“This is a call for all South Africans to be part of the solution; to contribute in whatever way they can to ending energy scarcity in South Africa.”

President Cyril Ramaphosa

For more than a decade, local businesses have faced the huge challenge of an unreliable power supply from a state-owned monopoly that allowed very little in terms of affordable or practical alternatives.

In addition, since then Eskom’s electricity prices continued to skyrocket – increasing by more than 400%.

Just a month ago, Eskom proposed a further tariff increase of 32.7% to the National Energy Regulator of South Africa (Nersa) and is also contesting, in court, the tariff increase of 9.6% for 2022/23 Nersa allowed, which was far below the 20.5% requested. 

A national crisis

South Africa’s energy crisis has been described as the biggest risk to the country’s economy. Recently President Cyril Ramaphosa, in his address to the nation on the energy crisis, announced measures to tackle it, including scrapping the licensing threshold of 100MW, Eskom buying more electricity from existing independent power producers, importing power from Botswana and Zambia, and doubling the amount of renewable generation capacity procured through Bid Window 6. 

Of particular interest to businesses and individuals are the measures designed to enable businesses and households to invest in rooftop solar. 

“South Africa has great abundance of sun which we should use to generate electricity. There is significant potential for households and businesses to install rooftop solar and connect this power to the grid,” the President explained. “To incentivise greater uptake of rooftop solar, Eskom will develop rules and a pricing structure – known as a feed-in tariff – for all commercial and residential installations on its network. This means that those who can and have installed solar panels in their homes or businesses will be able to sell surplus power they don’t need to Eskom.” 

This certainly provides reasons for companies to re-assess the long-term viability of alternative energy sources, particularly photovoltaic (PV) solar energy projects, which are incentivised because of their low impact on the environment and our scarce water resources.

In particular, the President called on businesses to: 

• seize the opportunities that have been created and invest in generation projects 
• reduce consumption through greater energy efficiency.

The good news is that there are tax incentives to assist in achieving these national priorities.   

Section 12B of the Income Tax Act provides for capital expenditure deductions for assets used in the production of renewable energy and particularly incentivises the development of smaller solar PV energy projects with an accelerated capital allowance of 100% in the first year for solar PV energy of less than 1MW. 

Section 12U of the Income Tax Act provides for capital allowances for roads and fencing used in the generation of electricity.

Section 12L of the Income Tax Act is aimed at directly incentivising investments in local energy efficiency projects and provides a deduction for actual savings resulting from a reduction in energy use. 

Capital expenditure deductions (S.12B)

Section 12B provides for a 50%/30%/20% income tax deduction over three years for certain machinery or plant – which means 50% of the costs of the assets can be deducted in year one, 30% in year 2, and 20% in year 3. These assets must be owned by the taxpayer, brought into use for the first time by the taxpayer, for the generation of electricity from, amongst others, photovoltaic solar energy or concentrated solar energy. The tax deduction also applies to any improvements to the qualifying plant or machinery that are not repairs related.

The following types of renewable generation projects may benefit from the allowance:

• wind power;
• photovoltaic solar energy;
• concentrated solar energy;
• hydropower (producing less than 30 megawatts); and
• biomass comprising organic wastes, landfill gas or plant material.

In respect of photovoltaic solar energy of less than one megawatt, a 100% income tax deduction is allowed in the first year of use.

What this means is that the cost related to a new solar power system can be deducted as a depreciation expense– reducing the income tax liability. The reduction can be carried over to the next financial year as a deferred tax asset.

In a previous binding ruling, SARS confirmed it will allow for both the capital cost of solar power units, as well as the direct cost of installation or the erection thereof.  

The capital costs that may be deducted are:

• Photovoltaic solar panels; 
• AC inverters; 
• DC combiner boxes;
• Racking; and 
• Cables and wiring. 

In addition, related allowable costs of installation are:

• Installation planning expenses; 
• Panels delivery costs;
• Installation expenses; and 
• Installation safety officer costs.

Taxpayers installing assets used in the production of renewable energy, and particularly smaller solar PV energy projects or systems should investigate the tax benefits of Section 12B, particularly now that selling electricity back to Eskom will soon be a reality.

Capital allowances for roads and fencing (S.12U)

Section 12U provides for capital allowances for roads and fencing used in the generation of electricity greater than 5MW from wind; solar; biomass comprising organic wastes, landfill gas or plant material; and hydropower to produce more than 30MW. It is granted in full in the year of expenditure and covers improvements to the roads and fencing related to the generation project, as well as foundations or supporting structures.

Energy-efficiency incentive (S.12L)

Section 12L, read with the Regulations, allows any person or entity registered with the South African National Energy Development Institute (SANEDI) to claim a deduction for energy-efficiency savings derived from activities performed in the carrying on of any trade.

The incentive allows for a tax deduction for all energy carriers (not just electricity, but also fuel) but with the exception of renewable energy sources.

Ownership of energy-efficient machinery and equipment is not a requirement to claim a deduction under section 12L, so a lessee of the machinery or equipment can equally claim a deduction under section 12L.

The deduction is calculated at 95 cents per kilowatt hour or kilowatt hour equivalent of energy-efficiency savings and can create or increase an assessed loss. 

A taxpayer must comply with certain requirements before being eligible for this deduction, for example, taxpayers are required to register with SANEDI, and a measurement and verification professional belonging to an accredited measurement and verification body must be appointed. An energy-efficiency performance certificate must be obtained from SANEDI detailing the energy-efficiency savings generated for the year of assessment.

Examples of energy-saving measures include, for example, investing in more efficient technologies such as LED lighting; installing clear acrylic door refrigeration equipment to reduce energy consumption in retail stores; using recycled waste heat from refrigeration plants or furnaces to reduce another electrical heating load; or investing in energy saving solutions for HVAC and refrigeration. 

With this incentive, businesses can ensure their energy efficiency measures not only result in lower energy costs but also reduces their tax liability. 

When heeding the President’s call to invest in generation projects and reduce consumption through greater energy efficiency, businesses and individuals are well advised to investigate further the tax incentives and rebates available. These are complex, so seek professional advice!

“Happy customers are your biggest advocates and can become your most successful sales team.”

Lisa Masiello

Anyone who has started a business has had those meetings. The ones where you trade a dozen emails explaining what you do and how you do it, what your rates are and why you are the best, and now your potential client has asked for a meeting. You drive to the other side of town, have a two-hour meeting explaining all the things you had explained before, and get back to the office feeling like you did everything you could, and then you wait. Perhaps for weeks there is no response from the prospect and you wonder exactly where you may have gone wrong. The problem here might not be you, but may instead lie with the potential customer, and all that time and effort you sunk into trying to win their business was perhaps always going to be wasted.

Success for a small to medium business is built on resource management. Those companies that manage to get the most return on investment are the ones that will grow the fastest and last the longest. Getting this return requires not only that you create excellent products or deliver excellent services, but that you do this with the right people – and that includes your customers. Being able to tell the difference between good customers and bad ones is a skill no one starts with, but everyone can learn. Here is a guide to recognizing a bad client before you get too committed.

Recognise what makes a good client

Being able to tell the difference between good clients and bad clients will first require you to know exactly what makes a good client. At a very basic level a good client is one that doesn’t take much of your time but is profitable. The best ones are regular customers as well.

Using your accounting software, you will very quickly be able to see which of your clients are giving you the most return for the effort being put in. While some clients you think of as “good clients” because they always take you to lunch or invite you to company golf days may not be having as much impact as you thought, the numbers will never lie.

Try to see if there are any patterns in the clients that deliver the most value to you. Are they of a particular size? Do they come from the same industry or are they from the same areas? What is it about your service or product that seems to appeal to those kinds of businesses? What are you doing for them that your competition can’t? Are there any other companies like them?

Now try to see if there are any patterns among the personalities who work for those clients and who pay for your services. What positions do they hold and do they have the power to sign purchase orders themselves or must they go further up the chain? Knowing these things will help you to avoid dealing with people who may not have the power at the end of the day to order from you and you might be better served focusing on those who can.

The first impression

In order to find good clients or customers, it’s important that your first meetings with them be as much about you examining them as it is about you selling yourself. Do not be afraid to ask the critical questions of them to gauge how much effort it’s going to take to get your first payment.

Are they simply weighing up options or do they have a project that needs completion by a certain deadline? Why are they looking for a new supplier or service? What happened to the people who used to do it? Clients who bad-mouth the previous company they worked with clearly had an acrimonious relationship and it may be time to ask yourself why.

While they may prove valuable in the long run, clients who are simply looking at options are going to be a lot more work moving forward. You may be called upon to offer advice, or chat over coffee more than you would like, and at the end of the day, the work that earns you money may never arrive. Those with project specifics and needs, on the other hand, are looking for solutions that you can provide and want to be quoted. At the end of the day they have to deliver a completed project and will need your help. These customers are much more likely to not only earn you money now but are clearly actually doing things rather than talking about them, making them far more likely to offer you work in the future too.

But even those with work that needs to be done immediately can come with warning signs. Any small business owner should automatically be aware of the clients who want you to “prove yourself” or “do a test job for free.” Filling your time with discount seekers ultimately means you can’t take on work for those companies that would actually want to pay you and anyone who asks you for free or heavily discounted first jobs may not value you or your time and should perhaps go immediately onto the bad customer pile. 

This is a good time to also be cautious of those who refuse to work with a written contract. Anyone who actively does not want to sign on the dotted line likely has a very good reason for avoiding commitment and usually, that reason is that they don’t want to pay what or when they say they will. Remember that although in our law most verbal contracts are binding, only by reducing your agreement to writing can you minimise the risks of misunderstanding and dispute. If you insist on a contract and they suggest you don’t need one, rather walk away.

Watch out for red flags in the first few weeks

You are through the initial introductions, have quoted for work and after negotiation have had your quote accepted, in writing. Now it’s time to buckle down and do the job. This might feel like the time when you just want to focus on delivering the best work you can, but it’s also a time to be wary. Watch the client’s behaviour carefully over this period because it’s at this stage that the first signs of an imminent bad relationship will start to raise their heads.

Does the customer respect your time or do they want you to be available 24/7? Are they calling you after hours, or looking for constant updates on your work? Are their deadlines reasonable or does everything need to be done yesterday? Do they micromanage you or nit-pick your work? People with high demands aren’t always problematic, but when it crosses over into your personal time, and they think nothing of calling you late at night to hash out tiny details then you know they are already becoming more effort than they are worth.

You should be equally cautious of those clients who work the other way around as well. These clients who don’t respond to your emails or take weeks to get you answers to important questions. Clients who can’t be bothered to live up to their own project timelines will also struggle to meet your payment deadlines.

