and
- Help with tax compilation and planning. As a sole trader, partner or director, you are responsible for calculating and paying your own income tax. An advantage of having an accountant dealing with your business finances is that they will be well placed to manage your personal tax matters too.
At the highest level is the Chartered Accountant (CA), who has complete a Certificate in the Theory of Accountancy (CTA), has passed the Qualifying Examination (QE) and has completed a three-year training contract. They will specialise in:
- Auditing your financial statements and accounting principles, and checking the accuracy of your financial records. The auditor is responsible for issuing an opinion on whether or not annual financial statements fairly present your business's results and financial position. As a close corporation, you won't need CA to do your audit, but you will if you're a limited company;
- Taxation - advising clients on lawfully minimising their tax liabilities through efficient tax planning;
- Financial management - budgeting, cash flow forecasting, business plans and advice. Remember that these functions are really yours, as the business owner, to understand and guide your business. Don't rely on others to do that for you;
- Management consultancy - just be specific about what you need to know from your accountant. They know a lot about finance and business, and nowadays a part of their training is about strategic management. But they won't necessarily be able to make the best business decisions for your business. They are not always entrepreneurial. The trick is to find the balance between listening to your accountant's advice and taking your own decisions;
- Secretarial and accounting services - designing and implementing accounting systems, capturing and recording financial data and assisting clients to comply with the Companies Act.
- Information technology - developing computer information systems;
- Management accounting - delivering up to date information on the status of a company to enable management to make decisions about the day to day running of the business;
- Corporate finance - acquisitions and sales of assets on behalf of clients, including negotiations and due diligence if you are looking at acquiring a business or selling your own;.
- Forensic accounting - this is a specialist area involving investigative accounting where fraudulent accounting may be suspected. It can mean serving as an expert witness if a case goes to court; and
- Insolvency - if your business runs into financial trouble, its chances of recovery must be assessed. Receivers are involved in selling a company as a going concern, and liquidators in selling off assets to pay creditors. An administrator plans for the organisation's survival through restructuring.
Finding an accountant
You can find an accountant in your area by looking on the 'About Members' button on the website of the SA Institute of Chartered Accountants [www.saica.co.za
]. They can help you to prepare a business plan, obtain finance and structure your new business, or help with any accountancy-related work from taxes to monthly management accounts.
The search facility on this site will also give you the option of searching for small to medium-sized accountancy practices in various areas.
As with most services, it is worth talking to a few accountants about their fees before choosing one. Remember, of course, that the cheapest firm may not offer the best value for money. Before making up your mind who to use, you should ask:
- Is the accountant a member of a recognised body?
- Can you pay a regular fee for a package of services?
- Does the firm have experience with your type of business?
- Can you get references from other clients?
Is there any free accounting advice?
While there is no formal system to provide accounting services to entrepreneurs free of charge, there are a number of Local Business Support Centres country-wide that can assist as a starting point. There are also voucher schemes for which you may qualify, which give you access to professional services at a discounted rate (in these schemes, the government issues you with a voucher that pays for part of the service you use from certain private sector providers).
Once your business is up and running, though, you can expect to have to pay market-related rates for your accounting needs.
Many accountants offer an initial consultation free of charge, particularly if you are starting a new business, and there is no harm in taking advantage of two or three of these offers in order to compare the different services available, and their costs.
How do I complain?
If you have a serious complaint about your accountant and cannot resolve it directly, you can take the complaint to the SA Institute of Chartered Accountants. The procedure is outlined on their website, and involves firstly verifying if the person is indeed a member/associate. This can be done on the site, where there is a facility where you can submit the name and/or membership number for confirmation. See the 'Verification of members' function after clicking on the 'About members' button on the SAICA home page
Alternatively, you can phone the SAICA's membership or standards division at (011) 621 6600. If the person concerned is not a member of the institute but holds himself out as a Chartered Accountant, you can contact the Standards Division as this act constitutes a contravention of the Chartered Accountants' Designation (Private) Act.
If you decide to simply change accountants, your previous accountant is required by their professional code of conduct to pass on all the details they hold of your affairs to your new accountant.
Points to remember
- Keep paperwork up to date and in order; tidy books save time which helps keep accountancy costs down;
- Keep all receipts for expenses that you want to charge against the business, as in an inspection, SARS will require proof of all allowable expenses;
- If your private or professional circumstances change, check whether your accountant is still suitable for your business;
- Remember that you, not your accountant, are liable for all fines and penalties imposed through the self-assessment tax scheme; it is therefore your responsibility to ensure your accountant is working to the required deadlines;
- Never be afraid to ask your accountant for help with specific problems such as tax, VAT or accounting difficulties; a small fee for a consultation could save you thousands in the long run; and
- Be aware that, because of South Africa's shortage of professional "business advisors", accountants have tended to fill the gap. While many accountants do think like entrepreneurs, their vocation tends to blunt this ability. Accounting is to a large degree backward-looking, while entrepreneurial strategy requires a strong forward-looking focus. Accounting is a numbers-on-paper profession, while growing a business requires a finely tuned feeling for the market and people. The result is that your accountants' advice on business strategy is not necessarily better than yours. The best business owners listen very carefully to their accountants and take them very seriously, but they take their own decisions.