Category Archives: Business advice

Keep your business growing

Having a successful business means ensuring that it continues to grow. Without growth, your business will eventually run dry and stagnant. But with the added responsibility of maintaining your business and keeping things running smoothly, it can be difficult to know where to look for business growth.

1. Look for cost savings

This point is especially true when your business is trying to survive a struggling economy. Making cost saving choices can become more or less difficult depending on how you manage your incomings and outgoings.

Try find cost savings wherever you can. What subscriptions are you still paying for that you no longer need? Which supplier relationships need to be terminated? Are you spending too much on stationery? Aim to eliminate all unnecessary costs, even if they’re small.

2. Automate everything

When you waste time, you waste money. When it comes to things like report preparation, data entry, and accounts payable and receivable, it’s worth investigating your automation options. Things like pursuing invoices can now be done with a click of a button and a few strokes of the keyboard. What’s more, they can be handled safely, legally, and efficiently.
Once you’ve automated portions of your business, you can focus exclusively on growing the business rather than just maintaining it. This is critical, because growing a business takes extreme dedication and commitment.

3. Target other markets

If your current market is serving you well, then ask yourself if there are others. Sometime, those other markets are what make money. If your consumer market ranges from young professionals to young families, think about where these people spend most of their time. Could you introduce your business to schools, restaurants or community events? You could also offer discounts to special-interest clubs or donate part of your profits to schools and associations.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

Take care of your biggest asset

I recently dreamt that I was at a conference and the topic was

“SHOULD EMPLOYEE COSTS BE CAPITALISED AS AN ASSET OR EXPENSED?

Now that is obviously NONSENSE but let us consider it for a moment.

  • The single biggest cost of some businesses is employee costs
  • You cannot do all the work yourself
  • Your quality of service is often dependent on the service levels of your employees
  • Service includes sales, administration, security, etc

One of the old wise business adages is to surround yourself with quality people – they will make you look good. Indeed most businesses can only flourish if the correct people are employed.

One must therefore consider changing the thought pattern of not regarding employee costs only as expenses but rather that this is your largest asset.

Assets are maintained, insured, protected and given a lot of TLC.

The same should be done with potentially your biggest asset by:

  • Proper communication
  • Respect
  • Training
  • Complimenting
  • Encouraging

Money is not necessarily the main driver of human beings. In terms of “Maslow’s Hierarchy of Needs” as set out below Self Actualization and Esteem Needs far outweigh Physiological Needs.

This is FOOD for THOUGHT so EAT DRINK AND BE MERRY and have a WONDERFUL CHRISTMAS filled with FUN and JOY !!!!!!!

From Cedric Schalk Wayne Lucha
And all the managers and staff of NEWTONS

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

5 Common small business money mistakes

Of all the roles, a small business owner takes on, often the most challenging is managing the business’s finances. You can improve your chances for success – and your profitability – by being aware of and steering clear of these common small business money mistakes. 

  1. Insufficient Cash

Insufficient cash is one of the leading causes of business failure. Startups often overestimate how quickly they’ll start making money, and underestimate all the expenses they’ll incur. But startups aren’t the only businesses prone to failure due to insufficient cash. Once you have a steady flow of business you can run into cash problems in a couple of ways. One is a failure to realize the difference between cash flow and sales. You can have plenty of sales on record, but unless you get paid in advance for those sales, you’ll have expenses to pay before you collect from your customers.

  1. Waiting Too Long to Seek Credit

The worst time to look for a business loan or line of credit is when you most need it. If your business is paying its bills late and is on the brink of failing, finding funding will be difficult or impossible. The time to seek funding is when your business looks solid enough to convince a lender you will be able to repay what you borrow.  

  1. Mixing Business and Personal Funds

Whether you are starting a new business, or you’re running an established business, mixing personal and business funds is a recipe for disaster. Assuming you are the sole owner and you buy business supplies with your personal credit card or use a business check to pay for a personal purchase, you’re going to have difficulty keeping track of how much money the business is actually making or losing throughout the year.

If there are times when you have to use personal funds for your business – or vice versa – the correct way to handle the situation is to make a formal transaction and document it. If you have business partners, get them to sign off on the transaction, too.

