ARC FOURWAYS LAUNCHES NEW MANAGEMENT INFORMATION PLATFORM

A1_bWe are all in business for the same reason – to be profitable. So why is it that profit is one of the most elusive and last figures we track? How do we manage something we don’t monitor? 

Consider how it would change your business, what you focus on, and the choices you might make, if you knew exactly how your decision would impact your profitability?

The inability to easily access quality, corporate data and current information is a significant stumbling block for most executive management teams. With the absence of a corporate data warehouse, high-level business managers are usually forced to dump and manually manipulate data from disparate applications.

After witnessing the frustration and waste of having some of the best talent in organisations spend countless hours scraping away at raw data, trying to make sense of it, creating reports that were out of date the minute they were finished and wasting days doing this, we resolved to provide a tool that would take away this important but painful process.

It has been our observation that there is a distinct disconnect between Financial and Operational data. Yet, the two combined give us the profitability of our business. Canvas has been designed to collate this data and format it into a concise informative report for the business. What is reported, how it is reported and what is measured is based on what the business needs in order to best manage its profitability.

Business Managers access to meaningful data is significantly increased by improving the data quality, manageability, usability and accessibility with the Canvas data warehouse and cube implementation.

All reports are live, current and can be customised on the fly to support each business’ dynamic needs. Measure your profitability per product, service, client, employee or even department and process. It’s an automated process delivered right to your phone, tablet or laptop hourly, daily, weekly or monthly. No human intervention required, it’s just that simple.

What is Canvas?

Canvas is a Platform that increases the effectiveness of your financial and operational data through automation in order to provide you with insight into, and control of your profitability.

  • Automation of current reporting and management accounts:

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  • Dashboards with drill down functionality that shows Profitability and Productivity on every level:

Client –Project –Process –Product –Employee –Resource –Division –Branch –Store–Transaction

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  • Real time insight into your company’s liquidity, efficiency, and overall health:

Net Working Capital –Age analysis –Accounts Receivable and Payable

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Why Canvas?

Canvas is a risk free platform, cost effective and fully automated. Canvas will not increase employee workload as it integrates seamlessly into existing systems.

No long-term contracts means that at any point you can terminate the contract with no residual implications. This out of the box solution has been developed over a 4 year process by Financial directors and BI developers. By using its inherent IP and numerous applications, very few adjustments need to be made, making it one of the most cost effective solutions on the market.

The Microsoft platforms ensure the longevity of the product as well as our ability to support and continually upgrade the offering to our clients. The simplicity of the process and its reporting outputs make Canvas deliverable on the platform of your choice; mobile, tablet or desktop; any time, any place, business is mobile we believe reporting should be too.

  • Mobile device delivery:

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Implementing a top down management information platform will undoubtedly expose areas for improvement in business processes. Day to day operations can be adapted and re-adapted based on continuous impact assessments which allows for a more pro-active environment.

The implementation of Canvas allows for the optimisation of the methods and processes you use to manage your risks and seize opportunities related to the achievement of your objectives. Our experienced team of consultants partner with you on the creation of bespoke checks and measures that enable you to pro-actively plan, organise, lead and control activities that minimise risk.

Is your organisation and the resources within it as efficient, effective and productive as it possible could be? We help you set, measure and achieve strategic objectives related to your business’ overall financial and operational performance.

CONTACT US TODAY FOR AN APPOINTMENT

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

 

ALLOWANCES AND FRINGE BENEFITS: PART 1

A2_bTravel allowance as opposed to the right of use of a business vehicle: What is the difference?

The Income Tax Act defines a travel allowance as an allowance and the right of use of a motor vehicle as a taxable fringe benefit. Although these two terms, allowance and fringe benefit, are closely related, their treatment for tax purposes differs.

Travel allowance

A travel allowance is normally paid to an employee to compensate the employee for the use of his/her own vehicle in the execution of his/her duties (e.g. a sales representative who has to visit clients to market an employer’s products). This allowance is usually calculated according to the distance that the employee will travel in the execution of his/her duties, the value of the employer’s vehicle, and also the maintenance costs and fuel usage of the vehicle. This can be either a fixed amount or a compensatory allowance based on the distance (tariff per kilometre) that the person has travelled.

The employer is obliged to calculate employee tax on 80% of the travel allowance paid to the employee, unless he is convinced that the employee has travelled more than 80% of the total distance for business purposes, in which case employee tax needs to be calculated on only 20% of the travel allowance.

The employee may, in turn, when submitting his/her personal tax return, claim a deduction against the travel allowance received for the portion of business kilometres travelled during the year. This deduction is calculated by apportioning the actual cost of the vehicle (wear and tear, fuel and maintenance) between the business and private kilometres, or by applying the cost scale of the South African Revenue Service (SARS), whichever is the most advantageous.

