SA’s Greylisting: Lessons for small business

The Financial Action Task Force (FATF) has placed South Africa on its grey list for failing to meet all eleven recommendations made by the FATF in 2019 to effectively put measures in place to combat money laundering and financing terrorism.

The greylisting sets in motion additional administrative and compliance obligations that may have indirect consequences such as reduced international trade and investment.

Many argue that the Government did not take heed of the steps required to quickly onboard the FATF recommendations ultimately resulting in the predicament that SA finds itself in today. Colin Timmis, Country Manager at accounting software provider Xero expands on a few business lessons that SMEs take away from this scenario.

“There are some lessons that small businesses and entrepreneurs can take from this. More than anything, it emphasises how important it is to be compliant. When looking at factors like lending and compliance, failure to adhere could result in reputational risks with funders, customers and the greater community,” explains Timmis.

Here are a few steps that entrepreneurs can take to ensure financial transparency and compliance:

Get to know stakeholder requirements
Understanding the requirements needed by lenders is the first step. Up-to-date financial statements, tax clearance certificates, cash flow forecasts and a clear business plan are important information. Use a cloud-based accounting system to keep a record of your business’s finances in real-time and any supporting documentation that your stakeholders may request.

“Using a cloud accounting platform to manage your finances makes it easy to see your finances in real-time and collaborate with your accountant seamlessly throughout the year. Automation can also help manage and monitor cash flow, PAYE, bank reconciliation and debtors. This means that they are always available in real-time for transparency,” says Colin Timmis, Country Manager at cloud-based accounting system Xero.

Understand processes and procedures
Educating yourself about the financials of your business and adhering to the proper processes and procedures to ensure your business compliance is of the utmost importance. We know that many SMEs are passion- powered but the days of a siloed approach to business is over. You need to always be in the know or lean on experts to help cover your blind spots. A good understanding of the types of financing options and fund schemes available to your business will also stand you in good stead.

Partner with the right people
Partner with the right support to ensure compliance by working together with a reputable and experienced financial advisor and tax professional. Partnering with a credible accountant to support your business means you’ll be up-to-date with rules and regulations that will keep your business compliant, and stakeholders invested.

We see accountants playing a critical role in helping drive digitisation amongst businesses, improve cash flow, and help SARS expand the tax base, adds Timmis. “At the same time, open banking has the potential to play a transformational role in helping small businesses automate processes. Many of them may already be using tools enabled by open banking, but the potential is much greater.

“A good example is bank feeds - these pull a business’s banking transactions directly into their accounting platform and automate reconciliation, helping to reduce admin and errors. This gives business owners an up-to-date view of the business’s financial performance so they can remain complain and make informed decisions”.

“Small business has always shown the most grit and hunger to succeed no matter the environment. At times like these, we need to draw on the support of the self-made community that continues to look at the glass as half-full and help drive our economy forward,” concludes Timmis.