Four Common Payroll Pitfalls To Avoid

Four Common Payroll Pitfalls To Avoid

Article credit: Sage 

Payroll management sounds simple, but it is surprisingly easy for a growing business to make payroll mistakes if it does not have robust processes and systems in place. In some cases, an error can have serious consequences for a business, ranging from damaging employee morale, to fraud losses, and tax penalties for late or incorrect tax payments and submissions.

Here are a few of the common errors South African businesses make in managing their payrolls:

1. Failing to automate

I’m putting this one right at the top of the list because poor systems and controls are the root cause of most of the other payroll mistakes I list below. If you don’t have an automated system in place, you can easily make errors in calculating employees’ salaries and deductions, compiling your tax submissions, and recording employee information and transactional data.

It can also be challenging to stay on top of the deductions, levies and tax incentives you need to cater for your payroll calculations, ranging from UIF and the skills development levy to the employment tax incentive. What’s more, you also need to keep track of yearly changes to SARS’ regulations that will impact on your payroll tax calculations.

Failing to automate also means that the payroll team spends all their time on compliance and admin—when they should be focusing on helping the business to understand payroll costs, identifying trends, enabling better employee experiences and providing strategic advice to finance and management teams.

What to do about it: Simply sign up for Kiteview Technologies’ payroll services. Kiteview Technologies will keep track of all your required annual, bi-annual and monthly submissions to both SARS and the Department of Labour. Kiteview offers a payroll solution that is 100% compliant with South African tax legislation and regulations and that can grow alongside your business.

2. Not putting checks and balances in place

Payroll fraud is a major risk for Businesses and it is often discovered by accident only after the company has lost a vast amount of money. Many Small & Medium Businesses are vulnerable to payroll fraud because they don’t put appropriate checks in place—for example, they give one accountant or payroll manager complete access to the payroll system and company bank account.

What to do about it: The simplest way to prevent most incidences of payroll fraud is to enforce segregation of duties in the payroll department. The people who calculate pay rates and accumulated hours for the payroll should ideally not be the same ones who process the payments. Different people should have responsibility for capturing payroll data and for managing access to the system as well as adding and removing employees from the payroll. Yet another person could be tasked with checking that the numbers add up.

3. Poor control over leave days

It can be easy to lose track of leave days if an employee takes leave without proper authorisation. The result can be that an employee benefits from extra paid leave or loses leave days due to errors in data capture or that their holiday leave payment could be inaccurately calculated when they leave the company. Other issues could include two critical team members applying and getting leave, when at least one should be in the office.

What to do about it: An automated payroll system allows you to take the sweat out of processing leave. It enables you to manage leave administration, enforce company specific leave policies and ensure the records are correct. You can also introduce employee self-service to streamline the process of leave applications and approvals for employees and managers.

4. Travel allowance pitfalls

Reimbursements and allowances for employee business travel are a minefield for the unwary. A travel allowance is a regular monthly amount the employer pays an employee to compensate them for monthly travel in a privately-owned motor vehicle.

The employer must include either 80% (low business travel) or 20% (high business travel) of this allowance into the remuneration on which PAYE is calculated. The employee keeps a logbook of business travel, submits it to SARS at the end of the tax year, and SARS does the final income tax calculation.

Under reimbursement, the employee logs his or her business travel kilometres and submits it to the employer for reimbursement. The employer decides on the rate per km at which it will reimburse the employee. The tax rules can be complicated but if the employer uses the SARS prescribed rate of R3,61 per km, then there is no tax in the payroll or on assessment.

The rules and calculations can be tricky to keep track of and incorrect capturing can result in employees paying too little or too much tax.

What to do about it: There are different SARS IRP5 codes and reporting rules for travel allowances (3701), reimbursement above the prescribed rate (3702 and 3722) and reimbursement at or below the prescribed rate (3703). Double check that you are using the right codes and withholding the right amount of tax. Persuade team members to opt for reimbursements rather than travel allowances because they are easier to understand. And once again, an automated payroll solution will do the calculations for you and help you to capture the right data using the right categorisations.

