As the new tax year begins, South African SMEs are facing a complex operating environment due to rising costs, low margins and ongoing economic pressures. Yet despite these challenges, many businesses still view taxes as a one-time compliance exercise that should be addressed come filing season, rather than an integral part of their financial strategy.
According to Shaheeda Solomon, finance manager at Lula, this mindset is one of the biggest risks facing SMEs today.
“Small businesses definitely need to take a more thoughtful strategy around tax,” says Solomon. “In uncertain times, it is important to understand your tax situation and proactively plan for it, not only for compliance, but also to protect your cash flow.”
One important change emerging in the SME landscape is increasing awareness. While business owners are becoming more aware of their tax obligations, many still lack the systems and discipline needed to effectively manage them throughout the year.
“One of the most common blind spots is not knowing what deductions and allowances are available. There are important benefits for small businesses to qualify for, but if you don't know about them, you're effectively leaving money on the table,” says Solomon.
This lack of awareness often results in costly mistakes. Late submissions, poor expense tracking, and reactive tax planning can trigger penalties and interest from Sars, putting additional pressure on already tight cash flows.
Solomon says, “Not making timely deposits has an immediate financial impact. And if your records aren't in order, you can't optimize your tax situation. These are avoidable issues, but only if businesses treat taxes as part of their daily operations.”
Importantly, Solomon emphasizes that tax should not be viewed in isolation. Instead, it should be incorporated into broader financial planning and operational discipline.
She says, “Paying tax is no different from paying salaries or suppliers; it is a core business obligation. If you can estimate your tax liability and factor it into your monthly cash flow, you can avoid the shock of large, unplanned payments at the end of the year.”
Financial visibility plays a central role in this process. For many SMEs, the challenge is not a lack of effort, but a lack of accessible tools and systems.
Solomon says, “You don't need complicated spreadsheets. It's important to know what's coming in and going out of your business in real time. There are affordable accounting tools that automate much of this, making it easy to stay organized and in compliance.”
Another warning sign is when businesses turn to outside funding to meet tax obligations, a scenario that Solomon describes as a red flag.
“If you need money to pay taxes, it suggests that you have not planned for anticipated expenditure. Ideally the money should be used for development, not to bridge operational shortfalls,” she says.
Looking ahead, the SMEs that will prove most resilient are those that combine financial discipline with informed decision making.
“Businesses that are successful really understand their numbers. They know their income, their expenses, and their obligations, and they ask questions when they don't know,” says Solomon.
His advice to SME owners at the start of the tax year is clear: “Make tax part of your everyday thinking. The earlier you plan, the more control you will have, not only over compliance, but over the future of your business.”
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