The third thing to look out for is those clients who are constantly adjusting the scope of the project. Scope creep starts out with asking you for a few small unpaid favours and slowly slips into the entire project taking on a different life to what was negotiated. Clients like this are usually more disorganised or inexperienced than dishonest but as the project grows and expectations around your workload increase, so should your remuneration. Don’t be afraid to speak up and ask for an adjustment to the contract.

The final red flag is if clients come back to renegotiate your rates for a job that’s already begun. Negotiating up front is normal and healthy, but when they don’t want to accept what has already been agreed or want to fiddle with the details it’s time to reconsider. This renegotiation technique is a sure sign they can’t really afford the project and at the end of the day they’re going to be someone who is likely to leave you unpaid.

At any stage…

So far all the issues that have arisen are probably excusable or can be overcome if the compensation is good enough, but there are some signs that are just too dangerous to ignore. If any customer of yours ever does any of these things it is far better for the long-term survival of your company to immediately terminate any further partnerships or projects and rapidly move on.

The first of these is when they ask you to copy brand logos, ideas or products from a competitor. Anyone willing to ask this of you neither respects you nor your company and certainly does not respect their competition. Being dragged into tacky business projects such as this will only end in your company being made to look bad as when they are inevitably caught, they will pass the blame squarely on to you and your new brand. 

This warning goes double for any client who asks you to ignore the law or break it outright. Examples can range from the small, such as when you are in construction and they ask you to just go a little outside of the building code to the large, such as when they ask for kickbacks or offer incentives to work with specific companies. Any form of corruption or criminality will eventually not only ruin your company but could also ruin your life.

If you have been in business for any small amount of time you are bound to have come across some people who tick some of these boxes and might be reliving the trauma of projects you would rather forget. Now is the time perhaps to head over to “Clients from hell” for a wry laugh from these people who may just have had it a little worse than you.

“During recession greed dies, frugality survives.”

Amit Kalantri, Wealth of Words)

With yet another return of loadshedding in August, and major banks upgrading their forecasts to reflect an increased possibility of further economic downturns, recession feels inevitable in South Africa. A recession is simply where an economy stops growing and starts retracting. A generally held definition of recession is when the Gross Domestic Product of a country declines for two consecutive quarters, or half a year. Apart from the shrinking GDP, recessions typically come with reduced employment opportunities and incomes, and a stalling in industrial productivity, all of which then impacts all other aspects of life from retail sales to reduced travel and entertainment. To be overly simplistic, when people are scared about their futures, they stop spending, which in turn means businesses, particularly those relying on consumer spending, stop making as much money and the economy has nowhere to go but down.

Businesses, already on the edge from years of pandemic, are preparing themselves to take yet another battering. Managing these economically turbulent times has become an ongoing challenge. Fortunately, though we have had numerous recessions before, and unlike the pandemic, economists are better able to predict the beginning, if not the length of recessions. We also have evidence for the things you can do to make sure these economic downturns don’t close your business. 

1. Manage your cash flow

In even the best of times healthy cash flow is the key to a healthy business. This is doubly so in a recession. With recession coming it’s wise to take another look at all your expenses and cut out everything that isn’t 100% necessary, while also starting to build a healthy cash reserve. Is it possible to get a better price with another supplier while maintaining your quality? Can you renegotiate your rent? What extras can be trimmed from the budget, even if it’s just temporarily? 

Sadly, this attitude also extends to your workforce. If you can afford it and your cash flow looks healthy enough, then keeping staff on is always the best solution as rehiring and retraining when the recession is over is expensive. However, if things are looking touch-and-go it might be wise to consider just who among your staff is essential. Moving your business to a model where you hire freelancers during the good times instead of bringing on full-timers, will ultimately mean that your lean full-time staff quotient is better able to weather the tough times. Remember not to fall foul of our labour laws in the process.

It is also important to ensure your money is coming in. In tough times it may not be as easy for your clients to pay you, and you need to get ahead of these situations. This is not a time to go easy on those who may have fallen behind on payments. Every cent you can recoup now is going to make the recession easier to navigate. 

2. Take another look at your debt

When the economy is booming debt is a good tool for growing a business, but in times of recession it can be the added millstone that sinks you. Debt doesn’t go away just because your business may be experiencing a downturn, so now is the ideal time to visit your accountant and take a new look at your debts, repayment dates and deadlines and how they fit into your projected, possibly reduced, cash flow.

Paying off high-interest debt first is always a good idea. However, before things get bad it may, ironically, be a good time to renegotiate your debt agreements or even take on some added debt if you think you may struggle to meet other obligations during the recession. At the end of the day, lenders are much more likely to work with you on your repayments than see you go into default. Taking the initiative may well build trust between you and your business and lenders. 

3. Don’t stop getting out there – recessions bring opportunity as well as risk

If you are anticipating a bad time ahead, then it’s likely your competition is too and it’s wise to remember that periods of downturn can often make the perfect time to grab extra slices of the market. 

The first step is to nurture the client relationships you already have. Good relationships are going to help convince people to stay with you even if there are cheaper prices elsewhere and having strong relationships with suppliers and creditors will likely give you more wiggle room and time to pay off debts if the real problems start taking hold. Equally, there has never been a better time to market your business and start putting yourself out there for new work.

In recessions it will be tempting for your competition to slow down on advertising spend, leaving you plenty of room to be noticed. The reason for this is simple; advertising during a recession is likely to be seen by clients at just the time when they are carefully considering their current service providers and what they are receiving. By having your offering in front of them when no one else is marketing you give yourself a better chance of turning their heads in your direction. 

Breakfast cereal manufacturer Kellogg is proof of this. Under the most difficult circumstances, when the market crashed in America in 1929, Kellogg doubled its advertising budget and invested heavily in staff and expertise. By 1933 their profits had increased 30% and they had grabbed their spot at the top of America’s breakfast company food chain.

4. Diversify your offering now

Don’t wait until the recession has hit to start making panic station plans. By diversifying your offering now, you will be ready to take advantage of gaps in the market that may arise due to the struggles of your competition. By now most companies are already online and selling their services and products direct, but diversification goes well beyond your online store. If you are in an industry that struggles during recessions, then expanding into products and services that don’t take a hit during tough times is going to give your company longevity. For example, basic essentials like toothpaste, medical supplies, food, baby items and in-house entertainment are all things people will need when their budgets get tighter.

Remember also to plan creatively. For example, the pandemic-fuelled shift to online purchasing hasn’t just boosted the profits of those suppliers and retailers that switched to online sales – companies that looked beyond the obvious and invested in packaging manufacture and in delivery services have also boomed.

5. Take professional advice!

Now is the time to be ruthless with your company, your products and your marketing. Getting advice from your accountant will allow you to accurately evaluate just where money may have become unnecessarily lost and will help you to spot areas of improvement. Additionally, plans can be put in place to ensure you do not struggle with your cash flow and that ultimately, you come out the other side of the recession as strong, or potentially stronger than you were before.

“Creativity is great – but not in accounting.”

Charles Scott, Former governor of Kentucky

Being able to track money as it is coming in and going out is essential for small business owners. Not having proper cash flow management and a full understanding of where your money is going makes it hard to analyse where your business can improve and whether it is succeeding. Come tax season compiling your tax returns accurately becomes extremely difficult if you haven’t been keeping track of every receipt and invoice. 

Fortunately, small business owners can now use out-of-the-box software that is capable of helping them to track these important aspects and ultimately to compile their various tax returns. This software can also help when it comes to invoicing clients, reconciling transactions and generating the reports. But how do you know which software programs are right for your business and which are simply more powerful than you need? And how do you balance the features you want with the budget you have?

Ask yourself these six questions – 

1. Is it simple to use?

Perhaps this goes without saying, but any software you choose needs to be simple to use. As a new business owner you are likely not an accountant and perhaps you lack basic IT skills (which is not unusual). The more complex the system the more time it will therefore take for you to get used to it, and further, to actually complete the day’s necessary tasks. When you are already overloaded with work, the addition of an extra thirty minutes of bookkeeping a day can really add up and put strain on your other deadlines.

While reviews can be helpful to narrow down your selection, it is advisable that you try out a few accounting systems before you settle on the one you want to use. Most accounting software is offered on either a free trial or comes with a guided demo to explore the interface that is easily visible before any purchase. If the software you are looking at has neither, it is wise to stay clear. 

If there is more than one person who will be using the system involve everyone in the decision-making process. Draw up a list of essential, common uses and take the opportunity of the trial to run through generating monthly reports, sending invoices, and running payroll. Simply by testing the software you will quickly discover which is the better fit for you and your team. 

It’s very important that the software is easy enough to use straight from the get-go. Don’t make excuses for the program by blaming yourself or promising it will be easier to use once you have “played around a bit.”

2. How good is the technical support?

In this light, it’s also extremely important that whatever software you do go with has helpful and responsive support. If you do ever run into a problem, it can cost a fortune to get an independent expert to help out, so rather go with a program that comes with the support you need from the beginning.

Generally, the best way for you to gauge whether their technical support is good is by looking at the reviews. Make sure you read these carefully and look for any issues around a lack of responsiveness from their side. Believe us, if there are problems, they will all be spelt out in the review. The worst time to find out that a company you are about to work with is not helpful is just after the system has collapsed and invoices are waiting to be sent out.

3. What features do you need?

Before you commit to buying any software it is extremely important that you work out just which features you need, which you don’t and which may be nice to have. What do you need the accounting software to do? Must it be able to track accounts receivable and payable? What kind of reports do you need to generate? Do you need it to track inventory? Do you need it to include ancillary services, such as time tracking, project management and payroll? Determining these aspects is important as every feature you add will likely also add to the cost and you don’t want to be paying for features you really don’t need.

There are other features to consider too that have little to do with the actual accounting functionality of the system. There are:

Integration: How easily does this software integrate with your other systems. It’s no good buying an accounting program that only runs on Apple when you are a Windows Office user. Beyond the obvious you should ask, “Does this software integrate with your shipping system, and sales platform?” Choosing software that integrates across the board could save hundreds of hours of troubleshooting in the future.

User access: Just how many people can be authorised to use this piece of accounting software? Can you set different levels of visibility and authority for different people? Perhaps you want your sales team to be able to invoice clients, but not see all the same things your accountant can see? Is this possible? Make sure the system you buy has the user access capabilities you need.

Accessibility: How accessible is your data? Most accounting solutions these days offer cloud-based access, allowing you to check your accounts from anywhere in the world and on any device. Which services are available on the app and which are available on the core program? Which services are essential for you to be able to operate remotely?

