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Thread: LOSS,HELP or EVEN

  1. #1
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    LOSS,HELP or EVEN

    I want to know if I am loosing, paying extra tax, trying to break even or being really foolish by helping people get Tenders. I pay good money to have my books done by an accounting company, SARS came and did a random audit and walked away happy, no issues at all. I realise I am paying accounting fees for any extra work and also bank charges when paying the people being helped.
    I get the Tender, they deliver the goods with my R50 000 invoice showing
    R7000 VAT with a total of R57 000.
    I get paid the R57 000 after 30 or so days and pay out the same amount
    R57 000 to the company supplying the goods.
    I get an Invoice from the supplier for a total of R57 000 and submit the invoice as a payment out. Am I loosing much? Should I maybe charge vat on the suppliers R57 000.(input/output)
    This will happen about 5 times a year. Amounts from R32 000 to R80 000.
    Some people struggle to get registered or get Tax clearances, so I help them out.

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    Site Caretaker Dave A's Avatar
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    If you're receiving a tax invoice that meets all the requirements, you can claim the input VAT and you're all square paying the supplier R57 k.

    However, if they're not a VAT vendor, you can't claim the input VAT and you should only pay the supplier R50k, otherwise you're losing R7k in the deal.

    Personally, I'd also charge some sort of handling/admin fee - there are other costs such as bank charges, postage, phonecalls, time - as much to limit the potential for abuse as anything else. Can I also point out that if the sums involved come to a significant percentage of your turnover, this is also screwing up some key ratios should you wish to sell the business one day...
    The trouble with opportunity is it normally comes dressed up as work.

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    is it a "loss"?

    It all depends on how you're feeling at the time of the transaction.If you're feeling at that point in time,then its a "loss". And at times when it feels good to be helping others then its just a "cost" for helping out.You follow what i'm trying to say.Then when you're eventually tired of helping out ,start charging an admin fee (i would pass a separate invoice for that).
    Oh! the joys of helping out.Its guaranteed to pay dividends at some point.

    As to it screwing up the ratios as Dave correctly points out, i would pass a journal each of the approx 5 times a year. To neutralise the increase in sales
    & increase in purchases ,a simple journal of debiting sales and crediting purchases for that transaction is quite legit as there is no profit motive.
    Hope this helps.

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    Quote Originally Posted by flaker View Post
    As to it screwing up the ratios as Dave correctly points out, i would pass a journal each of the approx 5 times a year. To neutralise the increase in sales
    & increase in purchases ,a simple journal of debiting sales and crediting purchases for that transaction is quite legit as there is no profit motive.
    Hope this helps.
    Thats an interesting way of dealing with it. You might just have to be careful when it comes to something like BBEEE where the journal brings you down into a lower category (eg below R5mil). The certification agency may have an issue with that.

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    Site Caretaker Dave A's Avatar
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    I'm not sure reversing/clearing out the sale is an option at all. Your turnover per financials needs to correlate with your declared turnover per VAT returns.
    The trouble with opportunity is it normally comes dressed up as work.

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    Quote Originally Posted by Dave A View Post
    I'm not sure reversing/clearing out the sale is an option at all. Your turnover per financials needs to correlate with your declared turnover per VAT returns.
    agree & i'm wondering if there is a way around that.

    if one delves deeper & considers Dept. of Statistics,then clearly there is a duplication of sales when in reality there is just ONE SALE

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    Quote Originally Posted by Dave A View Post
    I'm not sure reversing/clearing out the sale is an option at all. Your turnover per financials needs to correlate with your declared turnover per VAT returns.
    Good point. Forgot about that issue.

  8. #8
    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by flaker View Post
    if one delves deeper & considers Dept. of Statistics,then clearly there is a duplication of sales when in reality there is just ONE SALE
    Yet another reason why stats need to be taken with a pinch of salt
    The trouble with opportunity is it normally comes dressed up as work.

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