Why does my company tax return not match the profit in my bank account?

Name the three numbers before comparing them

A director opens the banking app, sees a modest balance and wonders how the company can show a profit. The first check is whether the numbers describe the same thing. A bank balance is a position at a date. A profit figure describes performance over a period. A tax calculation takes relevant accounting information and applies tax rules. They are connected, but they answer different questions.

Write the financial year and the bank statement date at the top of the review. Comparing today's cash with last year's taxable income creates a timing mismatch before any technical issue is considered. Also establish whether the profit number is before tax, after tax or a rough estimate from an incomplete bookkeeping report.

The SARS ITR14 guide includes financial information and tax adjustments. A bank screenshot cannot replace that information. The useful task is to trace each figure to a record and explain the differences. Where the explanation is unclear, ask the preparer to produce a short reconciliation you can follow.

Look first at timing and financing

Start with ordinary transactions before assuming the return is wrong. A customer may owe money for work already recognised in the accounts. A supplier may have invoiced the company but remain unpaid. Borrowing puts cash into the bank while creating a liability. Repaying loan principal reduces cash and that liability; it is not automatically an operating expense.

• Customer balances: compare invoices, credit notes and collections around year-end.
• Supplier balances: identify costs included in the accounts that will be paid later.
• Assets: separate equipment purchases from routine running costs and review their treatment.
• Financing: identify loan receipts, principal repayments and interest separately.
• Owner transactions: establish whether a payment is salary, a loan, reimbursement, dividend or something else.

These categories help explain movements; they are not instructions to choose a tax treatment without examining the facts. For example, a transfer labelled director payment could settle a genuine expense or reduce a loan account. Read the underlying agreement and supporting record. The bank's description is a clue, not a complete accounting conclusion.

Include all business accounts in the comparison. A transfer from the company's current account to its savings account changes the individual balances but does not create new company revenue. Mark both sides of internal transfers so they are not counted twice.

A cash and profit example

Consider this deliberately simplified example for one year. The company starts with no cash, invoices R100,000 for completed services and collects R80,000. Operating expenses recognised in the accounts total R35,000, of which R30,000 is paid. It also borrows R50,000, buys equipment for R40,000 and repays R10,000 of loan principal.

The closing cash is R50,000: R130,000 received less R80,000 paid. Profit before depreciation and tax is R65,000: R100,000 less R35,000. Neither number is the final taxable income. This example excludes VAT, depreciation, tax adjustments and opening balances so the cash movements remain visible. It illustrates a reconciliation, not a tax liability or a suggested deduction.

Ask for the bridge from profit to taxable income

Once the accounts make sense, review the tax calculation separately. Ask which adjustments increase or decrease accounting profit for tax purposes and why. Useful questions include whether an expense is private or capital, whether the accounting depreciation differs from the applicable tax allowance and how any assessed loss has been treated. The answer depends on the company, transaction and relevant year.

Request a schedule with the accounting starting figure, each adjustment, its supporting reference and the resulting taxable income. A single final number gives you little opportunity to spot an omitted transaction or duplicated adjustment. A readable schedule lets you ask a focused question about a particular line.

Do not use this review to force taxable income down to the bank balance. If the company collected an old debtor this year, that collection may improve cash without being this year's revenue. If it paid an earlier liability, cash may fall without creating a new current-year cost. Explain the event first. Then ask the accountant to show its accounting and tax consequences in the correct periods.

Gather a review pack that can resolve differences

A useful pack links summary reports to transaction evidence. Choose the same reporting period throughout, save the report versions being reviewed and include any changes made after the first draft. These are practical review suggestions rather than a universal SARS attachment list.

1. Obtain the final trial balance, income statement and balance sheet for the year.
2. Match every bank balance to its reconciliation and year-end statement.
3. Review customer and supplier ageing reports, including amounts settled after year-end.
4. Read asset additions, disposals and the depreciation or allowance schedules.
5. Check loan accounts and owner transactions against agreements and approvals.
6. Compare the tax calculation and return with the final accounts, then resolve differences before approval.

Mark a difference as explained only when there is a reason and a supporting reference. A note saying timing is not enough if no one can identify the invoice, payment or period involved. Where records are incomplete, add a named owner and a next action. The monthly bookkeeping close checklist can help prevent the same gaps accumulating again.

Deal with cash pressure as its own issue

A correct tax calculation can still create a cash-flow problem. The company may have made a profit but not collected customers, or it may have used cash to buy equipment and repay finance. That does not make the underlying profit disappear. Prepare a collection plan and payment forecast alongside the tax review.

List available cash, expected customer receipts, essential commitments and tax amounts with their actual due dates. Distinguish an optimistic sale from an invoice already accepted by a customer. Tell the adviser about a payment difficulty early so the company can consider the appropriate options using accurate figures.

Keep tax payments and return preparation connected but separate in the working file. A payment instruction does not show that the return was submitted. A submitted return does not show that the payment reached the correct account. Retain each confirmation and check the subsequent account position. Avoid promising a supplier or owner that a refund or reduction will fund a payment before the relevant SARS outcome is established.

What a useful explanation should leave you with

By the end of the review you should be able to describe the main differences in ordinary language. For instance: customers still owe part of the revenue, a loan funded equipment, some supplier costs remain unpaid, and the tax calculation includes specific adjustments. You do not need to memorise every return field to recognise whether that explanation fits the business.

Ask for a corrected set of reports if an error is found, with the change clearly identified. Keep the final version used for approval and avoid mixing it with an earlier draft circulated by email. If the return was already submitted, ask which correction process applies rather than editing the accounting records solely to match an incorrect return.

Business income-tax return support starts with reliable accounts and an explainable calculation. Take the bank statement, final reports and your unanswered questions to the review. The aim is a return supported by the company's actual transactions, with cash planning based on the resulting obligations.