4. What is your budget?

Every cent can make a difference to the small business and your accounting software is no different. When making your choice, it’s important to formulate a budget and stick to it. Apart from your starting costs watch out for any additional charges, which may add up. When purchasing make sure you fully understand things like setup and customisation fees, to make sure you’re not missing anything. 

5. Will you need to upgrade down the line?

When choosing an accounting system, you need to be aware, not only of your needs now, but also of your potential needs in the future. You may only need essential recording and reporting at this stage, but in the future might foresee the need to scale the system to do payroll and other valuable tasks. Carefully balance your current budget and your needs with your potential growth – how long will it take before you need to upgrade? What features will you need when you do? You may decide that you need to choose a system now that can be easily scaled at a later date, requiring you to spend a bit more money. Alternatively, it may make sense to use a simple system now with no scalable benefits and then overhaul it to a more complete system later. All of this is going to depend, not only on budget but on how much appetite you have for training and learning new systems in the future.

6. What do your accountants suggest?

Discuss your financial recording and reporting needs with your accountants. It is likely they have assisted and advised other clients on the selection and set-up of systems appropriate to various businesses’ needs. They may well have ‘war stories’ to tell of issues and systems you need to be wary of.

“You cannot escape the responsibility of tomorrow by evading it today.”

Abraham Lincoln

A good business credit score is a critical tool in business success as it helps your business unlock, establish and maintain relationships with lenders, suppliers and vendors. It reveals whether an organisation should lend your business money, give it credit or enter into a business relationship.

Building good business credit is, therefore, a vital aspect of running any enterprise and the sooner you embark upon developing a good credit reputation, the better. Business credit allows access to the funding you may need to expand, or get through a tough time, and can even give you better terms with suppliers and other vendors. Perhaps most importantly though, by establishing a good business credit score, you can take an important first step toward creating a dividing line between your business and personal finances, even if you’re running a sole proprietorship or partnership. 

So just how do you build this credit score and just what do you need to do to ensure you have the best score possible when the time comes to use it?

So, what is business credit?

Your business’s credit is a score that measures your history of borrowing and making repayments. In South Africa, Experian, TransUnion and XDS compile commercial credit reports and generate business credit scores using the information given to them by financial institutions such as your bank as well as any defaults that may have been recorded against you by those who may have loaned your business money or advanced it credit facilities which the business has failed to repay on time or at all.

Putting together this information will give any potential vendors and loan companies a clear picture as to just how reliable your business is when it comes time to pay back any loans or accounts. 

In South Africa, scores can range from 0 to 100 for some bureaus and 300 to 850 for others. The higher the score on the scale the safer it is to loan money to the business. For instance, any score lower than 527 on the latter scale is considered high risk, while scores above 750 are considered low risk.

Any business that records a high-risk level will therefore find it difficult to secure loans or indeed potentially even rent office space.

There are four different criteria that the bureaus look at to calculate your score. 

• Your debt payment history, 

• Amount of credit used or your credit utilisation ratio, 

• Your length of credit history, and 

• Your credit mix which looks at how you use credit and what kinds of credit are available to you.

As these reports are generated based on past behaviours, new companies may find it extremely difficult to secure loans. Without the history of past behaviour for a potential loan company to examine, your business’s risk would likely be considered fairly high.

How do you build your credit score?

So just how do you go about building your credit score? And how do you avoid falling foul of the system?

• Pay your creditors on time: This one really goes without saying. If you contract for a service or supply, you must pay the bill for that service timeously and on the agreed upon terms and date. Failing to do so could allow that creditor to list you with the bureaus thereby damaging your credit score.

• Use less revolving credit: Revolving credit is the kind of credit that is always available to you to use as long as you keep on making the necessary payments on the outstanding balance. Credit Cards, where a set amount of credit is extended and which can be drawn against and used as needed is an example of this type of credit. This differs from instalment credit where there is an end goal amount to be paid off and that amount may not necessarily be advanced again once a payment is received.

Revolving credit can be a good way to establish a relationship with financial institutions and help you build a credit score, but it can also be a trap. Revolving credit impacts a portion of your credit score called Credit Utilization which looks at just how much of your available credit you are using at any given time. Your Credit Utilisation is a calculation of how much of your overall credit you’re using and the amount of credit available to you at any given time. This calculation shows lenders and the credit bureaus how reliant you are on credit. Keeping it low on all your store and credit cards will positively impact your score. It will show lenders that you know how to use credit and you aren’t racking up debt that you cannot afford to pay. As a guide, you should try not to use more than 25% of your available revolving credit at any given time.

• Fix your cash-flow errors: Missed payments don’t always happen because your company is doing badly. Quite often they can be missed because a large invoice has simply not been paid on time. Making sure you have a balance of reserve money is important to ensure you don’t miss any crucial payments as credit scores do not have an excuses column to factor in as to why you missed your repayment obligations.

• Avoid missed payments and judgments: This takes us on to the next step, which is missed payments and their severe cousin, judgments. Missing too many payments is already bad, but worse is when a company gives up on you and files a warning with the bureaus that you are not to be trusted. Typically, defaults are listed for credit accounts overdue by 90 days or more. 

“Defaults” such as subjective classifications of consumer behaviour (delinquent, default, slow paying, absconded, not contactable and the like) typically remain on a credit record for one year, whilst classifications related to enforcement action (handed over, legal action, debt write-off etc) remain for two years.

If a court judgment is issued, that stays on your credit record for five years and remains collectable for thirty years in total.

• Keep your suppliers in the loop: To avoid missed payments and judgments it’s highly advisable that you keep suppliers and creditors in the loop should you miss a payment or expect to miss one in the future. Explain what you have done to rectify the matter and when they can expect payment to avoid having your mistake recorded on your credit score. Of course, it is essential to then ensure the payment is made as promised.

• Establish business credit with companies that report trades: Establishing a good credit reputation with companies such as banks that report to the bureaus is a good way to ensure you build a credit score quickly. Using credit responsibly helps establish your ability to show discipline and pay on time and in full. Other companies that may report on your behaviour include telecommunications and utilities companies.

Get your free reports

The National Credit Act states that every business is entitled to access their credit reports once a year, totally free of charge from each credit bureau. Keeping track of your credit score will allow you to see whether your business is improving or falling behind on its goals and give you a clear picture of just how others perceive you. It will also allow you to see if the information there is correct – incorrect judgments can be included on these bureaus, and checking the reports helps you correct any that may be hurting your company’s credit score.

Head to these links to get your credit score report directly from each bureau:

• Experian

• TransUnion

• XDS

In conclusion, a credit score is about your relationships with those with whom you transact. If you make payments timeously, use the credit that is available to you, and keep an eye on your credit score for any inaccuracies, you should be able to build a solid credit score in about two years. 

“Never take your eyes off the cash flow because it’s the lifeblood of business.”

Sir Richard Branson

Managing cash flow is often one of the biggest challenges business owners face and is also the reason for a concerningly large percentage of business failures. 

Cash flow can be defined as the total amount of money that comes in and then goes out of a business and – crucially – the timing between cash flowing in and cash flowing out. 

A positive cash flow means the business earns more than it spends and is a key indicator of the financial health of your business. A consistent, positive cash flow ensures there is cash on hand to cover payroll, expenses and loan repayments on time and enables business growth by ensuring cash is available for timely equipment purchases and upgrades, and investment in new opportunities that arise. 

As such, proper cash flow management is key to your short – and long-term financial success, and cash flow strategies should be a priority in your business planning. Good cash flow planning will allow you to predict when money can be expected to be received, and when it must be paid out. With this information, you can plan ahead and make smart business decisions.

Implementing the ten top tips below for maintaining a strong cash flow will ensure businesses can enjoy all these benefits in a short time and with little effort.

1. Increase sales – More sales are obviously the preferred strategy for a business to grow the amount of cash flowing into the business, and it provides more benefits than other options such as liquidating assets or taking out a loan. 

2. Collect client payments quickly – Late payments from clients are one of the most common reasons why businesses experience cash flow problems. Manage this proactively by invoicing clients promptly and sending monthly statements early. Verify the invoice was received, and contact late payers well in advance, reminding them to pay on time. Follow up on late payments right away, offer discounts to clients who pay early, and implement a cash-on-delivery policy for chronic late-payers. You could also consider requesting deposits when taking orders, and if you offer credit to clients, make sure to do credit checks first and maintain stringent credit policies.

3. Adjust inventory – Inventory that doesn’t sell well will also negatively impact your cash flow. Move outdated inventory and offload less frequently purchased items for discounted prices and don’t replace this stock – rather invest more into stocking items that do sell well. 
4. Manage and trim expenses – Cash flow reduces as and when expenses are paid, so managing your expenses better and eliminating unnecessary costs will immediately boost cash flow. Also consider other ways to conserve cash flow, such as leasing instead of buying equipment.

5. Prioritise payments – Know exactly which payments must be made when, then order according to priority, and spread payment dates so the most important bills are paid first and the less critical account payments with more flexible payment dates are paid later. Where necessary, negotiate payment terms with your suppliers.

6. Increase efficiencies – Take advantage of technological advances and artificial intelligence-enabled solutions, such as apps, software and equipment to streamline your business processes and increase efficiency. Also, consider identifying operations or tasks that can be cost-effectively outsourced to freelancers and third-party service providers. 

7. Use a business credit card – A well-managed business credit card could be used to pay day-to-day expenses during the month to free up cash. This will require keeping a tight record of those expenses and being disciplined in repaying the full balance within the interest-free period. It will also allow the business to benefit from any rewards programs that can reduce expenses, such as a certain percentage of cash back on some purchases.

8. Keep a line of credit – A business line of credit can be a saving grace for small businesses and companies impacted by seasonality. It provides quick access to funds when needed, for example, to bridge gaps between invoicing and payment, to buy equipment, to cover seasonal or unexpected expenses, or to take advantage of growth opportunities. The business will have to negotiate such a facility before cash flow problems arise. 

9. Make your money work – At times, there may be a surplus of cash, for example, in seasonal businesses, and at these times, it is crucial to make sure this money works for the business. This can be achieved through building up a reserve fund for emergencies, which experts suggest should ideally be sufficient to cover six months of business expenses; making smart short-term investments and paying off debts faster to reduce interest and shorten loan terms. Consider investing any surplus cash, short-term or otherwise, in a money-market call account to earn interest rather than leaving it idly resting in the bank account.