  1. Not Staying on Top of Record keeping

As a business owner, your focus is usually on winning business and making sure the customers get it in a timely fashion. Along the way there are so many things to do that it’s easy to let recordkeeping fall by the wayside. Receipts for inventory or other purchases get shoved in a folder, envelope, drawer, or the proverbial shoebox, until such time as you “get around” to recording them. Invoices for items you’ve purchased on credit maybe wind up in your inbox – with dozens of other pieces of paper.

Records for business travel may wind up on the back of a receipt or napkin, or stuck in a note on your smart phone. Receipts from people who still pay you wind up in the same folder or drawer, and credit card payments show up in your bank account based on the credit card used to make the purchase, with no convenient way of matching any one day’s credit card receipts to specific purchases made. 

  1. Under Pricing

Determining the right price to charge for products or services is seldom an easy decision. Charge too much, and you could lose sales to a competitor. Charge too little, and you won’t make much profit – or worse, you’ll lose money.

Small businesses – particularly those just starting out – often charge too little. Sometimes they rationalise that the low price is a way of “getting their foot in the door.” Sometimes the price is low because a new business owner isn’t taking into account the cost of his or her own labour, or hasn’t accurately determined all of the costs that have to be considered in setting prices. If you’re just starting out, remember to account for all your costs in figuring out what to charge, and check to see what competitors are charging for what you sell.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

References:

Attard, Janet. “5 Common Small Business Money Mistakes”. Business Know-How. N.p., 2017. Web. 29 June 2017.

Three financial tips for small business entrepreneurs

Here are three things which small business owners should consider implementing to improve their chances for long-term success.

  1. Do Not aim to match or beat prices offered by competitors 

Price may win among big retailers that include, as well as countless other larger businesses in a variety of categories – but smaller businesses know all too well they typically can’t compete in this big-box space when it comes to money. Instead? This is where smaller businesses have the chance to thrive in offering other experiences that stand-out from prices alone. Of course, price will factor into the overall impression any business leaves on consumers, but when combined with other experiences price can often become overlooked thanks to the many other factors that can outshine it.

  1. Create a loyalty program that encourages repeat customers 

Big or small, businesses gain the opportunity for increased customer retention and more frequent spending when loyalty programs are offered. You can create one that is digital, mobile, or even old-fashioned by using paper and a hole puncher, but the idea is that you create one that makes sense for your business and your customers.

Another tip to help your loyalty program thrive? Give it extra TLC so that it stands out among your other marketing efforts, including your business newsletters, via social media and of course, whenever you’re tending to customers and during any customer communication. Aim to have it stand out as a well-respected perk to customers experiencing your business.

  1. Have a lean start-up

Big companies like Starbucks test new concepts on smaller markets before launching their products worldwide. Small companies can learn from this approach. Develop a prototype to get the product out, launch it in smaller markets, test it, get feedback, pivot, and then refine it. By using this cost-effective process, you’ll have a refined product or service designed to the taste and needs of potential clients because they told you what they liked and wanted along the way.

As the economy continues to improve, small businesses will have more opportunities to expand and grow. By taking advantage of opportunities that exist now, you’ll improve your chances of success. 

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

References:

Glassman, Barry. “The Best Financial Advice For Small Business Owners Now”. Forbes.com. N.p., 2014. Web. 29 June 2017.

Leinbach-Reyhle, Nicole. “3 Small Business Tips Uniquely Aimed At Entrepreneurs”. Forbes.com. N.p., 2016. Web. 29 June 2017.

Ten tips for small business owners during tough financial times

When the economy is slow, small business owners struggle to survive, many for the first time. Financial problems consume valuable time and business resources, yet must be dealt with proactively. Also make use of your financial advisor or your banker; they have the expertise and knowledge regarding your business and its financial well-being.