Right of use of a motor vehicle

As distinct from a travel allowance, the right of use of a motor vehicle occurs when a motor vehicle belonging to the employer is allocated to an employee to use either for private purposes or for private and business purposes. This is an example of a fringe benefit that is not paid in cash but has tax consequences for the employee in the sense that the employee is taxed on the private portion of the use of the motor vehicle. Employee tax is thus calculated monthly on 80% of the cash equivalent of the right of use, or on 20% thereof if the employer is convinced that more than 80% of the distance travelled was for business purposes.

The value placed on the private use of a motor vehicle is 3.5% (or 3.25% if the vehicle is subject to a maintenance plan), of the ‘determined value’ of the vehicle for each month or part of a month during which the employee was entitled to use the vehicle.[1] The determined value of a motor vehicle is generally calculated to be the cash value of the vehicle at the time of purchase (excluding financing costs). It should be noted that the determined value includes VAT on the vehicle. There is, however, a reduction if the employee is given the use of a vehicle owned by the employer, that was not previously allocated to someone. This reduction in value is calculated at 15% of the determined value per annum according to the reducing balance method, for each completed year during which the vehicle was not allocated to an employee.

The cash equivalent (the 3.5% or 3.25%) can also be reduced by the amount that the employee contributes with regard to the use of the vehicle, excluding license, maintenance and fuel costs. (For example: The determined value of a motor vehicle without a maintenance plan is R114 000, inclusive of VAT. The employer expects the employee to contribute R1 500 for the use of the vehicle. Thus the monthly cash equivalent of the fringe benefit is R2 490 [(R114 000 x 3.5%) – R1 500]).

An employee who has the right of use of a motor vehicle is also entitled, when submitting his/her income tax return, to claim a deduction for business kilometres travelled during the year. The deduction is calculated by multiplying the cash equivalent of the benefit with the business kilometres and dividing by the total kilometres. (For example: The taxable benefit for the year amounted to R50 000, business kilometres were 12 500 and the total kilometres amounted to 18 000. Thus the deduction that may be claimed is R34 722.22 [R50 000 x 12 500km ÷ 18 000km]).

Which of the two methods is the most advantageous from a tax point of view?

This is, unfortunately, a difficult question to answer because it depends on several factors, viz.:

The value of the vehicle;

The total distance travelled;

The ratio between private kilometres  an business kilometres;

Who receives the travel allowance / right of use;

To what degree the employer contributes towards the fuel, maintenance and insurance of the vehicle;

If the vehicle is a delivery vehicle, in which instance VAT may be claimed.

Therefore, each case must be considered individually to ascertain the most beneficial choice for both the employer and the employee. You are welcome to contact Jaco van Straaten at jaco@asl.co.za or at 021 840 1600 should you require further information regarding allowances and fringe benefits.

Important to remember

The distance between a taxpayer’s home and place of work is regarded by SARS as private kilometres and cannot be claimed as a deduction against a travel allowance or reduction in the right of use.

If an employee wishes to deduct business kilometres for tax purposes, full records must be kept in the form of a logbook with particulars of business trips and the odometer reading of the vehicle.

Supporting documentation should be kept of fuel and maintenance expenditure since this could be more beneficial than using SARS’s cost scale.

Where the employee has the right of use of more than one vehicle, further considerations and tax implications, which are not discussed in this article, apply. Please contact us for more information in this regard.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

HOW TO SAVE ON AUDIT FEES: FINANCIAL AUDIT PREPARATION CHECKLIST

A3_bAn audit can protect business stakeholders from the risk of fraudulent practices and therefore stakeholders will often require audits to be done annually. If a business doesn’t have a choice whether to have an audit done or not, they can still control the expense to a certain extent by planning for the audit and supporting the auditors as best as they can.

The main purpose of a financial audit is to ensure that a business’ accounting information accurately reflects its financial position. By trying to put yourself in the shoes of an auditor and attempting to anticipate what information they might require to complete their audit procedures, you can prepare a significant amount of the information needed for an audit in advance. Thorough preparation will reduce pressure on the side of both the auditors and the business during the time of the audit and can potentially reduce audit fees.