Closing words

We are only entering the second month of a new tax year, so now is the perfect time for companies that use manual payroll processes or old payroll technology to modernise with a cloud-based business solution. There is no reason today for payroll to be a headache or distraction—the right tools can take care of most of the red tape so you can focus on growth, strategy and talent development.

About Us
Kiteview Technologies (Pty) Ltd was founded in May 2010 to provide the Sage Evolution Business Management solution to the SME market. The management team of Kiteview have combined +30 years of experience in the delivery of small to mid-market Financial & Business Management solutions. This experience, combined with a sound project implementation methodology has helped in Kiteview’s growth, becoming a Platinum status partner for SAGE Pastel within just 1 year.

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How To Use Business Intelligence To Get Paid And Improve Cash Flow

How To Use Business Intelligence To Get Paid And Improve Cash Flow

Article credit: Sage 

For small and growing businesses, there are few tasks more important than ensuring you’re paid on time and managing your cash flow.

Let’s face it, your startup capital or the money you currently have in the bank is not enough to fund the day-to-day expenses of your business indefinitely, and so you need to be able to plan for cash coming in and going out as accurately as possible.

Without doing so, you place yourself at risk of manning a sinking ship—as the decisions you make aren’t based on accurate financial data and it’s likely that you’ll end up spending more cash than you’re earning.

There are many ways business intelligence can help guide you towards better and smarter business decisions, ensuring you get paid timeously and ultimately safeguarding your cash flow. Here are a few that stand out:

Know exactly who owes you cash and how much

Keeping track of who owes you cash and how much they owe you can be hard, especially when you’re focused on grinding out sales or services to keep your business going. However, without following up on customers and their unpaid or partly paid invoices, your business can quickly run into financial difficulties.

In fact, according to a study conducted by Sage, 17% of all payments to small and medium-sized enterprises (SMEs) are late in the UK alone, which leads to more than 50% of UK SMEs experiencing a negative impact on company investment, and their ability to pay their suppliers and pay staff an annual bonus.

With business intelligence, you’re able to get a quick overview of your debtors and easily identify who you need to reach out to so you can ensure you get the cash that’s owed to you.

Better yet, great business intelligence solutions will empower you to instantly dig into the details behind who owes you cash and discover what they owe you for, who you need to contact to get that cash and, most importantly, how long it’s been outstanding. This could potentially save you up to 15 days a year in chasing late payments.

An Analysis of Aged Debtors dashboard should quickly tell you how much cash you’re owed, who owes you this cash and when it’s due
An Analysis of Aged Debtor’s dashboard should quickly tell you how much cash you’re owed, who owes you this cash and when it’s due

Get visibility into when that cash is due

While insight into who owes you cash and how much certainly helps, the true power of business intelligence when chasing payments lies in its ability to present you with information on due and overdue invoices.

Access to this information in a visual and easy-to-understand format is vital when you’re following up on payments, as it equips you with the knowledge and insight you need to approach your customers and ask them to pay up.

Late payments are truly the small business killers of the economy, so don’t let your business fall victim.

The Federation of Small Businesses (FSB) reports that if all payments were made on time, 50,000 more businesses could be kept open each year, whilst the UK economy would receive a £2.5bn boost.

If you notice a certain customer is often late with their payments, reach out and attempt to come to an agreement with them. Communication-based on accurate information always yields better results than confrontation based on speculation.

And, keeping your finger on the pulse of your company’s cash in-flow is much better than wondering when the next “ping” from your bank is going to hit your mobile phone.

Identify how much cash you owe your creditors

Getting paid on time is one of the top priorities in any business. However, it’s called cash flow for a reason, and ensuring you pay your creditors is also an important aspect of your company’s success.

Just like business intelligence gives you a quick overview of who owes you cash and how much, it can also provide an insight into who you owe cash to and how much.

This is especially important to consider when planning for the month or period ahead because you need to ensure that what you’re expecting to be paid is enough to cover what you’re expecting to pay out.