  1. In tough times cash is king.
    .
    Have a close look at every purchase you need to make, and decide if it is worth the money. Will the product generate enough cash to pay for itself? If not, don’t buy it.
  1. Let your budget show the way.
    .
    Without a budget, you will find it difficult to cope with hard financial times. Adapt it regularly and do the same with your personal expenses. If you don’t keep track of expenses, they will become a bottomless pit into which all your cash will disappear.
  1. Look at your business’s financial position and performance objectively.
    .
    Do you get maximum returns from your investments? Could you sell those that are not making you money? When times are tough, survival is the only goal.
  1. Examine how your debt is structured.
    .
    If you have an imbalance between short-term and long-term debt you should restructure your long-term debt so that you can pay back the short-term debt over a longer period. Be careful not to take a loan against long-term assets, except if you are in critical need of money.
  1. Prepare for your meeting with your banker.
    .
    Make sure you have all cash flow and balance sheets and inventories at hand for your banker. This will make your review time more productive. Write down any ideas regarding your financial position and discuss them with your banker.
  1. Ask your banker about guaranteed loan programs.
    .
    Your banker could be able to restructure your business debt over a longer period if you are able to secure a credit guarantee on your loan to the bank. If your business is situated in a qualifying rural area, you may qualify for a guaranteed loan. Ask your banker about any additional resources which may be of use to your business.
  1. Review your insurance coverage.
    .
    Increase your deductibles and your premium will decrease. Items that are low-risk or obsolete should be removed from your inventory list.
  1. Examine your life insurance policies.
    .
    Some whole life policies have provisions that enable you to borrow against the cash surrender value at very low rates, or you could deduct the cost of the premiums from the cash surrender value. Determine whether your life insurance is worth the money or whether you couldn’t get by at a lower cost. Make sure all key personnel in your company have life insurance so that business can continue in any of the key players’ absence.
  1. Deal with financial problems immediately.
    .
    As soon as a financial problem arises, deal with it immediately. Keep your banker informed of any problems and make him part of your inner circle of confidants. Use your team as a soundboard to discuss financial difficulties and brainstorm solutions.
  1. Get some perspective.
    .
    Sometimes you need to get some distance from your work to solve the problems. Take a weekend off or go and watch a movie – whatever you do, leave your worries behind for a short while and focus on something else – it will make you and your business a lot stronger.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

When it comes to strategy, think big

To create a strategic roadmap for your business you don’t need heaps of wonderful resources; you only need to give up your preconceived ideas about strategy. Sometimes the thing that holds a small business back the most is small thinking. If you believe that the size of your business is a disadvantage when it comes to strategic planning, simply because the big companies have all the financial resources and manpower to influence the market, then why start a business at all? Fortunately, money or size of personnel is not what counts when you create a strategic plan – common sense is.

Keep your enthusiasm in check

You don’t need to strategise constantly; rather make sure that you understand the market conditions and that you have attainable goals – don’t waste time on too much planning. You could also try using your company’s small size to out-manoeuvre larger, slower companies by addressing challenges and options and seizing opportunities over short but regular spaces of time.

Challenge assumptions

Believing in the status quo is not part of a successful entrepreneur’s strategy. The business climate is constantly changing with the help of the Internet, social media and other mobile devices. Many companies have landed on the business rubbish dump because they could not adapt to changing times. Question everything. Attempt playing devil’s advocate with your new ideas, then get your team together and devise plans to make the idea viable. Ignore preconceived notions about what can or cannot work – while some business principles are a given, very few business ideas are completely useless.

Avoid myopia

You can build a sales strategy based on the outcome you desire. Don’t miss out on good opportunities because you are too caught up in day-to-day activities to think outside the box and re-examine your progress. Change your perspective and get your team to think in more creative, profitable ways.

Jack (or Jane) be nimble, eager and bold

The market and the needs of customers keep changing, and it’s beyond your control. What you can control, however, is how you adjust to these changes and what new plans you create. Be bold in your new approach and keep an open mind as to the unconventional ways in which to grow.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

Beware of Capital Gains Tax when you emigrate

While many people immigrate to South Africa, we also see many of our clients emigrating from South Africa. And while formal migration-status is not necessarily linked to tax residency, the time of tax migration often coincides with formal emigration linked to passport or visum status. Many are surprised to learn (often after the fact) that emigration for tax residency purposes gives rise to tax consequences in South Africa, and specifically to capital gains tax (“CGT”) consequences in the form of so-called “exit charges”.

In essence, section 9H of the Income Tax Act, 58 of 1962, determines that when a person ceases to be tax resident in South Africa, that person is deemed to have disposed of all his or her assets on the day that the individual emigrates for income tax purposes. In other words, in calculating their income tax exposure, individuals emigrating for tax purposes are regarded as having sold all of their assets at market value on the day before that on which they leave the country. As a result, a capital gain is realised on this deemed disposal that is subject to CGT at the prevailing tax rates. Currently, 40% of capital gains so realised by individuals are included in their annual taxable income, which amount may be subject to tax at rates of as high as 45%.

