Introduction

Let me tell you about a client I'll call Thabo.

Thabo had been running his logistics business for six years. He was good at what he did — his clients were happy, his team was growing, and the invoices were going out. Life was busy, and that was a good thing.

Then one Tuesday morning, he opened his email and found a letter from SARS requesting a verification audit.

He called me within the hour. I could hear it in his voice — that particular mix of panic and confusion that I've come to recognise over the years. "Have we done something wrong? Are they going to fine us? What do they want?"

Here's what I told him, and what I'll tell you now: receiving attention from SARS doesn't automatically mean you've done something wrong. But it does mean that something in your financial picture has raised a question — and SARS wants an answer.

For many business owners, a SARS notification feels exactly like seeing flashing blue lights in your rear-view mirror. Even if you've been driving perfectly, your heart still skips a beat. The difference between a stressful ordeal and a straightforward process usually comes down to one thing: how organised your records are when that moment arrives.

The reality is that most SMEs don't attract SARS' attention through dishonesty. They attract it through inconsistency — gaps in records, mismatched figures, or financial habits that look suspicious on paper, even when they aren't.

So let's talk about what those red flags actually look like, and more importantly, what you can do about them.

Key Point 1: Inconsistent or Incorrect Tax Submissions

Imagine handing someone a puzzle where some of the pieces don't quite fit together. They're going to stop, look closer, and start asking questions. That's exactly what happens when your tax submissions don't tell a consistent story.

One of the most common triggers for SARS scrutiny is a pattern of errors, inconsistencies, or unexplained changes in submitted returns. We're talking about things like:

• Late submissions — Consistently missing deadlines signals disorganisation, and disorganisation invites a closer look.

• Incorrect VAT calculations — Even honest mistakes here can create discrepancies that are difficult to explain after the fact.

• Figures that don't match your financial records — If your VAT return shows one revenue number and your bank statements tell a different story, SARS will want to know why.

• Large, unexplained swings in income or expenses — A sudden spike or drop without a clear business reason raises an obvious question: what changed, and why isn't it documented?

I worked with a retailer a few years ago who had been submitting her VAT returns herself to save costs. She was diligent and well-meaning, but she'd been calculating VAT on her total deposits — including loan repayments that had been landing in her business account. Over time, the numbers started drifting away from reality. By the time SARS flagged it, there were three years of returns that needed to be reviewed and corrected.

It wasn't fraud. It was a misunderstanding that compounded quietly in the background — the kind that's far easier to prevent than to fix.

The insight here is simple: SARS doesn't only look for deliberate wrongdoing. They look for patterns that don't add up. Inconsistency creates questions, and questions create scrutiny.

The fix? Make sure your submissions are prepared — or at minimum reviewed — by someone who understands both the numbers and the rules. And ensure that what you submit to SARS matches what your financial records actually show. Every time.

Key Point 2: Mixing Business and Personal Finances

Here's a scenario that might feel uncomfortably familiar.

It's a Friday afternoon, you're at the petrol station, and you realise your personal card is in your other jacket. Your business card is right there in your wallet. Just this once, you think. You'll sort it out later.

Later never comes.

This is one of the most common financial habits I see in small businesses — and one of the most damaging when SARS comes knocking. When personal and business finances are tangled together, your records stop being a clear financial story and start looking like a mystery novel. And SARS doesn't enjoy mysteries.

The red flags here include:

• Personal expenses quietly claimed as business deductions

• Unexplained transfers between personal and business accounts

• Business accounts being used for everyday personal spending

When a SARS reviewer looks at your records and sees transactions that have nothing to do with your business operations, they don't give you the benefit of the doubt. They ask questions — and if you can't answer them clearly and quickly, the scrutiny deepens.

The rule of thumb is this: if you couldn't confidently explain every transaction in your business account to a stranger in under a minute, your records need attention.

Keep your business and personal finances completely separate. Different accounts, different cards, clear boundaries. It's one of the simplest things you can do — and it makes an enormous difference when your records need to speak for themselves.

Key Point 3: Large or Unusual Expense Claims

Legitimate expenses are a normal and healthy part of running a business. SARS knows this. What they're looking for isn't the expense itself — it's whether the expense makes sense, and whether you can prove it.

Think of it like this: if a sole trader who works from a small home office claims R180,000 in travel expenses for the year, that's going to raise an eyebrow. Not because it's impossible, but because it needs explaining — and the explanation needs to be backed up by documentation.