Being able to quickly and easily identify exactly how much is owed to your creditors and which creditors are owed this cash empowers you with the knowledge to make smarter business decisions. The next point then empowers you to act on those decisions.

An Analysis of Aged Creditors dashboard should quickly tell you who you owe cash to, how much is due and when you need to pay it by
An Analysis of Aged Creditors dashboard should quickly tell you who you owe cash to, how much is due and when you need to pay it by

Know when you have to pay your creditors

So, you now know who you owe cash to and how much, but do you know when you need to pay that cash over?

Businesses often run into cash flow problems when they don’t have visibility into this information because they end up paying the wrong creditors at the wrong time. For example, you may think a payment is due for stock at the end of the month and so you quickly scrape together cash (you may even take out a loan) to get it paid.

However, this payment may only be due at the end of the following month, and so you could have delayed the payment and planned ahead to ensure you turn whatever stock you have left into cash to easily cover the payment.

Insight into when you have to pay your creditors is priceless because it can also empower you to further bolster your cash flow by renegotiating terms if necessary—more on that next.

Renegotiate credit terms if necessary

Sometimes cash flow will be tight no matter how hard you work in following up with payments owed to your business and ensuring you pay the right creditors at the right time.

However, with the accurate insight that business intelligence gives you into this information, you’re empowered to contact your creditors and attempt to renegotiate your credit terms if necessary.

Most creditors will be open to hearing you out, especially if you’ve been sticking to your current terms and communicating with them often. This is because creditors would rather be paid regularly than not at all, and this also ensures your relationship with them remains in good standing.

Renegotiating these terms over a slightly longer period will help free up your cash flow if your business is going through a rough patch.

By using business intelligence to regularly keep track of the cash that you’re owed and the cash you owe your creditors, you empower yourself to take control of your company’s cash flow.

You give your business a much greater chance of being successful because you have accurate information at your fingertips.

With this information, you can make smart decisions about the cash that’s coming into your business and the cash that’s going out. You’ll know exactly how much will be in your bank account at the end of the month and how much of it you have available to spend—minimising your risk and helping to avoid any nasty surprises.

About Us
Kiteview Technologies (Pty) Ltd was founded in May 2010 to provide the Sage Evolution Business Management solution to the SME market. The management team of Kiteview have combined +30 years of experience in the delivery of small to mid-market Financial & Business Management solutions. This experience, combined with a sound project implementation methodology has helped in Kiteview’s growth, becoming a Platinum status partner for SAGE Pastel within just 1 year.

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Three Stealthy Tax Hikes Payroll Managers And Employees Need To Take Note Of

Three Stealthy Tax Hikes Payroll Managers And Employees Need To Take Note Of

Article credit: Sage 

The adage summarises the difficult decisions government and the Finance Minister faced when balancing the country’s books, rescuing state-owned enterprises, and reviving the growth of our economy. Given the economic pressure that most taxpayers are facing, government ideally needed to achieve all of that without direct increases to personal income tax in the most recent Budget Speech.

Personal income tax has comprised at least a third of South Africa’s total tax revenue in recent tax years, despite growing unemployment. The 2019 Budget, presented in February, forecasts that personal income tax will account for nearly 39% of tax collected during the upcoming (2019/20) tax year. Given that we are in an election year and that the tax base is fragile, it’s not surprising that the Finance Minister and the National Treasury avoided direct increases to the statutory tax tables used to calculate PAYE for employees in the budget. 

Nonetheless, the government has made inflation work in its favour to impose some tax increases by stealth. Here are three ways the government is raising more revenue without direct tax increases:

  1. Bracket creep

The statutory tax tables used by payrolls and employers have not been changed for 2019/20, nor have the brackets been adjusted for inflation. This effectively amounts to an indirect tax increase that will yield a revenue saving of approximately R12.8 billion for the government’s coffers.

It is not unusual for the government to use ‘bracket creep’ to effectively raise more revenue. But unlike previous tax years, even low- and middle-income earners are not getting much relief. Rebates and the tax threshold are being increased by small amounts to allow some relief, but many people this year will feel the pain as inflationary salary increases push them into a higher tax bracket.