The policy justification for taxing individuals upon emigration is that taxes are to be levied on all capital growth achieved on assets owned by South African residents while they were tax resident. Once an individual will have emigrated, limited mechanisms would exist whereby capital gains may only be realised upon eventual actual sale of assets subsequently once the individuals are no longer tax resident in South Africa. (It is for this reason that South African immovable property is excluded from the “exit charges” regime; section 35A of the Income Tax Act provides for a withholding tax mechanism whereby CGT may be recovered from non-residents when they sell South African immovable property.)

While one may have sympathy for the policy justification for the levying of “exit charges”, it must be recognised that any deemed disposal of assets necessarily creates a cash flow conundrum for the individuals affected, quite often proving prohibitive for wealthy individuals seeking to emigrate. It is quite possible that assets of individuals emigrating may consist mainly of illiquid assets such as share investments. Upon emigration, these very assets may need to be actually disposed of in order to raise sufficient cash resources to be able to pay the resultant CGT that would have been payable on a deemed disposal of those assets at emigration.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

Offshore companies and doing business in South Africa – a companies act perspective

According to the most recent statistics released by the South African Revenue Service, South Africa remains a net importer of goods and services. Put differently, one could say that South Africans are more often clients in cross-border transactions than they would be the service provider. Many of our clients operate in this space, including foreign incorporated companies which are doing business in South Africa. This article is aimed at those specific clients of ours: those clients doing business in South Africa through companies incorporated outside of South Africa.

Section 23 of the Companies Act, 71 of 2008, regulates when foreign companies are required to register as “external companies” in South Africa. In terms of that section an external company must register with CIPC within 20 business days after it first begins to conduct business, or non-profit activities, in South Africa. The question is then when will the company in question be considered to be conducting business here?

A foreign company is, by virtue of the provisions of the Companies Act, regarded as conducting business in South Africa if either it is a party to at least one employment contract in South Africa, or if it is conducting such activities for a 6-month period “as would lead a person to reasonably conclude that the company intended to continually engage in business or non-profit activities within the Republic.” (section 23(2)(b)) Therefore, having even one employee in South Africa requires a company to register.

Certain exclusions may apply and where the Act is explicit that certain activities should not be considered to establish sufficient enough a presence in South Africa to deem the company to be one conducting business here (and therefore required to register with the relevant authorities). However, these exclusions are illuminating in the sense that it presents a rather low bar of activity (such as having shareholders’ meetings here or maintaining a bank account), therefore potentially hinting that the bar for being considered to conduct business in South Africa and therefore required to register as an external company may not be very high.

In terms of section 23, any foreign company required to register as an external company in South Africa must maintain an office in this country. Moreover, failure to adhere to the requisite registration requirements may ultimately lead to a company being notified that it is no longer allowed to carry on business operations in South Africa. Although this article does not consider the implications of registering as external company, we also wish to alert affected clients thereto that this legislative registration requirement may have certain tax and exchange control related implications inherent to them, and on which advice should be taken to manage these requirements in a sensible and responsible manner.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Home office expenditure

With current day realities manifesting in ever increasing distances required to be travelled to get to an office, traffic congestion, etc. more and more employers are opting to give their employees the option of working from home. The proliferation of “home offices” has surfaced in dramatic fashion in recent times. It is therefore only natural that we have been experiencing an increased number of queries related to whether expenditure linked to home offices are tax deductible. With home office expenditure, we refer here specifically to those costs linked to occupying a specific space in a home for purposes of earning an income. This includes typically rent, interest paid on a bond, repairs, maintenance and other related costs.Limitations to deductions for tax purposes in relation to home office expenditure is specifically dealt with by section 23(b) of the Income Tax Act, 58 of 1962. In essence it determines that home office expenditure is not deductible save in very strict circumstances, being:

  • where the part of the home used is used exclusively and regularly used for purposes of the taxpayer’s trade; and
  • on condition that the space so used must also have been specifically equipped for this purpose.

Home office expenditure will moreover not be deductible where the trade exercised involves employment or the holding of an office (such as a director for example), unless either:

  • the income earned is in the form of commission or any similar type of variable payment, and on condition that the duties of employment or office held are performed primarily outside of an office environment provided by an employer; or
  • the employment/office duties viewed holistically are mainly performed in the designated part of the home.