10. Use accounting expertise – Successfully monitoring and projecting cash flow often requires professional assistance. Alongside the balance sheet and income statement, the crucial cash flow statement is one of the three main types of financial statements. Generally covering three main areas: everyday business operations, investment activities, and financing, it reveals trends and allows potential cash flow problems to be identified and managed in time. 

Projecting future cash flow requires assessing the previous year’s numbers as the basis of cash flow for the following year and then adjusting these numbers for anticipated changes, such as new pricing, more staff and new funding sources. Of course, these forecasts will change continuously, so it’s important to monitor cash flow on an ongoing basis. 

Speak to your accountant about accessing cash flow reports regularly and for professional assistance in understanding what they reveal about your business, to enable more accurate and relevant business decisions.

“Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.”

Steve Jobs, co-founder of Apple

It is easy in business culture to start believing that more is more. Entrepreneurs often fall into the trap that more meetings, more employees, more products and more leads is equal to more success. Many large companies have failed because they branched out too much, lost focus and, as a result, lost their market.

Quite often the idea that bigger is better and more is more can lead to poor decision making that guides a business away from its competitive advantages, confuses the market and leads to a lack of focus internally. The flip side of this is the ability to strip back unnecessary complexity and instead focus on simplicity. 

Simplicity is defined as “the quality or condition of being easy to understand or to do” and it comes with some genuine advantages.

The advantages of simplicity

1. Being understood

The major advantage of simplicity is that it makes it easy for everyone in your organisation to be on the same page. Having everyone understand the goals and ambitions of an organisation is easier when you are a small company, but as things develop it becomes increasingly difficult to get everyone pulling in the same direction. 

Removing jargon and chaff from company communications, and simplifying product offerings, your vision, team structures and communication will ensure that not only do your team know what they are doing day-to-day to achieve success, but also that they know how to do it. 

Once your whole company is singing from the same hymn book it’s far easier to get the world at large to understand what you are doing too, which makes defining your brand and selling your products a simpler proposition at the same time.

2. It’s easier to operate

The more things that have to happen right for your business to succeed, the greater the risk. Keeping your business practices simple; from the number of suppliers to the levels of training needed by your staff will help you avoid the problems that complexity can bring. If you have thirty suppliers, it takes only one of them to fail to start impacting your business. 

On the other side, if you have one supplier of a common product that can be sourced somewhere else, it’s much easier to keep a handle on your production line and ensure that you always have the products you need. (Of course, you do not want to be reliant on a sole supplier without the option of other sources for your essential resources). Obviously, this is an extreme example, but it will never hurt to go through your supplier lists, staffing or any other factor of your business and look at where the number of cogs can be reduced.

Also, with a select group of suppliers, it will be easier to keep informed of their health and sustainability and ability to continue supplying your business regularly and on time. 

3. It’s adaptable

A simple business model is much easier to adapt should the need arise. A simple business with easy-to-understand communication lines and supply chains is easier to pivot because staff can all be contacted at once and updated, while supply adjustments can be adapted as needs be on the spot.

4. Results are easier to measure

Overly difficult strategies are harder to implement, and they also make it harder to gauge results. It is far harder to work out which staff and departments are delivering the most value in a company when you have two dozen departments with different KPIs and a hundred staff each than it is in a small company with just a handful of staff. The most successful companies have a straightforward direction, along with clear and simple measuring parameters that keep them on track. 

If, however, your operation has grown into a business with a number of divisions, apply these tips for simplification to each division to encourage their efficient and effective performance.

Tips for simplifying your business

Ironically, making a company easy to understand and operate is not necessarily an easy thing to do. Getting to grips with where changes need to be made will take some time and will require bold decision making. Here are our tips for keeping things simple in your business.

• Outline your goals

Whether you want to reduce waste, increase employee happiness, or boost profitability, simplifying your business should always start with defining your goals. This should be a short list that allows you to more clearly understand and communicate just what is being tackled and why. Having a short list makes it much more likely that it will get completed without burdening staff further, and also allows you to easily see if the process has been successful. 

Having simple, clearly defined objectives and goals, that the whole team understand and commit to, gives the business the best possibility of success.

• Consider the outsider’s perspective

There is no doubt, if you lead a business, that you know what it is you are offering and just how many ways you offer it. Being in this position of full understanding can, however, mean that you have lost track of what the average person, or woman, on the street thinks it is you do. Looking at your company from the perspective of an outsider is therefore important if you want to get a sense of how your company and brand are perceived. 

The easiest way to do this is simply to ask. Ask customers, ask friends, ask people at business meetings, or, if you are a larger company, hire a company to do a survey or bring in a consultant. Getting other people’s opinions will quickly show you if you have lost track of your core business. If there is confusion about what you do, or what your primary services are, then it’s a sure sign you may need to go back to basics or change the messaging around your company.

At the same time, ask your customers what they really want. The answers may surprise you and reveal areas where you have been putting in a lot of effort that doesn’t necessarily give the customers what they actually need. This is an essential exercise to determine the continuing relevance of and need for your service offering or product. Change is an ever-increasing factor and new products and services are coming to market. Keeping your business focussed and simple can enable recognition of the emerging threats and need to change, adapt or even develop new offerings.

• Focus on outcomes

While it may be tempting to watch every move every employee makes, doing so is a hugely time intensive activity that adds layer upon layer to the complexity of a business. Instead of simply hiring someone to do the job, you are now hiring people to supervise and check up on them, and to do that requires more HR functionality to manage all their expectations. Your focus should be on performance outcomes of your key employees.

Additionally, not all rules and regulations will assist your company and these need to be looked at carefully if you want to streamline workflows and increase employee job satisfaction and retention. Look, for example, at how many people need to review and sign off on expense reports or small purchases; or how many times slide decks need to be reviewed before they are presented. 

Reducing menial tasks and making things easier to do gives employees more time to actually do their real jobs properly. The answer to all of this is to focus on outcomes and avoid micromanaging your team. Be sure to maintain an open line of communication with the understanding that the more you listen to your team, the simpler things will be and the better the entire group will work. In addition, being accessible and listening to your people will alert you earlier to emerging risks and potential opportunities in time to take action.

This is going to extend to your ability to hear bad news or have employees tell you when they think your decisions may be wrong. You are only going to find out about bad practices and unclear instructions if you are genuinely interested in fixing problems rather than protecting egos.

• Fix your non-functioning processes

Whether it’s because you have been in operation for so long that your processes have become redundant or because you are just starting out and haven’t developed any, having non-functioning processes can hamper your workflow and cause a huge amount of unnecessary and time-consuming work. 

The first step is identifying your pain points. Start with the areas of the business where you are actively getting complaints. Break down what processes are leading to these complaints and fix them. The time you spend developing good practices will be more than paid back in the decreased amount of time you spend putting out fires and dealing with unhappy customers. Ultimately, you will want to look at all your processes to make sure they are running optimally, and that time isn’t being wasted unnecessarily dealing on a daily basis with inconvenient problems that could be solved outright. 

• Organise administration assistance

Administration is a necessary but unfortunate consequence of doing business that can clog up all the otherwise smooth flowing systems. You did not hire those important and highly educated staff to have them sit filling in order forms. You and they should be focused on driving the business, not dealing with payment complaints. Whether you choose to use automated assistance that frees up a researcher’s time in a laboratory, an accountant to organise your finances and save you money on your taxes or someone in HR to deal with errors in pay, getting others to do the finicky work will allow your core team to focus on what they need to do to bring in the profit. Keep management of operating/production teams simple. In the long run, the time saved for everyone will turn into a smoother, and more efficient company. 

At the end of the day, simplifying a company is about getting to the core of what it is you need to do, supplying customers with exactly what they need and no more, making sure your staff are well informed and working together and not overburdened with work that isn’t their place to do.

“The really expert riders of horses let the horse know immediately who is in control, but then guide the horse with loose reins and seldom use the spurs.”

Sandra Day O’Connor, former Supreme Court Justice

n be tempting, and even inspiring, to be seen “rolling up your sleeves” to execute tactical assignments. But as your responsibilities become more complex, the difference between an effective leader and someone who is battling to do everything themselves will become clear. While it may seem difficult, elevating your impact requires you to embrace an unavoidable leadership paradox: You need to be more essential and less involved. The trick is learning to delegate effectively – a skill you may not have expected to need to know.

To know if you are delegating well or need to still learn a few tricks, you just need to ask yourself this one simple question, “If you had to take an unexpected week off work, would your initiatives and priorities advance in your absence?” If the answer is no, or only maybe, then you need these tips for learning to delegate.

Work out what can be delegated

Step one is knowing exactly what can, and should, be delegated. It’s important you take time to analyse the work you are doing to assess which things aren’t maximizing your efforts and time to the fullest and then work out which tasks would help your teammates develop into the kinds of people the company will need in the future. For your team members to grow, you will need to offer them opportunities to prove themselves and learn new skills. The perfect tasks to delegate are those that are within an individual’s capabilities, but which push them outside of their comfort zone and force them to develop new skills or ways of thinking.

Take time to teach them how to do it

When you first delegate a task you will need to take the time you would have used actually doing that task to teach the new person just how to get it right. This period of training will achieve a few things. Firstly it will make the person who is tasked with the new responsibility capable of actually getting it right first time, but secondly it will give you the confidence to hand the task off effectively as well as develop your new and valuable skill of mentoring and training. 

During this period of training you need to stress the reasons for the task. When people lack understanding about the value of a task or why they have been chosen to do it they also lack the motivation to do it well. Giving them the context about what’s at stake, and the benefits of the opportunity, increases personal relevance and the odds of accurate follow-through. As well as reasons, you also need to clearly provide your expectations. Your employee cannot read your mind, so the need for quality and meeting the delivery date must be equally clear-cut when you pass the job over. Once clarity is established, confirm their understanding preferably face-to-face to avoid any later confusion. Often, mistakes by trusted employees can come down to poor communication on the brief.

Let them do it themselves

For people used to doing everything themselves, this may be the hardest aspect of the entire process. While monitoring them doing the job from afar will allow you to pick up any mistakes as they happen, micromanaging them will only put unnecessary pressure on them and can force mistakes. You need to get out of their way. If your hiring process has been good, you have chosen the right person to delegate to, have clearly defined the task, taken time to teach it to them and then explained your expectations, micromanaging them doing it will not be necessary. Demonstrating that you trust them to do the work will likely yield rewards. Part of delegating is learning to respect the varied and creative ways your teammates get the jobs done instead of requiring that they do it exactly the same way you would have. 