A business owner and/or management can increase the efficiency and reduce the costs of an audit by following the proposed steps below.

i)   Preparation before the start of the audit

  • Designate an audit liaison personDesignate one person with experience as well as good communication and organisational skills as the auditors’ main contact with the business. Ideally all communication between the auditors and the business should happen through this person first.
  • First meeting with auditorsMake a list of items to discuss with the auditors and arrange a preliminary/planning meeting a while before the audit. Some of the points that can be included for discussion are the following:
  • the purpose and scope of the audit
  • information required by auditors
  • who the audit liaison person will be
  • how communication between the auditors and the audit liaison person and ultimately the employees will be handled
  • the expected finish date of the audit
  • a budget for the audit broken down in terms of the time the auditors expect to work on the audit and the resulting costs to the business (for a first audit with a new auditor it might be difficult to budget for audit hours as the auditors will probably not have much background information about the business or experience with the client)
  • Financial records and other informationObtain a list of the reports, documents and other information from the auditors that they will require to conduct the audit. Generally auditors will require the following documents where relevant:
  • Income statement
  • Balance sheet
  • Cash flow statement
  • Budget(s)
  • Trial balance
  • General ledger
  • Debtors ledger, age analysis and reconciliations
  • Inventory reconciliations and stock counting records
  • Creditors ledger, age analysis and reconciliations
  • Bank statements and bank reconciliations (including petty cash)
  • Tax related documentation e.g. tax returns submitted and paid during the year being audited
  • Major contracts e.g. sales contracts, purchase agreements, leases, insurance policies
  • Minutes of meetings where important decisions were taken which had or can have a material effect on the business
  • Policy and procedure manuals
  • Internal audit reports
  • Any other information which might have a material effect on the financial health of the business

Collect as many of the above items in advance as you can, review them thoroughly and try to anticipate what questions the records may provoke from the auditors’ side.

ii)  During the audit

  • Communicate with the auditors regularly.
  • Respond to auditor queries as soon as possible with accurate information.

iii)  After the audit

  • Audit management reportObtain an audit management report from the auditors setting out suggested solutions and improvements in the way business is conducted. Implementing as many of these suggestions as possible before the next audit can reduce audit fees for the next audit.
  • Post-audit evaluationIdentify weaknesses and time-wasters experienced during this audit and consider possible solutions and different approaches to improve the next audit.

As can be seen from the above, there is quite a bit of planning and preparation that can be done in advance to make an audit less disruptive for a business and its employees and at the same time also pay off in reduced audit fees.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or ommissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

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WILL SARS ALLOW YOU TO DEDUCT YOUR COMPANY/CLOSE CORPORATION’S ASSESSED LOSS?

A4_bUnder normal circumstances SARS will allow a taxpayer to carry forward the previous tax year’s assessed loss and set it off against the current tax year’s taxable income. However, there are certain circumstances under which SARS will not allow a taxpayer to carry forward the previous year’s assessed loss and the assessed loss will be lost for set off against future taxable income as well.

If the following two requirements are not met, SARS may not allow a business to carry forward its assessed loss to the current tax year:

Requirement 1: Carrying on a trade during the current year of assessment (the “trade” requirement)

The onus rests on the company/close corporation to prove to SARS that it was indeed trading during the current tax year. In deciding whether the taxpayer carried on a trade, SARS will take into account, amongst others, the following factors as they apply to the taxpayer’s specific business:

a)  The amount and type of expenses incurred during the tax year
b)  The extent of the business activities
c)  The nature of its general business activities
d)  Whether the business activities were actively pursued
e)  The number of transactions entered into during the tax year

The following aspects are not necessarily enough to prove that a trade has been carried on:

a)  An intention to trade in the future
b)  Activities to prepare for future trading
c)  Holding meetings
d)  Preparing financial statements

Requirement 2: Earning income from trading (the “income from trade” requirement)

A company/close corporation may indeed have traded (and incurred expenses) during a tax year, but the related income will only be realised in the following or a later tax year due to the type of industry in which the business operates. Once again, the onus rests on the business to prove to SARS that it was actually trading in the current tax year despite the fact that no income was earned.

SARS acknowledges that it is possible that a business may have carried on a trade without earning an income in the same tax year. Take a property rental company for instance. The company could have been actively advertising and marketing available rental properties without finding any suitable tenants. This would result in a loss for the tax year as expenses was incurred but no income earned in the same period. In this case it is clear that a trade was carried on and SARS should allow the set off of an assessed loss in the current tax year. However, SARS will only consider allowing the set off of the assessed loss if:

  • It was incidental that no income was earned during the current tax year despite the fact that the business was actively trading; or
  • No income was earned during the current tax year as a result of the business cycle or nature of the trade in which the business operates.

As can be seen from the above discussion, the deduction of assessed losses is a grey area. The onus rests on the business to prove to the satisfaction of SARS that it meets the “trade” and “income from trade” requirements as set out above. SARS will assess each individual business based on its unique facts and circumstances, taking into account the abovementioned factors to determine if the business will be allowed to carry forward its assessed loss.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

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