As the World celebrated the end of 2021, a lot of businesses in Tanzania closed their Financial Year as well. And while the new year has just begun, most businesses will already have an eye on the looming deadline of submitting their 2021 Final Accounts.
At first glance, it might seem that the deadline is far away, a full 6 months. But taking that period for granted and delaying the preparation and submission of the financial statements has led many to fall on the wrong side of the law.
We all know someone from our friends or family network that starts on their final accounts at the last hour. They then end up rushing to get them completed in time – or have to fall on the mercy of the authority to grant an extension.
“But we have a full 6 months to complete them”, we hear you say, “Why should we get started early?”. Getting started early comes with many advantages, both tangible and intangible. It can be a key driver for success in the coming period and the result of it can play a vital role in the business.
Let’s explore 4 important reasons why you should get an early start on your Final Accounts.
Table of Contents
No.1 Determining Your Tax Liability
No.2 Forecasting & Budgeting
No.3 Remuneration & Bonuses
No.4 Avoid Delays & Rush-Hours
No.1 Determining Your Tax Liability
So you’ve had a successful year in business and are happy with the positive cash flow you have closed with at the end of the year. You are now making plans for the coming year based on what you see. But this may be misleading.
Taxes are an important part of any business. Tax compliance is an even more important aspect of the business. But you cannot calculate or compute your tax liabilities (or tax payable) until you first finalise your accounts.
Imagine a scenario where you made major plans based on your perceived status of the business only to find out that your tax liabilities for the year are higher than what you imagined. You would now need to re-plan and refocus some of your activities.
By starting early on your accounts, you can build a much clearer picture of the financial status of your business and accurately calculate your tax liabilities. This will put you in a far better position to plan out the rest of your year, your investments and your growth.
No.2 Forecasting & Budgeting
Management thinker Peter Drucker is often quoted as saying “You cannot manage what you do not measure.” This is pretty fitting for your final accounts at the end of the financial year. They are a result of your measurement and monitoring.
Your final accounts provide you with a detailed view of your performance through the past year. This will include everything from your sales, expenses, assets and liabilities. All of these components are essential when planning for the future. Afterall, how would you plan for the future if you don’t know how you did in the past?
Your final accounts allow you to get a detailed view at the performance of your goals and initiatives through the year and see the results in numbers. By understanding these early, it allows you to plan better for the coming year, taking in the lessons learned.
In simpler scenarios, how can you budget or forecast for future performance if you do not know where exactly you stand? The earlier a business starts on the finalisation and compilation of its annual accounts, the earlier a clear picture will emerge.
No.3 Remuneration & Bonuses
Continuing from the previous point, here’s another off-shoot: How can you plan out rewards, remunerations and bonuses if you do not have a clear picture of what your financial situation actually looks like?
For most businesses, planning out pay rises, awarding performance bonuses and remunerating the shareholders is intrinsically linked to the overall performance of the business at the end of the financial year.
By starting on your final accounts early, the business can make meaningful decisions and enact changes early to drive better performance and growth.
No.4 Avoid Delays & Rush-Hours
Consolidating a years worth of data, transaction details, receipts, invoices and other records is a considerable task. And while businesses will often have an outsourced team of professionals or a small in-house team of accountants that oversee these aspects, challenges are not unexpected.
Running into problems of being unable to trace certain records easily, or missing a document or two from a key supplier are very common. These types of trivial challenges can often add dependency on other parties that the business cannot fully control. Inadvertently, this can lead to delays.
For businesses that outsource their accounts to accounting & auditing firms, there is an added element of complexity. Such firms will, in almost all cases, be dealing with multiple clients – all of whom are working towards the same deadline. This can mean that the dates closer to the deadline are some of the busiest for these accounting firms. This can lead to delays, and, due to rush-hours, lead to a hike in pricing as well.
Starting on your final accounts early can give you adequate breathing room to deal with trivial challenges and avoid rush-hours at the last minute, which can lead to you missing your submission deadline.
In a Nutshell
It’s hard to argue against the clear advantages offered by starting early on your end of year financial accounts. Business is all about risk management and the delays that can result from starting too late are very easily manageable. A risk that no sound business should ever take.
A reminder that for those Tanzanian businesses that closed their financial year on December 31st 2021, the submission deadline for your 2021 Audited Final Accounts is 30th June 2022.
Got questions or feedback?
Do you need help with your final accounts preperation? Write to us at [email protected] and we will help. We are a fully fledged bookkeeping, accounting and tax consulting company that can help your business grow.