THE COST OF A BAD ACCOUNTANT - Heather Flack

 THE COST OF A BAD ACCOUNTANT Heather Flack, Business Leader, Flair Accounting The wrong accountant doesn’t just cost you fees. They can cost you refunds, trigger penalties and interest, and even break the law. Here’s how to spot the risks and protect your cash flow.

Why This Matters Now

If you run a business in KwaZulu-Natal, you’re already juggling rising input costs, municipal tariffs, and, at times, no water! The last thing you need is an accountant who quietly drains your cash flow through sloppy work or non compliant fee practices. This article spells out the real world costs and what you can do right now to prevent them.

The Refund “Commission” Trap

If your accountant proposes taking a percentage of your tax refund as their fee for preparing or ‘fixing’ your return, treat it as a major red flag. South African tax practice standards, shaped by the Tax Administration Act (TAA) and the rules of recognised professional bodies, do not permit contingency fees for routine return preparation or correction. There are very limited exceptions. Contingency fees may be used in formal dispute matters (the objection/appeal process under Chapter 9 of the TAA) or in applications to review a SARS decision under section 9 and even then, a written agreement and professional oversight apply. If someone offers you ‘we’ll take 20–30% of your refund’ for normal return work, that isn’t compliant. Walk away.

Bottom line:

A legitimate practitioner charges transparent, fixed or time based fees for return work and ensures refunds are paid into your bank account, not theirs.

The Price of Messy Books

Poor record keeping isn’t just untidy, it’s expensive.

Administrative penalties: File late and SARS can levy fixed amount penalties every month a return is outstanding (scaled to income). These add up quickly (R250 – R16,000 per month) plus interest until you file and pay.

Interest: Any unpaid tax attracts prescribed statutory interest until it’s settled. Miss a deadline by a few months and you’re not just paying tax - you’re paying for the delay.

Understatement penalties: If errors understate your tax, SARS can impose behaviour based penalties (from ‘reasonable care not taken’ to ‘intentional evasion’). Voluntary disclosure can help but only if you act before SARS notifies you of an audit.

A quick reality check: Compare your accounting fee for meticulous bookkeeping, with a year of late filing penalties and interest. The saving from doing it right dwarfs the cost almost every time.

The Opportunities You Never See (But Pay For) A mediocre accountant doesn’t just make mistakes; they miss legal savings:

■ Choosing the right regime: Qualifying micro businesses might benefit from Turnover Tax; many don’t even get told it exists.

■ Disputes done properly: When SARS gets something wrong, the fix is through Chapter 9 objections and appeals or a section 9 review, not through a risky refund commission.

■ Amazing tax benefits and their relevant requirements like SBCT (Small Business Corporations Tax).

■ Cash flow planning: Aligning VAT cycles, provisional estimates, and payroll submissions avoids the ‘surprise interest bill’ that wrecks month end.

Record Keeping: Your Cheapest Insurance By law, taxpayers must keep books and records; generally for five years from the date a return is submitted (longer if there’s an audit, dispute, or specific legislation that requires it). A competent accountant will give you a retention plan, store documents in accessible formats, and be able to put their hands on supporting schedules within minutes.

Quick win: Implement a simple retention system today – cloud folders by tax type and month, with bank statements, invoices, payroll reports, and working papers. Future you will thank you. How to spot a risky accountant (and what good looks like)

Red Flags

■ ‘We charge a percentage of your refund’ for normal return work.

■ Refunds routed to the accountant’s bank account.

■ Vague engagement letters with no clear roles and responsibilities; no calendar for VAT/PAYE/CIT deadlines.

■ Shrugging at missing documents – ‘we’ll just estimate it’.

Green Flags

■ Registered tax practitioner, member of a recognised controlling body, and happy to show it. ■ Clear, fixed/time based fees for return work; written terms for any dispute only contingency arrangements.

■ A five year record keeping checklist and a shared document vault.

■ Proactive reminders, reconciliations, and practical advice you can action next week.

A KZN Lens: Durban’s Cash Flow Realities Manufacturers, logistics operators, and retailers around the harbour live or die by cash flow timing. Missed VAT inputs, overdue EMP501 reconciliations, or a bungled provisional estimate can choke operations when you need liquidity most. In this environment, a great accountant is a cash flow partner, not a data capturer.

What To Do Now?

1. Review your engagement letters and proposals: Remove any ‘% of refund’ clauses for routine returns.

2. Verify your practitioner: Check registration and professional body membership.

3. Confirm refund banking details: SARS should have your verified bank account on file.

4. Request your own Tax Clearance Certificate: Identify yourself if all is up to date and in order.

5. Set up a retention system: Five year document archive, properly indexed.

6. Book a disputes readiness chat: Understand objections/ appeals and when a section 9 review applies.

7. If you do have compliance issues, fix it before it gets expensive.

At the end of the tax year there are only two kinds of costs: the ones you planned for and the ones a bad accountant donates to SARS on your behalf – interest, penalties, and ‘oops, we missed that deduction’. If your books keep throwing surprise parties, it’s not luck; it’s lousy accounting.

T: +27 (0)31 207 1572 M: +27 (0)76 555 7529 E: heather@flairaccounting.co.za

www.flairaccounting.co.za

Heather Flack, Business Leader, Flair Accounting