subscribe: Daily Newsletter

 

Plan now to ease year-end

0 comments

It’s year-end time again and companies are focusing on what they need to do to make financial statements, reports and tax matters easier, or simply to get through the process and survive. 

At the same time companies should also be planning and strategising in the heat of this year-end to ensure that all is plain sailing for the next year-end.
“Many companies will have to recognise that they’re in a pickle now because they haven’t implemented proper planning or are still using manual systems when they should have automated,” says Grant Lloyd, MD of payroll and HR software developer Softline Pastel Payroll.
“It also makes so much sense to focus now on what can be done to avoid similar pressure and panic for the next year end.”
Lloyd reckons that SME businesses need to recognise that in the case of payrolls, legislation is changing rapidly because there are five separate Acts of Parliament that impact directly on employees, their remuneration, taxation, levies, perks, allowances, leave and conditions of employment, and they’re all becoming increasingly difficult to calculate manually.
Legislation changes all the time. There used to be less than 10 available reporting codes for IRP5/IT3(a) Certificates. Now there are 82 codes for various classifications of earnings, deductions and company contributions. Previously income classifications involved little more than salary, a travel allowance and salary sacrifices. Today it is vastly more complex.
“Automation of the payroll function with appropriate software goes a long way to solving most of the problems but it is also smart to take on a business partner that can help with year end planning and organisation and supervise the execution of all the connected aspects during the full course of the year, as opposed to doing this in panic mode two months prior to year end.”
In the small business arena Lloyd says a mindset still prevails that financial, payroll and HR software is not a necessity and can be handled manually in-house.
“Instead of saving money, these companies invariably find that year end will cost them a great deal. They frequently end up paying more tax than is legally necessary or incur penalties for late or inaccurate returns and become involved in time-consuming disputes over calculations. Legislation is so complex these days that it makes absolute sense in terms of both cost and peace of mind, to leave the legalities and complexities to experts and automate the process.”
Outsourcing these functions or “insourcing” them by installing specialist payroll and HR applications software, are both excellent options, says Lloyd.
“With either of these approaches, managers are free to concentrate on what they should be doing – strategising and directing the business, not programming, developing spreadsheets or trying to understand legal requirements and implications. It no longer makes sense to manually process salaries, wages, tax deductions, SDL and UIF payments or issue IRP5/IT3(a) Certificates. Automate these processes and it removes a huge, inefficient and costly administrative burden.”
An automated payroll and HR system calculates PAYE, UIF and SDL and produces a printout used to complete EMP201 returns every month, eliminating human error. By using an automated system, the summary of the EMP201 returns is inserted on the IRP501 return by the Payroll Administrator at the end of the tax year. If this return does not balance with the EMP201 monthly returns, SARS might suggest a company audit.