Being able to do this successfully builds confidence in the employee tasked with the job and also gives them greater job satisfaction at the end of the day when they achieve it. This in turn will make them more willing to take on other tasks and keep them happier in their workplace, meaning you are less likely to lose a now skilled employee.

Prepare accurate feedback

Once the task is complete for the first time, it’s important to have a follow-up session at which you analyse their performance with the task and offer both positive and negative feedback. This is an important step in reinforcing the lessons, building confidence and correcting any errors in technique or process before they become locked in habits. It’s as important here to recognize the things the employee did well as it is to recognize the things they did badly. Likewise, if the work differs too much from what you were looking for, take immediate and decisive corrective action. Mutually agree on a plan to return to the targeted goals and take a more active role in monitoring of the task. If the situation doesn’t improve, end the assignment and move on. 

Once you are confident the job can be done well, feedback sessions remain important, but can be conducted less often. It’s vital to ensure you continue to recognise the input of your employees and reward those who are doing well. Exceptional performance is more likely to continue if it’s noticed and rewarded. Do follow through when someone performs exceptionally and be generous with promotions, salary increases, bonuses, and a sincere and heartfelt thank-you. 

“When written in Chinese, the word ‘crisis’ is composed of two characters. One represents danger and the other represents opportunity.”

John F. Kennedy, 35^th U.S. President

When people hear the term “crisis management” they immediately picture a PR team in front of the media defending a company from an unpredictable disaster, but crises that close down businesses are seldom unpredictable and even those that come out of the blue don’t need to close a company down. Here are 6 things you will need to do if you want to avoid a crisis from closing your business.

Be Prepared! Set up a crisis management plan

The first step to handling any crisis is being prepared to accept that a crisis is possible and having a plan in place for how you will handle it. This plan should attempt to anticipate any future crises and should look at the best possible way to resolve them. Throw the net wide and try to come to terms with all the things that could potentially go wrong and then develop step-by-step plans for overcoming those things. 

The plan should include important aspects such as budgeting for costs and employee time should a crisis arise. This will allow you to at least have the resources available to handle the crisis correctly, something which is even more important should your company be small or relatively new.

If for instance you are releasing a new product in the near future, have your accountants run the numbers on recalls vs repairs and the costs of PR and marketing around potential problems. This will help you to make quick decisions should something actually go wrong.

The other important aspect of a crisis management plan is determining which of your employees will make up the crisis management team. The primary role of your crisis management team is to assess the situation and implement your plan. Strategic thinkers are especially useful in this situation, as is an empathetic team leader with a proven ability to communicate effectively. If the budget allows, consider hiring a crisis management leader whose experience can guide the team in times of crisis. If none of this is within your scope, ask your accountant to assist or recommend a consultancy to do so and start to develop a relationship with them, so they are on hand if the worst does happen.

Regularly review your business plans and systems

Many crises, particularly those of a financial nature, arise because companies have become complacent in their business practices and plans. Going back and looking at the way you are doing things is an important part of avoiding future errors. Just because something has worked in the past, doesn’t mean it still works. 

These reviews should specifically look at where your company stands using simple financial, cashflow and product quality milestones and then compare your company with its competitors. Are you getting ahead or sliding behind? What changes have occurred in the industry or in technology, which may assist you to do things in a more streamlined fashion? 

How does your business plan describe your business? Is it still relevant in today’s environment or are new products, services or the convergence of technologies threatening to make your operations and products obsolete? Think of Polaroid, telex and then fax machines and so on. 

If you find you are stagnating or falling behind your competition then that’s a strong sign that your plans or systems may be obsolete and in need a bit of a shakeup. The best way to avoid going bankrupt in a crisis is to stop yourself from having one entirely.

Lean on others

With your plan in place, once a crisis does hit it’s important you follow the plan. This will often mean leaving things in the hands of your crisis management team, or the company you have agreed to bring in for the crisis. As CEO or company founder it can be tempting to take control yourself but getting through a crisis will require all hands on deck, working together collaboratively. Your role is then not to do everything yourself, but to rather help co-ordinate the important people and get them working together. 

This may be easier than it sounds though. Making sure your team is willing and ready to do whatever is necessary in a crisis begins long before the crisis itself. The crisis is just where you cash in on all the goodwill you have built up with your employees over time. If you have looked after your employees, treated them fairly and built a reputation as a trustworthy and fair leader then there is no doubt they will be ready to help you in your time of crisis.

Communicate clearly

Communication with all stakeholders is going to be one of the most important pillars when it comes to getting you out of your crisis. Being able to clearly define what is happening and the path to fixing it to your employees, customers and other interested parties such as the media is critical if you hope to undo, or at least mitigate, the damage that has been done. The last thing a company needs in a crisis is leadership that goes silent.

If you discover that a crisis is imminent it’s important that you face it head on, and immediately send out communication that acknowledges the crisis and explains that you are working on solutions and workarounds. This will show nervous clients and employees that you are in charge of the situation and are taking care of it, giving everyone a sense of important calm. This gives the public a sense of trust in you and your company, which will be important to weathering this storm.

If you are required to make a statement, keep that statement simple. There is no point flooding the market with information or excuses. Always focus on acknowledging the problem, apologising for it, if appropriate, and then on what is being done to fix it. This gives a sense that the worst is behind you and the problem is being actively addressed. 

Be decisive

In times of crisis people look to those in charge for leadership. This will require making hard decisions and doing so quickly. This is partly where your crisis management plan comes in, as it allows you to make these decisions with the most important information on hand. It’s far easier to explain where the company will find the money it needs if the money is already set aside and your accountants have analysed exactly which aspects of the business are most likely to survive cutbacks.

If one particular person was responsible for the crisis (say by slandering clients in the media) decisive action needs to be taken to remove that person from their position. Leaders cannot allow sentiment and emotion to dictate their actions at this stage. This is most important in the early days of the crisis when the public, essentially your customers, clients, financiers and suppliers, may demand to see that you are doing something positive to manage the situation. 

Be prepared to change everything

While planning is extremely important, no plan can cover all contingencies. Your plan should identify potential actions, but it should not make those actions prescriptive. Allowing your team to adapt the plan as opportunities and good ideas arise will make the plan fit better to the crisis you are in and strengthen the outcome. At the end of the day, every organisation and every crisis is different, but historically the companies that fare the best are the ones that have a plan and the right people backing it.

“The golden rule of all estate planning is: don’t wait.”

MissionWealth.com 

Just 20% of South Africans have a valid will (“Last Will and Testament”), resulting in countless heart-breaking stories of grief-stricken surviving spouses and children with no income or access to funds as bank accounts have been closed, floundering in confusion with no idea where the deceased’s will or important documents are kept, what assets and debts there are, how to access password-protected devices or who to contact for help.  

To avoid this sad scenario everyone, regardless of age, health or financial position, should have their own estate plan ready, including a valid and properly executed “Last Will and Testament.”

If you are a business owner, estate planning is even more important, especially if your business is your family’s only income. Without proper estate planning, your passing may leave them at a most difficult time without any money and possibly trying to manage a business with no experience.

Implement the six steps below as a matter of urgency to ensure that when you pass away, the legacy you leave behind is maximised and structured, and protects those important to you when you are no longer around to protect them yourself. 

Act now!

Not one of us is assured of tomorrow and the consequences of dying without estate planning and a will are dire. 

Act today! Allocate time right now to attend to this most urgent and important responsibility, or contact a trusted professional to help you get the process started. 

If you already have an estate plan and will, schedule time to review and update them immediately, and diarise regular reviews – at least quarterly and definitely no later than annually. It is essential to ensure an always up-to-date estate plan to account for any ongoing changes in personal circumstances, business circumstances, financial structures, laws and taxes. 

Call in the experts 

Your legacy depends on the quality of your planning, involving a combination of financial planning, wealth planning and estate planning, and therefore requires the expertise of qualified professional advisors such as your accountants. 

The issues at stake are too complex and the consequences of mistakes, omissions or oversights too dire to risk going it alone – there is just no substitute for specialised expertise and professional advice specific to your circumstances. 

For example, a professional should draw up or check your will, which must be properly formatted and worded to reflect your wishes correctly and clearly, and it must be validly executed. 

Similarly, specialised advice may be required where there are minor children, or if you have assets in another country. 

If one of your assets is an operating business, or an interest in a business, you will need professional advice to ensure the best outcome for your loved ones, business partners, employees, investors and other stakeholders.  

Draw up a will 

The absence of a will; or an invalid will; or a will containing areas of uncertainty or dispute, will almost certainly result in animosity and long delays in winding up your estate.

If you pass away without a valid will: 

• You put your grieving loved ones at risk of financial and emotional hardship;
  
• You forfeit your right to choose who inherits what from you, instead leaving assets to be distributed according to the laws of “intestate succession”; and
  
• You forfeit your right to nominate someone you trust to administer your deceased estate.

A valid and updated “Last Will and Testament” is the core and foundation of your plan to protect the people you care for. It should communicate precisely your expectations to all concerned and be valid and accurate in every respect. 

Proper estate planning 

Estate planning means arranging your financial affairs in such a way that you leave behind a legacy that is as large and as well-structured as possible. 

Without a proper estate plan, the assets you have accumulated over a lifetime may be decimated by costs and taxes and the business you worked so hard to build could be lost.

Proper estate planning doesn’t have to be overly complicated or expensive, but must:

• Maximise the assets in the estate, including business assets, 

• Reduce estate costs and taxes, and 

• Streamline the process of winding up your estate. 

For business owners, a well-conceived estate plan will include consideration for the owner’s specific intent, for example, that the business continues to provide income as an ongoing concern; or becomes a source of capital for the surviving family. This may involve handing over to the next generation, or an employee, or an outside buyer. A business might be sold to family or staff, and this often requires special planning, for example, staggered payments or a slower transition where the cash is not available upfront. 

If you have business partners, a buy-and-sell agreement should be drafted in advance and measures put in place to ensure co-shareholders are financially able to take over your share of the business when you pass away, and vice versa. A shareholder’s agreement is also necessary to deal with potential conflict and shareholders selling their shares.

Provide liquidity   

To protect your family from financial distress, it is essential to provide money for ongoing financial needs during the lengthy winding up of the estate. 

As soon as the bank learns of your death, all your bank accounts will be frozen. Pensions and insurance policies will take time to pay out, and your assets will generally be tied up in the estate, inaccessible to your loved ones. This means you need to find other ways to provide your family with immediate funds to live on after you pass on. 

Separate bank accounts and investments, businesses held in entities unaffected by your death, and family trusts are some options, while nominating beneficiaries for life policies, annuities and tax-free investments can ensure payout directly to the chosen recipients. 

