As an entrepreneur, you will always be confronted with issues related to money, money management and profitability. Here are a few frequently asked questions (FAQs) by other entrepreneurs and the responses to these FAQs. In providing these responses, it is expected that you will come to fully grasp the mind-set requisite to mastering your business finances.
Q. At what point should I start preparing financial statements for my business?
R. Financial reporting is an integral part of your business. It is not an event that you are planning for; it is the report card of the business. I find people saying that they want to wait till they are bigger before they start preparing financial statements. This is an erroneous concept. From the moment you decide to start running your business, accounting for that business comes into the plan. It is not an after-thought and should be given the priority it deserves. Think of all the big brands you love; they got to where they are by being financially responsible.
Q. What do I do if I cannot afford a qualified accountant?
R. If you are just starting a business, the fact of the matter is that you have got to plan for accounting for your business. If however you are unable to afford a qualified accountant, then you can outsource the function. You are likely to pay half the cost of keeping a qualified accountant full time if you go this route. Alternatively, you can decide to spend the time to learn to do it yourself. It is a time consuming activity and it shouldn`t be an activity that you handle yourself over the lifetime of your business. As a business owner, your primary activity is to drive sales and customer retention. So have a plan in place to drive sales to the extent that it can cater for the cost of having your own accounts handled professionally.
Q. Do I pay VAT even when my business is making a loss?
R. Value Added Tax (VAT) is actually a tax on sales and not a tax on profit. It is expected that as long as you are selling an item or service subject to VAT under the tax laws governing the country, you are to charge your customers 5% of the selling price and remit same to the tax authorities. If your excuse is that you did not charge your clients VAT because you didn’t know you were supposed to, it will not absolve you of your VAT liabilities to the government. There are other taxes applicable to the company’s profit like Company Income Tax and Education tax. However, as stated above, the VAT is a tax on sales. Even if you make losses month on month, you are still to remit your VAT.

Source: Proshare

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