  1. Medical aid credit not adjusted for inflation

As proposed in the 2018 Budget, the Finance Minister did not apply an inflationary increase to the Medical Tax Credit, which allowed him to raise an extra R1 billion in revenue for the year. Surprisingly, these funds will be allocated to general tax revenue rather than ring-fenced for healthcare. In previous tax years, revenue generated from below-inflation increases on medical scheme credits was used to fund National Health Insurance (NHI) pilot projects.

There is still no clarity on how the NHI is going to be funded except for a general statement that the funding model is a problem for the National Treasury to solve, and that the principles of cross-subsidisation will apply. One wonders if any real progress will be made soon, given the fiscal constraints the government faces.

  1. Business travel deduction left untouched

The Budget leaves the per-kilometre cost rates used to determine tax deductions for business travel untouched. By not increasing travel rates to account for inflation, the government effectively increases income tax collection at the cost of the taxpayer. This will be a blow for people who need to claim from their employers for business travel in their personal vehicles. This change has slipped through largely unnoticed and the budget does not provide numbers for the expected increase in tax revenue.

Closing words

Amid political turmoil and uncertainty, the Finance Minister presented a balanced budget for 2019/20 that offers hope for the future along with some tough love. With the government taking steps to accelerate economic growth and improve revenue collection, we should hopefully see a steady improvement in government finances, which will translate into less pressure on the taxpayer in future years.

About Us
Kiteview Technologies (Pty) Ltd was founded in May 2010 to provide the Sage Evolution Business Management solution to the SME market. The management team of Kiteview have combined +30 years of experience in the delivery of small to mid-market Financial & Business Management solutions. This experience, combined with a sound project implementation methodology has helped in Kiteview’s growth, becoming a Platinum status partner for SAGE Pastel within just 1 year.

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8 Things You Should Know About Payroll In South Africa

8 Things You Should Know About Payroll In South Africa

Payroll in South Africa Infographic

Most South African entrepreneurs believe that a rock-solid Payroll process is only necessary when you have multiple employees. That, however, is not true. There’s a long list of requirements and submissions that your company needs to comply with to avoid penalties from both SARS and the Department of Labour for processing successful payroll process.

Have a look at our list of 8 vital things every entrepreneur should know about Payroll in South Africa to avoid penalties:

Tip From SARS: On 19 October 2012, SARS clarified in a notification that merchants who use eFiling may continue to submit VAT declarations on the 25th of the month. The advantage of no interest, fines or prosecution will stay in effect if the declaration and payment are submitted via eFiling (or EFT) on or prior to the last business day of each month.

About Us
Kiteview Technologies (Pty) Ltd was founded in May 2010 to provide the Sage Evolution Business Management solution to the SME market. The management team of Kiteview have combined +30 years of experience in the delivery of small to mid-market Financial & Business Management solutions. This experience, combined with a sound project implementation methodology has helped in Kiteview’s growth, becoming a Platinum status partner for SAGE Pastel within just 1 year.

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How To Set Up A Chart Of Accounts – Business Tips

How To Set Up A Chart Of Accounts – Business Tips

Article credit: Sage 

In the age of modern software, when the computer can do much of the hard work for you, setting up a chart of accounts is straightforward. However, knowing how a chart of accounts works is still a good thing to learn.

The first thing to know is that a chart of accounts can be physical (using good old paper and ink) or online. Indeed, most small companies opt for online accounts as this lessens the workload and helps to ensure they make fewer mistakes.

There are two key elements that make up your chart of accounts: the sales ledger and the purchase ledger. These are the vital building blocks and without them, you are not going to get very far. When it comes to the accounting system you’ll be using, most small businesses follow what’s known as cash-basis accounting.

A cash-based business will summarise its sales invoices with a sales ledger and summarise purchases with a purchase ledger. This is the simplest way to keep records. You record income when you receive money from a customer and record expenses when you pay them.