In addition, your family will need funds to cover significant ‘final expenses’ such as existing debts, medical bills and funeral costs, income taxes and capital gains taxes, estate duties and executor fees. 

Similarly, if you have a business, you may need to provide operating capital or liquidity through, for example, key person insurance, life insurance for partners and contingency policies. 

If there isn’t enough money in the estate to meet the various costs and taxes of winding it up, heirs will have to use their own funds or the executor will have to sell an asset, such as the family home or the business, to cover the liabilities. 

Create an “Important Information” file

All the relevant parties will require documents and information to settle your affairs quickly and easily. 

Create a file for your loved ones that contains all the information they might need, for example, details of funds they can access while the estate is being wound up; the location of your will and important documents such IDs, passports, and power of attorney; bank account numbers, card numbers and PIN numbers; and details and passwords for devices, apps and social media accounts. 

The executor will also require a file of documents and details, for all assets, all income and all accounts, insurance policies, loans, agreements, business assets and interests, as well as personal documents, along with the required access codes, PINs and passwords. 

Business owners will also have to prepare and keep updated documents such as statutory documents; the succession plan; a power of attorney so business affairs can be taken care of by a nominated person; and professionally drafted buy-sell agreements for partnerships or where there is more than one owner. 

Taking these six steps without delay will ensure you have structured a full estate plan that will protect those you care about from unnecessary uncertainty, worry and risk, at the time they most need your protection.

“What gets measured, gets managed.”

Peter Drucker 

Financial reports, such as a balance sheet, income statement, cash flow statement, debtors reports and actual spend vs budget reports, provide an understanding of where your business stands financially at a certain point in time. They detail the business’s financial performance over a period and also raise red flags, reveal opportunities and highlight changes that need to be made to meet business goals in the future.

Especially in trying and uncertain times like these, keeping a finger on the pulse of the organisation’s financial position and regularly reviewing its financial performance provides a range of benefits. 

What the right financial reports reveal

• The financial position of the business – past and present – provide invaluable insights for informed decisions about the future, for example, forecasting future cash flow requirements or identifying financing needs timeously.

• Business financial performance can be assessed and analysed with the right reports, for example, evaluating marketing efforts or projecting inventory needs, which allow for improvements to be implemented and tracked.

• Important indicators of financial health – such as liquidity ratios, efficiency ratios, profitability ratios and solvency ratios – can be calculated based on accurate and timeous reports. 

• How to better manage costs – costs that are unnecessary, duplicated, over budget, or rapidly increasing are often only managed, reduced or eliminated once categorised and identified in the financial reports. 

• Trends – financial reports provide a means to compare financial trends in the business from one reporting period to another, as well as to benchmark company trends against industry trends.

• Where the opportunities are – financial reports reveal opportunities and are essential to review before making big spending decisions or considering ways to grow the business. For example, financial reports may reveal where outsourcing or automation are viable options, or where changes to employment structures, operating systems or processes are required; or where there are opportunities to grow and expand into new locations or product lines.

• Tax liabilities, challenges and deductions – reviewing financial reports can help manage ongoing tax liabilities, flag potential tax challenges, and reveal possible tax deductions. 

• Financial irregularities or risks – regularly reviewing financial reports ensures that potential areas of concern regarding irregularities, risks or even fraud are picked up timeously and can be quickly addressed.

• Viability for third parties – financial institutions, creditors and potential investors will request financial reports to consider credit lines, loans or investments in the company. 

The 5 financial reports to understand

To enjoy these business benefits, there are five financial reports to understand – and review regularly – at least on a quarterly basis, but ideally on a monthly basis. This will provide a finger on the business’s financial pulse and enable more accurate and relevant business decisions.

1. Profit and loss (P&L) statement

The profit and loss statement, also called an income statement, summarises the profit or loss over a certain period by reporting on three components: 

• total income (or the total sales less costs of goods sold);
  
• total expenses including operating costs, taxes, utilities, insurance and interest on loans; and

• net profit or loss, calculated as total income less total expenses.

This report reveals whether the business made a profit or a loss during the specific period, and also allows the calculation of profit margins, operating profit margins and operating ratios. This allows profitability to be evaluated and enables investors or creditors to assess the level of risk in the business.

To be profitable, the income in the business should exceed the expenses. However, companies may show a net loss at times, and the reason should be evident in the reports, for example, slow business periods or times when extraordinary expenses are covered. Where the net profit is continuously lower over more than one period or expenses regularly exceed income, these may be red flags of financial trouble. 

2. Balance sheet

A balance sheet provides a summary of the company’s financial position at a specific point in time by summarising total assets and total liabilities, as well as shareholders’ equity, or investments and retained earnings. 

The assets, or what the business owns, can include cash and investments, equipment and property, stock and accounts receivable. Liabilities, or what the business owes, include loans, accounts payable, wages, rent, taxes and utilities. 

It is used to calculate factors such as the current ratio of assets to liabilities, a measure of a company’s liquidity or ability to pay short-term liabilities. This is a particularly crucial consideration when borrowing money from a financial institution or requesting credit from a supplier. A declining current ratio could also indicate financial problems. 

3. Cash flow statement

A steady cash flow is one of the most crucial success factors for business, especially smaller business, and this makes regularly reviewing the business’s cash flow statement vitally important. 

Summarising the expected cash inflows and outflows over a period, the purpose of this statement is to reveal which areas of the business are generating and using the most cash; enable informed budgeting and spending decisions; as well as to allow potential cash flow problems to be identified and managed in time. 

A cash flow statement will also show how readily a company can meet its debt and interest payments; and how much money was distributed to owners or investors as dividends.

4. Debtors’ reports

Cash flow problems are often a result of poor management of debtors. An aged debtor’s report enables current and overdue invoices to be tracked and proactively managed to ensure payment is received on time. Lenders and investors will also look at this report to better understand a company’s creditworthiness.

5. Budget vs actual income and expense reports

Comparing actual revenue/sales against the budgeted figures for a period indicates how well or otherwise the business is trading.

These reports allow a comparison of actual spending as recorded primarily in the income statement, against the amounts budgeted for the period, to assess how well spending matches financial forecasting projections and where there are areas that are over or under budget.

The percentage of costs of goods sold to sales for a period indicates how sales pricing and control over the costs of goods sold are being managed.

Speak to your accountant about accessing these reports on a regular basis and for professional assistance in understanding what the reports reveal about your business. Regularly reviewing your company’s financial reports will unlock many business benefits, provide a finger on the financial pulse of your business and enable more accurate and relevant business decisions. 

“If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business.”

Lee Kuan Yew, Former Prime Minister of Singapore

Launching a business requires the small business owner to wear many hats. From marketing, to accounting and HR the small business owner needs to learn any number of skills to get their venture off the ground. Eventually though there comes a point where doing everything yourself as owner is hurting the company more than helping it and knowing when to bring help on board can be the difference between success and failure.

If you aren’t quite ready to hire employees or if you just need a few hours of help a week as opposed to full time, outsourcing work can become the solution you are looking for. With many professionals working freelance it is easier now than it has ever been to find the right people to pick up the slack and give you a few extra hours in your day to focus on the core of your business.

When is it time to outsource?

Knowing when to outsource is critical. Bringing people on board at the right time can free up hours a week and give you the opportunity to win new clients or refine your product offering. So what are the signs you should be considering outsourcing?

1. You find you don’t have time to do all the work

Having plenty of work is a blessing but having too much can mean repeated late nights or missed deadlines. Making sure you keep on delivering at your best means you can’t afford to be tired, rushing jobs or worse, simply turning work away. If this is a problem that’s happening every month then it’s definitely time to consider bringing someone on board.

2. You want to turn away new work

Turning away work is always a bad idea. Once turned away those clients may never come back whereas getting what they need done could build additional income for life. Whether it’s simply helping them with your core services or taking on new growth areas for your company, always rather outsource some of the work and make sure you can make it work for these new customers.

3. You get hired for irregular or once off projects

If you find the work is regularly outstripping your capabilities and capacity it might be time to bring on permanent employees, but when your business is getting once-off projects or work that will only last a short while it can be much safer to outsource work to freelancers or agencies. This way you can meet your needs for those projects and not worry about paying people in the months where you don’t have as much work.

4. There are tasks you hate doing

You may be surprised to see this on the list, after all surely you have become used to telling yourself to get over it and just plough through? The truth is, work you hate is work you are likely doing badly. Save yourself the time and the pain of doing a bad job by giving it to someone who specialises in that field and is going to get it done well.

The best jobs to outsource

Outsourcing doesn’t just refer to those jobs that are directly related to your business. Sometimes it can actually help you to hire a domestic, an au pair or a personal assistant at home to free up a few more hours you can dedicate to the business. Outsourcing business functions though is much more likely to be the right choice when it comes to getting yourself some valuable time as these jobs can generally be trickier, better done by professionals and may, in fact, lead to long term growth of your business as well as simply giving you some breathing room.

1. Accounting, bookkeeping and payroll

For those unused to finance, tracking income and expenditure, invoicing clients and filing tax returns can be extremely time consuming. Given that you are running a small business it might be cost-effective to outsource bookkeeping and payroll because you can then pay a set amount that changes as the company grows, rather than paying an employee full time and having the hours vary. This bookkeeper can also be in charge of extra tasks such as document scanning to help keep your receipts and bank statements in order. 

At the end of the year handing your taxes over to an accountant is invaluable. Not only will it take an important task off your plate but can often get you a percentage of that spend back in tax savings. Outsourcing some decision-making to an accountant may help as well, as they will be able to run the numbers and advise on whether a new venture, expansion or client is viable. They can also help you work out whether outsourcing or bringing someone in-house is the right solution for you.

2. Human Resources

Human Resources isn’t quite as simple as hiring and firing. There are so many rules and regulations involved in the running of good HR, not to mention submission of PAYE, UIF, pension contributions and returns etc., that doing it yourself may end in bitter acrimony and high costs. 

Hiring a company that specializes in human resources laws and regulations will not only help you stay compliant and up to date but can also streamline the onboarding process of new employees and the hiring process in general. A good HR company or freelancer will additionally handle details such as retirement plans, group health insurance, and other benefits that you offer, saving a huge amount of effort and time.

3. Marketing and content creation

Almost everyone believes they can write well enough for a website, blog or LinkedIn update, but there is a lot more that goes into these things than simply filling a page. With SEO, and content tailored for the outlet it’s being used on, creating content can be a time-consuming job for those who aren’t experts. Developing strategy and deploying it correctly takes a professional and handing this task over to an outsourced freelancer will often pay for itself in the success of your digital marketing. 