The claims that tend to attract the most attention include:

• Entertainment expenses that seem high relative to the nature of the business

• Vehicle and travel claims without logbooks or supporting records

• Home office deductions that aren't clearly calculated or motivated

• Sudden spikes in deductions from one tax year to the next

The problem I most often see isn't that business owners are claiming things they shouldn't. It's that they're claiming things they should — but they have no paper trail to support it. A receipt thrown away here, a logbook never started there, and suddenly a perfectly legitimate deduction becomes impossible to defend.

Documentation isn't just good admin — it's your protection. If SARS questions an expense and you can hand over a clear invoice, a business purpose, and a date, the conversation ends quickly. Without it, you're relying on memory and goodwill, and that's a shaky place to stand.

Keep records as you go. Don't wait until tax season.

Key Point 4: Poor Record-Keeping

If there's one thread that runs through almost every SARS-related problem I've seen, it's this: poor records.

Think of your financial records as a filing cabinet. When it's organised — everything labelled, every document in its place — you can answer any question quickly and confidently. When it's a jumble of loose papers, half-filled spreadsheets, and missing invoices, even an innocent business looks like it has something to hide.

SARS has the legal right to request supporting documents for any return you've submitted. If you can't produce them, the burden of proof falls on you — and the assumption doesn't automatically go in your favour.

The most common record-keeping gaps I see:

• Missing invoices and receipts for claimed expenses

• Bookkeeping that's done in a rush at year-end rather than maintained consistently

• Manual records with errors that were never corrected

• No clear system for storing and retrieving financial documents

The businesses that sail through SARS reviews aren't necessarily the most profitable or the most sophisticated. They're the ones who can open a folder — physical or digital — and find exactly what's needed within minutes.

Good bookkeeping isn't just about compliance. It's about confidence. When your records are clean and current, a SARS query stops being a crisis and becomes a conversation.

If your current system is reactive — meaning you only deal with your books when something forces you to — that's the first thing worth fixing.

Key Point 5: Consistently Reporting Losses

Every business has a tough year. SARS understands that. What starts raising flags is when a business reports losses year after year — while continuing to operate, grow, and in some cases, fund a very comfortable lifestyle for its owner.

It creates an obvious question: if the business isn't making money, what's keeping the lights on?

I once worked with a business owner who had reported losses for four consecutive years. On paper, the business was barely surviving. In reality, he was taking regular owner's drawings, driving a company vehicle, and travelling frequently — all funded through the business. The losses weren't fabricated, but they weren't telling the whole story either. When SARS came to look closer, untangling it all was a lengthy and stressful process.

Consistent losses attract attention for two main reasons:

• They suggest possible profit manipulation — expenses being inflated or income being underreported

• They create a lifestyle mismatch — where the owner's visible standard of living doesn't match what the business appears to be generating

If your business is genuinely going through a difficult period, that's okay — but document it. Have a clear explanation. Show the context. A business restructuring, a lost contract, an industry downturn — these are legitimate reasons, and they should be reflected in your records and communications.

Losses need a narrative, not just a number.

Key Point 6: Cash-Based Transactions and Unexplained Deposits

Cash is convenient. It's also, from SARS' perspective, the hardest thing to verify — which is exactly why cash-heavy businesses tend to receive a closer look.

When money moves through a business without a clear paper trail, it creates gaps. And gaps invite questions. An unexplained deposit sitting in your business account doesn't come with a label explaining where it came from — so if SARS asks, you need to be able to answer clearly and quickly.

The common issues here include:

• Large or frequent cash deposits that aren't reflected as recorded sales

• Revenue that doesn't match banking activity

• Missing sales records for cash transactions

Here's the thing about cash — every rand that comes into your business tells a story. Whether it's a cash sale, a loan from a family member, or a personal deposit to cover expenses, it needs to be accounted for and explained. What looks innocent to you can look like unrecorded income to a SARS reviewer.

The fix is straightforward: record everything, deposit consistently, and make sure your sales records reconcile with your bank statements. If you received a large cash amount that isn't income — document what it is, where it came from, and why it landed in your business account.

Wrapping It All Up

Here's the mindset shift I'd love for you to take away from this:

Stop thinking "I hope SARS never notices us" — and start thinking "if SARS ever reviews us, we're ready."

The difference between a stressful audit and a straightforward one almost always comes down to the quality of your records, the consistency of your submissions, and the clarity of your financial story. None of these things require perfection — they require good habits, maintained consistently over time.

If any of the red flags in this article felt a little too familiar, that's not a reason to panic. It's a reason to act. Review your bookkeeping systems, separate your personal and business finances, and if you don't already have an accountant in your corner — it might be time to get one.

Because when your financial house is in order, SARS stops feeling like flashing blue lights in your rear-view mirror — and starts feeling like nothing more than a routine speed check you're well prepared for.