This helps you manage cash flow because it only records revenues and expenses when they appear in your account. Bigger businesses tend to practice accrual-basis accounting.

Accounting records

It’s important to note that nowadays, most people refer to the chart of accounts as the accounting records, and that title gives the game away. All businesses need to keep accounting records, which are made of sales invoices, purchase invoices, and bank statements.

Sid Moore is the owner of Moore Accountancy. She says: “Every business needs to keep accounting records. Some people call it ‘chart of accounts’, some people call it ‘cash book’, I call it ‘accounting records’.

“Accounting records record your sales and your expenditure, and there are many ways of doing this. It can be very simple, or it can be quite detailed, depending on the type of business you have and how good your IT literacy is.

“Your accounting records are a combination of your bills invoices and your purchase invoices and your bank statements. And for a very small cash-based business, they will literally have a summary of their sales invoices, their sales ledger, and a summary of their purchases, their purchase ledger.

“These different building blocks create your accounting records, so it’s important to ensure you have records detailing those different elements.”

How To Set Up A Book Of Accounts

 

Using software for record keeping will save you time

How to keep records

Your chart of accounts could be a physical book that compares sales on one side and expenses on the other. Or you could set up a simple spreadsheet document on your computer with a tab for sales invoices and a tab for expenditure. Of course, online accounting software simplifies this further by taking the data and automatically collating and comparing invoices with sales.

Sid says: “In terms of types of record keeping and creating the chart of accounting records, you can have something simple like Excel, where you can have a tab showing each thing.

“So you can have a tab showing sales invoices and the money that’s been coming in from that and you can have another tab showing your purchase invoices, the expenditure you’ve incurred, and then you will compare that. And that will be the core accounting records that you keep.

“Some of our smaller businesses stick with manual book and records, a big cathedral book. On one side is all their cash in, i.e. their sales, and on the other, is their cash out, their purchases. This might be done over via the bank, a debit card or paying cash.

“Or you can use online bookkeeping, where a bank feed comes through and you record your invoices and you record your sales and it automatically matches off.”

Other accounting methods

If you run a larger business, your chart of accounts may include debtors and creditors, so it records monies not yet received, or paid. This is called accrual accounting and it records income when the sale is made. The best thing to do is to decide which accounting method you prefer at the outset and use this method both internally and for tax purposes.

Sid says: “A bigger business will have a lot more involved accounting records. They will have what’s called sales ledgers with debtors and purchase ledgers, which have creditors because they may offer credit to people. They may make a sale and say to people they have seven days to pay them, in which they are several different ways to record it, and that’s more detailed.

“As a business, you need to ensure that you keep good records. It’s essential that you understand your sales and expenditure.”

Accounting records top tips

Here are some tips and pointers when it comes to your accounting records:

  1. You can streamline your chart of accounts using online accounting software
  2. Ensure your record keeping details sales and purchases
  3. Small businesses use cash-basis accounting to manage cash flow
  4. Choose the same method internally and for tax reporting.

Chart of accounts managed digitally

Oliver Squirrell, founder and MD of Pop My Mind, a business that creates unique creative ecosystems for people and businesses, says his company has no physical chart of accounts, as everything is managed digitally via software.

He adds: “Our chart of accounts covers quite a lot of detail, including what’s coming into the business, what’s going out, any direct debits, and bills that we are paying ongoing.

“It breaks down the different types of income that they have as well, which is important to understand, including the balance of where the income is coming from, which all in all gives us a really detailed picture.”

For Oliver, peace of mind that everything tallies up and expectations are meeting reality, is the crucial thing.

How do you manage your records and what sorts of challenges have you overcome? Let us know in the comments below.

About Us
Kiteview Technologies (Pty) Ltd was founded in May 2010 to provide the Sage Evolution Business Management solution to the SME market. The management team of Kiteview have combined +30 years of experience in the delivery of small to mid-market Financial & Business Management solutions. This experience, combined with a sound project implementation methodology has helped in Kiteview’s growth, becoming a Platinum status partner for SAGE Pastel within just 1 year.

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