This is all also true for PR and other marketing. It may seem simple to send off an email detailing your recent projects and successes, but professional PR people will ensure it’s read by the right people. With a PR professional you aren’t hiring a writer, you are hiring a network of important contacts. 

Finally, no business can succeed without advertising and bringing marketing people on board will be essential if you don’t want your extremely useful product or service to vanish unnoticed by the public. The good news is that provided you hire the right people, what you spend on advertising will almost certainly come walking back through your door at a later stage in the form of customers. 

4. Graphic design and presentation construction

Your last job required you to put together a few PowerPoints so now you sit and laboriously put together your pitches and presentations yourself. The truth is, unless you’re a skilled designer yourself, your digital presentations could definitely use a boost, so instead of wasting your time on PowerPoint animations and choosing fonts rather spend a little money to make your pitch look extra good and use the time you’ve just saved to rehearse your presentation.

Is outsourcing “the future of work”?

Outsourcing is increasingly being touted as “the future of work”, and certainly the truth is that it is here to stay. Those who refuse to put the work they can’t do perfectly out to the new wave of freelancers and outsourcing agencies are ultimately only hurting their business. 

Of course, the ultimate question is whether outsourcing makes commercial sense for your business, given your particular financial situation and business structure. Chat to your us at Emma Pardoe Chartered Accountant (SA) to see where it may be right for you.

“Since the unemployment rate in the Republic is of concern to Government; and since Government recognises the need to All company bosses want a policy on corporate social responsibility. The positive effect is hard to quantify, but the negative consequences of a disaster are enormous”

English economist and academic, Noreena Hertz

Stimulating the SME sector is considered as one of the quicker ways to rejuvenating the economy. According to a 2020 survey by McKinsey & Company, SMEs make up over 98% of South African businesses, and employ between 50% and 60% of the workforce. 

However, it takes money to run a business and there is a need for assisting and guiding SME owners to secure more funding, particularly given the devastating impact of the Covid-19 pandemic over the past two years. 

There are varying reasons why these small businesses need additional capital, determined by differing requirements in the business value chain – including the scope of production, workforce and the nature of the business, among other factors. 

Some – but not all – of the funds available in the market are allocated according to specific trades, departments in the production process and demographics of the directorship – usually according to age, race, location and gender. 

Here are some examples of the grants and funds available, along with a brief overview of the funding models

• Equipment related financial support. The Department of Trade and Industry’s (DTI) Small Enterprise Development Agency (SEDA) Technology Program, provides both “financial and non-financial technology support” – meaning either funds or equipment support for small enterprises.

• Staff training. The DTI’s Black Business Supplier Development Program offers grants in a cost-sharing scheme to black-owned businesses for the purpose of business skills training. 

• Female directors can take advantage of gender-empowerment funding programs like the Business Partners Women in Business Fund, which is aimed at increasing access to finance for female entrepreneurs for them to start, expand or purchase existing businesses. 

• A more narrowed down version of this model of funding is the I’M IN Accelerator Fund, which is for black South African women who have founded technology start-ups. They can apply to be part of this 10-month long acceleration program and possibly access up to R1,5 million in pre-seed capital, mentorship, marketing support and follow-on investment. The business has to be 51% black- and-women owned to qualify. 

• The National Empowerment Fund (NEF) is a black economic empowered driver and funds businesses with a black majority ownership. 

• The DTI funding model is usually segmented according to factors like industry, marketing channels and/or the age of the directorship. However, qualifying small businesses can currently obtain the following loans and grants:

• The Export Marketing and Investment Assistance Scheme (EMIA) is designed to support the export market and stimulate new foreign direct investment into South Africa. This is closely linked to the Sector Specific Assistance Scheme (SSAS), which is a repayable cost-sharing grant that supports stakeholders in the export market for South African goods. This scheme comprises three sub-programs, namely: Generic Funding, Project Funding, and Project Funding for the Emerging Exporters. 
• The Umsobomvu Youth Fund: A Government initiative aimed at creating opportunities for South African youth in entrepreneurship and job creation, helping youth setup, expand and develop their businesses by teaching them essential business skills. Umsobomvu is a Voucher Program not a loan program. The Voucher Program provides support services to both new and existing youth owned businesses

• The Agro-Processing Support Scheme (APSS) is a R1-billion cost-sharing grant fund aimed at boosting SME investments in the agricultural space. Minimum qualifying investment size, including competitiveness improvement cost, will be at least R1 million.

• The Aquaculture Development and Enhancement Program (ADEP) is a cost-sharing incentive program for projects in primary, secondary and ancillary aquaculture (activities in both marine and freshwater).

• The Support Program for Industrial Innovation (SPII) is aimed at funding the innovation and development of technological products in South Africa.

• R&D Tax Incentive is supported by the Treasury and offers a deduction of 150 percent in respect of expenditure on eligible scientific or technological Research and Development (R&D) undertaken by companies in South Africa. In his 2022 Budget Speech, the Minister of Finance announced that the R&D Incentive is under review but that it will be extended in its current form until 31 December 2023.

• The De Beers Fund: At a more localised level, a large diamond mining company also awards grants, for small businesses located in its operating areas. These areas are Kimberley and surrounding areas in the Northern Cape, Viljoenskroon and surrounding areas in the Free State, Musina, as well as the Blouberg Local Municipalities in Limpopo.

• Tshikululu Social Investments: Tshikululu is South Africa’s leading social investment fund manager and advisor, working alongside investors and other development partners to achieve sustainable social impact. The organisation manages other companies’ CSI funds.

Over the years, the organisation has managed the likes of the De Beers Fund, Rand Merchant Bank Fund, among others. 

• SA SME Fund:  Established by members of the CEO Initiative as a collaboration between government, labour and business to address some of the most pressing challenges to the country’s economic growth – as an avenue of support for the SME sector. The SA SME Fund invests in repayable funds that support and develop entrepreneurs, typically with an enterprise value of less than a R100m.

• Financiers: These are licensed lenders with their own products and terms of trading, being that they are private entities. However, the terms have to be agreeable with trade regulations, including Fair Practice – which protects the borrower’s interests.

If you need an urgent loan, private financiers might be an alternative to the grants and cost-sharing schemes mentioned above. There are several types of loans that small business owners can apply for, depending on the individual needs of their businesses. The following are the repayable financing products available to SMEs:

• Purchase order finance is used by a business to complete an existing order.

• Working capital finance is an option that can boost a small business with much needed cash flow.

• Bridging finance is a short-term loan that can be used by small businesses to finance their working capital. An example of this is Lula-lend, which positions itself as a good option if your business requires a loan provider and you need urgent funds of between R10 000 and R5 000 000. The company can have the funds in your account within days and repayment is over 3-12 months. 

• Credit cards can be handy for entrepreneurs; however, they require discipline as their interest charges and repayment rates are normally higher.

• Inventory loans can help your small business keep enough stock in the inventory. It is more suitable for small businesses with tangible products to sell. 

Because of the varying types of funds, SME owners are encouraged to consult with financial advisers in order to make the right decisions for their individual businesses’ needs, the amount required and the right funding model.

Don’t miss out, ask for professional advice about grants and take advantage of the opportunities they afford small businesses.

“Out of clutter, find simplicity. From discord, find harmony. In the middle of difficulty lies opportunity.”

Albert Einstein

To many people the idea of working from home can seem like a dream. Just avoiding the daily commute makes it worthwhile for many, but add in the benefits that arise from being present for your family, and being able to work the hours that suit you, and suddenly it’s an extremely attractive proposition. 

While it definitely does depend on the individual, working from home can present a number of new challenges when it comes to getting work done. Laundry is building up, the home needs cleaning from the weekend, and your TV and fridge are also always on hand. 

Luckily there are some small changes anyone can make to ensure their home office is at least as good as a corporate office for concentration, and potentially even better for productivity.

1. A dedicated workspace

While not everyone has the ability to turn one room of the house into an office, it is wise to try and create a dedicated workspace for when you are “at the office”. Even just pushing a desk into the corner of your lounge and working from there will put you in the right state-of-mind for getting your business done, and at the end of the day you can log off and go back to your family life. Sitting in bed to work may be fun for one day, but long term blurring of the lines between the spaces for work and those for play can mean you can never really get away from your job.

For the same reason it may be wise to have a “work computer” and one for social media and recreation. Use the work computer the same way you would the one at any corporate office. When you turn it on there will be no non-work apps to distract you, and you should immediately be able to get into a work state of mind.

Ideally your work desk should face out a window, or failing that, towards a wall so you aren’t constantly looking at the distracting build-up of dishes, or the temptation of the television. Put up some work-related art, keep the table organised and you will find that when you sit down you are already thinking of working.

2. Noise is a distraction too

It’s not just visual things that can be distracting. The noises of a home can also take you out of that important work mindset. If you live alone this will be a lot easier, but if you have a family around, their activities can break your train of thought as easily as if they were tugging on your shoulder.

You don’t need to go overboard but finding ways to mute the external noises will help you to concentrate. Consider changing your office door from a hollow one to a solid wood one. Adding weather-stripping or a door sweep along the bottom of the door can also cut down on the amount of sound pollution that seeps in. If you use a corner of a common room for your office, consider investing in a pair of noise-cancelling headphones to ensure your thoughts remain entirely undisturbed.

3. Get an office chair

By now you will no doubt have spent a day working from a dining room chair, or on a couch and will know that this is not an effective way to do it. There is a reason offices splash out on their chairs. Dining room chairs are intended for short stays whereas an adjustable office chair will enable you to set your ideal height and maintain good posture throughout a full workday. No one’s watching to see whether you’re sitting up or slumping, but your back will let you know if there’s been any cop-out. 

Giving yourself a sore back or painful legs is a great way to ensure you get no work done, so apart from getting a good chair, make sure you take scheduled breaks away from your computer. Be sure to look away from the screen every 20 minutes and don’t be afraid to get up and walk around the house from time to time. A study conducted a few years ago by DeskTime indicated that the most productive interval was 52 minutes of work interrupted by 17 minutes of break. Just don’t allow yourself to get caught up in home chores.

4. Keep it tidy

A cluttered desk may make you look busy, but it isn’t doing you any favours when it comes to focus. You might be surprised by just how much paper can build up doing an average job and often this is something you need to keep under control. Getting decent paper storage is therefore an important thing to consider when building a distraction-free office. 

If your job is particularly paper-heavy you may want to invest in a filing cabinet, but for most a couple of desk drawers or shelves should be fine. Set aside a designated place for incoming mail or work on the to-do list, another for projects in process, and a third storage area for completed projects or paid bills. Organising your computer files in a similar way, to keep upcoming work and work in progress in a designated accessible area and finished projects stowed away in a cloud database, may help you stay on top of the jobs you need to do.

