05 Jun Small Business Owners: Don’t Overlook Your New Compliance Requirements!
Small business has limited resources and optimising these resources is a balancing act. Part of this balancing act includes the role of compliance. These requirements have increased as new laws are rolled out along with other regulations, such as BEE and FICA, which also need to be considered.
One needs to carefully weigh up the consequences of not complying with laws or regulations. It is no excuse to say “I was not aware of that requirement” – the onus is on the business to take the time to understand what it needs to know.
The new accounting reporting standards and how they impact on you
If your business is subject to audit, be aware that new standards have become effective in 2019.
The most important of these is “Revenue from Contracts with Customers”. This could, depending on your business, fundamentally alter the way your company recognises revenue (such as, construction and telecommunication industries) and even if it does not, disclosure requirements in the notes to your Annual Financial Statements (AFS) may change. These notes will have knock-on effects, for example, to bonus schemes tied to sales which may need to be altered. This will affect how you disclose remuneration in the AFS and could in turn impact how much additional tax your staff need to pay. In turn, this will change your PAYE (Pay as You Earn) and will roll through to the EMP 201 and EMP 501 (monthly and annual earnings declarations to SARS).
This is only one of several new standards, so speak to your accountant to assess the effect on your business.
Banks and other financial institutions rely on your AFS to determine the health of your business. Not complying with these standards could result in an audit qualification, in turn resulting in a negative perception of your business by key stakeholders.
Disclosing directors’ and prescribed officers’ remuneration
The Companies and Intellectual Property Commission (CIPC) recently released a Notice warning that the Companies Act disclosure requirements of remuneration to directors and prescribed officers are not always being correctly complied with. The CIPC is referring to organisations’ AFS (remember that you are required to lodge your AFS with the CIPC).
The Notice warns businesses that this is a significant area of governance and transparency –failure to comply could trigger an investigation into your company. This is something any business can do without as the CIPC is empowered to instruct entities, subject to the Companies Act, to correct contraventions. Or it may apply to the Courts to issue an administrative penalty or refer the matter to the prosecuting authorities.
Extensive disclosures are required as set out in the Companies Act in terms of remuneration – so again, consult your accountant!