If either of the above two exceptions are met, home office expenditure will be deductible irrespective thereof that the taxpayer is an employee or the holder of a specific office. It is noted that section 23(m)(iv) in this regard also does not operate to limit deductions of home office expenditure more than is already the case in terms of section 23(b). (Section 23(m) ordinarily operates as the onerous provision severely limiting the tax deductions available to salaried individuals.)

As a final comment it should be pointed out that the above tests linked to whether home office expenditure is deductible or not all involves objective tests. SARS is also known to be extremely strict in its application of section 23(b). The Tax Administration Act, 28 of 2011, by virtue of section 102 provides that the burden of proof for showing that a deduction should be allowed rests on the taxpayer. SARS is therefore under no obligation to disprove any of the requirements necessary to qualify for home office expenditure. Rather, the taxpayer should be able to show that the space in question is exclusively and regularly used for business purposes and that it has been specifically equipped therefor. It should further illustrate that income earned comprises mainly a variable form of compensation and that no other space is available to the taxpayer, or that the services are performed mainly from the designated space at home.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Newtons Laws of Business

Running a successful business is one of the most difficult things to do.

One has to consider

  • Staff
  • Customers
  • Suppliers
  • Product
  • Finances
  • Marketing

As an owner there is often nobody to talk to or to assist in dealing with all these facets that comprise running your own business.

Over many years I have come across some tips which might be interesting or assist in thinking differently.

Please enjoy and read.

Law 1

Control and understand your business

Due to all the different facets that comprise the running of a successful business, try and find the one or two things in your business that can be easily identified that will inform you as to the health of the business.

For example, the owner of a shoe manufacturer insisted that every morning the total number of shoes manufactured the previous day was placed on his desk. In this way he was able to know exactly on a day to day basis what the general state of the business was.

Try to determine which factors are critical to your business and monitor them closely.

Law 2

Communication

Business owners often find it difficult to communicate.

Remember you are not alone. Your employees are a vital asset. It is only through proper communication that your employees know what is expected from them, what the goals and strategy of the business is.

Law 3

Think out of the box

Things do not stay the same and are continually changing.

In order to stay relevant the business must adapt, change and develop. Don’t do the same thing over and over and expect a different result. Take time out to think about the business. This is easier said than done but as the owner one has to have a wider vision. Most businesses have a limited lifespan especially with the technological developments.

It is important to sit back and think creatively on what to do or where to go.

Law 4

Accounting and sales

Salesmen want to sell and are not bothered if the money comes into the bank account while the accountants would rather not sell if there is a chance that the money will not be received.

It is very important that accounts and sales work in harmony with each other. The accounting side must not inhibit sales and sales must act responsibly. The two must ensure that maximum income is achieved with the necessary controls in place to ensure recovery.

I think it is important to tell both divisions that they do often pull in different directions and for them to realise this so that they can work together to achieve the right outcome.

Law 5

Employ the right staff

You will be successful if you appoint the best people available.

Surround yourself with great people. They will make you look good and increase profitability.

Compliments are for free and employees need to be praised if good work is achieved. They need to feel respected and appreciated. This features prominently in “Maslow’s hierarchy of needs”.

I know it doesn’t always feel this way but staff is an asset.

Law 6

Focus

Running a business is not easy and unfortunately in order to be successful one has to work very hard. Don’t lose focus on what you are doing.

Distractions are many and easily come by. Whether you are behind the till or have a group of managers and staff one always has to stay focussed on your business. Things can slip easily and quickly.

It might be useful to remember the 80 : 20 principle. Concentrate on the 20% that produces 80% of the profit whether the 20% is customers, stock items, services or areas.

Owning your own business is hard work and like everything else that is important needs a lot of attention.

Law 7

Happiness – Love what you do

You have a much greater chance of success if you enjoy getting up every morning and going to your business.

If you are not in that fortunate position, focus on the positives and don’t let the small negatives overshadow all the positive points. Often employing the right staff may change the environment into a happy place. Maybe by getting a partner that shares the stresses of a business can be the answer.

ENJOY LIFE

Many of these points may have no bearing on you or your business but I hope that some part of this would have been of interest.

– Cedric Peterson