For many companies the first provisional tax payment falls due on 31 August. Many companies are paying VAT every two months. Employee taxes every month. Predictable payment dates with predictable payment values, and yet so many businesses are caught off guard when it's time to pay the piper. It's not because these businesses are struggling. Failure to plan and prepare for these events leaves many business owners scrambling for cash and funding at the last minute because they failed to account for the known timing difference between booking revenue and collecting their money.
Take a business turning over R50 million a year, where customers take around 72 days on average to pay. At any point, that business has close to R1.5 million of VAT sitting in invoices that customers haven't settled yet. VAT that will need to be paid to SARS before the invoices are finally settled. The cash to pay SARS is still sitting with your customers. There may be months when the VAT deductions offer enough offset, but if you're growing, you've definitely faced the months when the SARS bill couldn't hurt more.
Provisional tax follows a similar pattern, just on a longer time scale. Payments due on fixed dates every six months. Some businesses don't bother with the tax estimates until it's time to file the returns. Others set estimates but then don't revise these as time goes by and actual performance begins to deviate from the estimates. A big contract lands or falls through, margins change, an investment decision is made or delayed. By the time the payment date rolls by, the estimates are wrong and there's no runway left for anything except to scramble.
The penalty dilemma
When the date arrives and the money isn't there, something's got to give. Most owners choose to pay salaries and settle key suppliers before they settle SARS. That's an understandable instinct. Nobody wants to miss payroll to make a statutory deadline, and losing a supplier over late payments can destroy a business in a way that a SARS penalty will not. In the same position, faced with the same alternatives, I would make the same trade-offs.
But when you're making these instinctive calls multiple times a year, year after year, that turns an avoidable cost into a routine one. The SARS penalty and interest that follow late payments are not just another cost of running a business. These costs come straight out of your profit and they offer nothing in return. These costs are the price of a planning failure, and it's entirely within the business's control to fix.
Build a cash reserve
The first fix isn't complicated. Whenever a tax obligation becomes identifiable, whether it's VAT, PAYE, or the tax on your profits, set some cash aside, rather than leaving it in the operating accounts where it looks like money available for everything else.
This single habit changes what the operating account actually tells you. Without it, a healthy-looking balance might just be tax money that hasn't been paid over yet, waiting to disappear the moment a statutory date arrives. With it, the money in the account is what's actually available to spend, and SARS stops competing with payroll and suppliers for the same funds. This isn't about precision down to the last rand on every transaction. It's simply a deliberate, repeated practice, and the value is in being consistent.
Setting cash aside doesn't mean it sits doing nothing until the day it's needed. Money you know you won't need for weeks or months can still work for the business in the meantime, right up until the date it's due. Exactly how you do that is a conversation for your adviser or your bank. Reserving cash for taxes is a discipline about timing, not a decision to freeze cash and let it sit idle.
At first this may feel difficult, so start small. Before long you have a small reserve and a steady saving habit, and like in so many other things, consistency is the key. At some point your reserve funds are sufficient for your expected obligations, and the only effort required is to accurately estimate the settlements required and to top up as you need.
Build a forecast
Forecasting is an essential tool for most management decisions. When it comes to reducing your SARS-related stress, forecasting is vital. Building a cash reserve works so much better when you know what you're saving for, and that's where forecasting becomes essential. I recommend two forecasts, each doing a different job.
A full-year forecast, built early in the year and revised throughout the year as trading results come in and business conditions change. When it comes to your taxes, the full-year forecast tells you what your expected tax liability is likely to be. Revenue moves, costs shift, deals close a little higher or lower than expected, and a provisional tax estimate made in April on assumptions from January stops being useful. Revise the forecast as the real trading numbers come in, and your estimate for provisional tax gets sharper every time you touch it. That sharper estimate is also what tells you whether your cash reserve is enough, or whether you need to set more cash aside before the big date arrives.
A rolling 13-week cash forecast does the near-term work. It's a rolling view of the coming quarter, updated weekly for what's actually happening rather than what you assumed a month ago, with the previous week's forecast checked against what actually landed. Run it properly and hardly anything catches you by surprise, least of all a SARS payment. A 13-week cash forecast lets you see the payment date approaching, shows you your cash reserve status, and gives you all the information you need to prepare accordingly. Your tax payments, alongside payroll, creditors, and everything else the business needs to fund, are all reflected within the same forecast window.
The cash reserve is a buffer, a release valve for cash flow pressures. Forecasting insulates a business from tax surprises. Not because the tax bill gets smaller, but because nothing about it is a surprise come payment day.
The businesses that are ready for it
Provisional tax will come around again in six months, guaranteed. The question is whether it catches you unprepared again, like last time, and the time before that.
The businesses that aren't dreading that SARS payment aren't paying less tax than anyone else, and they're not the ones with the biggest finance team. They're the ones who saw it coming, knew what to expect, and already had the money on hand well before the deadline.
That's the real difference between a business that treats tax payment dates as a fire drill and one that barely notices the dates go by. Same tax bill, same statutory obligations, completely different experience. What separates the two isn't luck, and it isn't size. The difference is preparation and planning.
Neither habit requires a finance department if the business doesn't have one. A reserve is a conscious decision, executed consistently. A forecast can be as simple as a spreadsheet, updated weekly. Both habits demand that you start well before the pressure is on, because the whole value of these habits is the runway they buy you. Start them the week before a deadline and they're just a more organised way of scrambling.
With 31 August just weeks away, now is the moment to start. Will you get caught off guard once more, or are you ready to take control of your finances?
