Unlocking the Power of Your Public Interest Score, What Every Business Needs to Know.
If you run a business in South Africa, you may have heard about something called the Public Interest Score, or PI Score. This might sound complicated, but it's actually pretty straightforward—and very important. Your PI Score affects how your business's financial reports are handled and what rules you need to follow.
What Exactly is the PI Score?
The PI Score is a number that tells you how much public interest there is in your company. Every company has to calculate this score at the end of each financial year. The score is based on things like how many people your company employs, how much money your company makes, how much money your company owes to others, and how many people have a stake in your company.
Why Should You Care About Your PI Score?
Your PI Score is important because it helps determine:
Whether Your Financials Need an Audit or a Review: Depending on your PI Score, your company may need to have its financial statements audited (checked thoroughly) or just reviewed (checked less thoroughly).
Which Accounting Rules You Need to Follow: The PI Score also tells you if you need to follow stricter or simpler accounting rules.
How to Calculate Your PI Score
Calculating your PI Score is easy! You just need to add up points based on four things:
Number of Employees:
You get one point for each person your company employs during the year.
Annual Turnover:
You get one point for every R1 million your company makes in a year.
Liabilities (Money You Owe):
You get one point for every R1 million your company owes at the end of the year.
Number of Stakeholders:
You get one point for each person who has a share or interest in your company.
Example: Calculating the PI Score
Let’s say you own a small business, and here are your details for the year:
Employees: You have an average of 25 employees.
Turnover: Your company made R15 million this year.
Liabilities: At the end of the year, your company owed R8 million.
Stakeholders: You have 2 shareholders.
Now, let's calculate your PI Score:
Employees: 25 employees = 25 points
Turnover: R15 million = 15 points (since it's R15 million, you get 15 points)
Liabilities: R8 million = 8 points
Stakeholders: 2 shareholders = 2 points
Total PI Score = 25 + 15 + 8 + 2 = 50
What Does Your PI Score Mean?
Once you calculate your PI Score, you can figure out what it means for your company:
PI Score of 350 or More:
Audit Required: Your company must be audited by a registered auditor, no matter what. This is because a high PI Score indicates that your company has a significant impact on the public, so it requires more thorough checks.
Accounting Rules: You also need to follow strict accounting rules like IFRS (International Financial Reporting Standards) or IFRS for SMEs (Small and Medium-Sized Entities).
PI Score Between 100 and 349:
Non-Owner Managed Companies:
If your company is not owner-managed (meaning the owners aren’t the ones running the company daily) and your financial statements were compiled internally, you’ll need an audit by a registered auditor.
If the financials were compiled externally, a review might be enough.
Owner-Managed Companies:
If your company is owner-managed and the financial statements were compiled internally, an audit is required.
If the financials were compiled externally, a review might suffice.
PI Score Below 100:
For smaller companies with a score below 100, you might only need a simple compilation of your financials, especially if your company is owner-managed. This is because a lower PI Score indicates less public interest, so a full audit isn’t necessary.
However, if you prefer or if it’s specified in your company’s rules (Memorandum of Incorporation), you can also opt for a review.
Owner-Managed vs. Non-Owner-Managed
Owner-Managed Companies: These are businesses where the owners are also the directors who run the company. Since the owners have a personal interest in the company’s success, they are likely to manage the business carefully, which often reduces the need for intense scrutiny. A company can only be owner managed if every single shareholder of the company is also a director of the company.
Non-Owner-Managed Companies: In these companies, some of the shareholders are not involved in the day-to-day management, which might increase the risk of mismanagement and therefore require stricter checks, like audits.
Why the Right Financial Check Matters
Depending on your PI Score, your company might need a different level of financial check:
Compilation: The simplest and least expensive option, suitable for companies with lower PI Scores.
Independent Review: A bit more detailed than a compilation, but still not as in-depth as an audit. This is a good middle ground for companies with moderate PI Scores.
Audit: The most thorough and expensive check, but necessary for companies with a high PI Score to ensure everything is in order.
For many smaller businesses, a simple compilation might be enough, which can save both time and money.
Final Thoughts
The Public Interest Score is a key part of running a business in South Africa. It determines what kind of financial checks you need and what rules you have to follow. By understanding your PI Score, you can make sure your company stays compliant and operates smoothly.
Let’s recap on the PI Score, get your PI Score Calculator Here.