A financial year end (FYE) is the last day of a company’s accounting period. It’s also known as the end of the fiscal year. In South Africa, the financial year end for most companies is the last day of February as this ties in with the South African Revenue Services(SARS) tax year end.
Nooshin Jeeva, CEO of NJ Adam Inc, says, “Some older companies still use a tax year that runs from July 1st to June 30th while newer companies who have been incorporated recently usually go with the SARS financial year.”
Seasonal business such as farming often set their financial year end for shortly after the season ends and the same goes for businesses that rely on grants and investor funding who will set their financial year end to shortly after the funding period.
“The documents that are required for tax and other compliance purposes are collectively known as the Annual Financial Statements,” adds Nooshin.
Why is the Financial Year End so important?
Nooshin adds, “The FYE is important both from a financial management and a compliance perspective. It determines when taxes and corporate filings are due, and it ensures that organisations measure their revenue on a regular and accurate basis.”
SARS requires companies in South Africa to have a designated FYE and it is reflected in a company’s CIPC registration documents.
The FYE also helps with financial management tasks such as cash flow and budget forecasts are performed accurately.
How to choose a financial year end
“If you are in the process of setting up a business and trying to determine when to establish your financial year end then important points to consider are when your company shuts down and when the business cycle peaks,” adds Nooshin.
For most companies, the SARS tax year that runs from 1 March in one year to the end of February in the following year will work well. This financial year also makes the submission of tax returns easier and it also takes into consideration the main holiday periods in South Africa.
Nooshin says that the financial year end requires input from several departments in a business as it includes activities such as stock takes and the directors’ meetings. She adds, “Financial records are created and reported, Annual Financial Statements are generated, and Business accounts are reconciled – there is a lot to cover.”
Doing all these activities in the middle of a holiday shut down or maintenance period or during the busiest time of the year may cause frustration amongst staff and delay the completion of the required activities.
What happens at the end of the financial Year
Nooshin says, “The financial year end is the process of closing the books for the previous fiscal year and involves reviewing, reconciling, and verifying all transactions. It also involves preparing a final financial statement for tax purposes.”
The financial year end is important for public companies because it’s when they need to publish their financial statements to keep investors informed.
For private companies, FYE is a time of reflecting the true financial position of your business. From balance sheets and income statements to cash flow analysis and budget summaries, financial reporting provides you with the clarity and insight needed to understand your business’s financial health, identify growth opportunities, and address potential challenges before they become problems.
What can NJ Adam Inc do for you
In short NJ Adam can assist you in choosing your FYE and completing the CIPC documentation. We can also manage your financial year end and complete your annual financial statements.
We offer personalised solutions, flexible pricing structures, excellent financial reporting and powerful tax advice. We are a small firm that offers personalised solutions. We pride ourselves on fast turnaround times and we take the time to listen to our client’s needs and adapt to the service needs accordingly.
For more information contact Nooshin Jeeva on +27 (0) 41 001 0184 or email info@njadam.com