5. Be Work Ready

When you sit down to work you want to be able to do just that. In order to make sure you will be at your most efficient your workspace needs to be work-ready. You don’t want to have to interrupt your flow with a trip to the shops to get printer paper for example. Invest in your workspace so that it’s the same as you would find in any corporate building. 

Make sure you have the stationery and things you need to get the job done, and this includes having a good internet connection. How easy is it to get to your router if you need to reset something? Do you have enough bandwidth for online meetings? What is behind your desk? What will your colleagues and clients see when they get you on camera?

Have everything on hand that you need, and make sure it’s up to date and in working order, because trying to make things work with the wrong equipment, or dealing with problematic old technology, are real distractions. As an added benefit, the investments you make in your home office, and the equipment you use, may be tax deductible (but there are many factors at play here so professional advice is essential before you claim!).

6. Have a plan for your family and pets

Children and pets are probably going to be the biggest distractions to your day, so make a plan to ensure neither interrupt you. Children must understand that while you are working only emergencies are worth interruptions. 

Pets may be a little simpler – replace their squeaky play toys with chew sticks, and move their beds close to you so they feel comfortable lying quietly with you even though you aren’t being attentive. Good luck by the way with persuading your cat not to sit on your keyboard – this  article may help but all bets are off!

Make sure you plan to take time out to spend with both the children and your pets, so they know that you are not ignoring them, just busy when you are at your desk. Taking your dog on a lunchtime walk, or playing with your children for an hour on a sleepy summer’s afternoon can really invigorate you for the rest of the day, and are the absolute perks of working from home as well. You might as well enjoy it.

“Employees are the key to your success… Treat them well!”

Ron Kaufman

The death of an employee can be a difficult situation in any company, but particularly so in smaller businesses where employees work more closely together and often consider each other more than just co-workers. 

In addition to handling the emotional aspect of such an event, companies must also keep the business running and take care of various compliance and tax issues. 

Here are seven crucial issues to address swiftly after the death of an employee. 

1. Contact with the employee’s family 

Obtain the name and contact details of a person from the deceased’s family with whom the company can communicate about a range of matters, including funeral details, collecting company property such as keys, equipment, (company cars, computers and the like) and credit cards, finalising employee benefits procedures, and the return of the deceased’s personal belongings.

It is also helpful to have the details of the executor of the deceased employee’s estate, who is also the ‘representative taxpayer’ for the deceased and responsible for finalising the deceased’s financial and tax affairs.  

2. Inform employees and establish internal processes

Notify other employees with respect, tact and care, providing as much information as possible. Nominate a company representative to answer employees’ questions; to accept flowers, communications and donations on behalf of the deceased’s family; and to make appropriate plans for memorials, tributes or gestures.

Realise that some people are better able to deal with such an event than others. Encourage employees to seek the help of lay therapists or religious advisors, and to provide mutual support to each other. Also consider arranging grief counselling and providing time off as needed, as well as for attending the funeral, preferably on a paid basis.

3. Keep the business running

Update business roles and functions and reassign space and equipment to reflect the employee’s death in a respectful and compassionate manner. 

To minimise disruption to the business, assign the deceased’s tasks, functions and responsibilities to other team members, and redirect phone, voicemail, email and mail communications as soon as possible. Collect company property and address security issues as per the company’s established termination procedures. 

Inform clients, suppliers and other stakeholders who are affected of the change, while beginning the process of finding a suitable replacement. 

Compensate for those employees who find it difficult to focus or make more mistakes, especially where this presents a safety issue, for example, in manufacturing or production environments.  

4. Calculate the final remuneration and benefits

In calculating the deceased employee’s final renumeration, the normal procedures for terminating employment must be followed: all hours worked until the date of death must be compensated, any outstanding leave must be paid out and, if the employee had any savings or loans with the company, these need to be finalised. Depending on the circumstances, payment will be made to the executor of the deceased estate, to the family or to a beneficiary.

At the same time, finalise employment benefits, such as medical aid and pension or provident fund membership, ensuring that all compliance issues are promptly attended to, so the family does not experience delays caused by the company when claiming benefits. 

5. Take care of tax issues

Whether the deceased was registered with SARS or not, and whether there is estate duty payable or not, SARS must be notified of the death of the person. This must be done by the executor of the deceased employee’s estate or by a tax practitioner acting on behalf of the deceased or the company. 

The employer must provide the executor acting as the representative taxpayer of the deceased employee with the employees’ tax certificate within 14 days after the employee passed away. The provisions that state that employees’ tax certificates may not be delivered until the EMP501 reconciliation has been submitted does not apply.

Once the deceased employee has been coded as such by SARS, all outstanding tax returns should be submitted up to the date of death by the executor of the deceased’s estate. This applies to all tax types – income tax, VAT, PAYE, SDL, UIF and estate duty. As soon as all the tax liabilities have been paid in full, a Deceased Estate Compliance (DEC) letter is issued for all taxes except estate duty and an ED clearance letter for estate duty. Any refund due will only be released if all other taxes are up to date, all accounts have zero balances and all outstanding returns have been submitted and processed.

6. Take care of UIF matters

Following the death of an employee who contributed to the Unemployment Insurance Fund (UIF), the dependants – a spouse or life partner, children under the age of 21 or a guardian of dependent children – can claim benefits from the UIF. The death benefit is the amount that the employee could have claimed if he/she was unemployed and it is paid out in one payment.

The dependants must apply within six months of the date of death by going to a Labour Centre to complete and submit Form UF126 (for a spouse or life partner) or Form UF127 (for a child). 

The dependants will also need the following from the deceased’s employer: 

• Copies of the deceased’s last six payslips; 

• The employer’s details on form UI19; and

• A service certificate from the employer. 

They will then receive another document, Form UF128, which needs to be filled in by the deceased’s last employer and then submitted at the Labour Centre. 

7. Take care of Compensation Fund issues

The surviving spouse or dependants of a deceased employee may be able to claim from the Compensation Fund if the employee died while working or as a result of a work-related accident, injury or disease. The Compensation Fund covers most employees.

By law, anyone who employs one or more part- or full-time workers must register with the Compensation Fund and pay annual assessment fees, based on the employee’s earnings and the risks of the type of work. Workmen’s compensation is a no-fault system, which means there is no need to prove that an employer was at fault. The compensation awarded does not form part of the deceased employee’s estate and can also not be attached to satisfy a debt. 

Assisting the deceased’s family in these matters reflects well on the reputation on the company/employer.

“At the heart of the strategy is a strong belief…that systemic problems require systemic solutions” 

MIT Sloan associate deans, Fiona Muray and Ray Reagans

Businesses usually spend the last quarter of the year reflecting on how they have done and using the lessons learned in planning for the year ahead, while also keeping a keen eye on government’s financial plans as revealed in the budget – which will be tabled this month.

The 2021 calendar year has been tougher on the private sector than any other time in memory due to the global pandemic. A study by Wits University on accounting and governance in the context of covid-19  suggests that the danger of the covid-19 pandemic and resultant restrictions on businesses is the knock-on effects and  the negative impact in the short-to-medium term and short-to-long term, rather than the immediate impact.

The knock from 2020, when the pandemic was first declared, was apparent in the first half of 2021 – with record breaking rates in demand for capital and liquidations.

So how did the businesses who made it through 2021 do it?

1. Proactive accounting and governance

Good quality accounting and governance with qualified finance professionals helped these companies navigate through the storm. Particularly in addressing the necessary extra expenses involved in setting up remote working and communication systems and equipment for their staff and even, in some situations, the costs of Personal Protective Equipment.

2. Loans 

The South African Reserve Bank reported that “Year-on-year growth in total loans and advances extended by monetary institutions to the domestic private sector accelerated slightly between March and October 2021, after slowing markedly since the onset of the national lockdown. The gradual lifting of lockdown restrictions boosted the demand for loans by companies in particular, although growth remained subdued.”

3. Good saving habits

Reducing spending on anything but necessities was essential during the pandemic, and it is interesting to note that South African saving trends were at an 11-year high by the end of the Second Quarter of 2021. This was amid fears of an uncertain future due to the ongoing covid-19 pandemic and the rate remained high towards the end of last year. The South African Reserve Bank said that the high rate was driven up by higher savings by companies and households.

4. Embracing digital 

Businesses that survived and even, in some circumstances, flourished during the global slowdown, used the opportunity as a means to be innovative and embrace digital, and where appropriate and possible, they developed or expanded their online offerings. This included keeping their essential staff busy by investing in systems to enable them to work remotely.

The CEO of IBM, Arvind Krishna famously said, “When we look at the usage of AI and cloud, I think it is especially going to accelerate also not just us, but how our clients are going to go on their digital transformations. And I believe this crisis is only going to accelerate that as we go over the next few months.”

Ask a professional for tips on how to use these lessons effectively as the pandemic continues.

“Any remedy is going to depend on having financial statements that are reliable”

Tom Foley

On the last day of February each year, many companies face their end of financial year or “EOFY”.  Whether it’s referred to as the EOFY, Close of the Financial Period, Financial Year End or FYE, or simply ‘Year End’, this important time is just around the corner for many companies on the 28^th of February. It is often a stressful time as the financial loose ends from the last 12 months are tied up, various reports and registers are produced, crucial decisions are made, and the accounts for the last year are closed off. All necessary to present an accurate and up-to-date overview of the financial performance over the period, enabling proactive tax planning, ensuring audit-readiness and providing key information for business owners to strategise for the future, plan, structure, invest and grow. 

Why a specified financial year end? 

The financial year of a company is its annual accounting period and can be any 12-month period the company uses for accounting purposes. 

A financial year is a legal requirement. The Companies Act stipulates that a company must have a financial year, with a start and end date. The financial year end date must be set out in the Company’s Notice of Incorporation.

For many companies this date is the end of February each year, although some companies have a financial year end on a different date. A company can change its financial year end by filing a notice of change with the Companies and Intellectual Property Commission (CIPC).  

Why is a financial year end so important?

A company’s financial year is not only a statutory requirement, but also – crucially – the period on which its tax liability is assessed. It also determines when the tax payments are due. 

Annual income tax returns must be submitted within one year from the end of the company’s tax year. Payments are made with provisional returns filed at six-month intervals from the tax year end based on an estimate of taxable income for the year. 

Interest is charged on any underpayment outstanding for more than six months after the tax year end, except in the case of February year ends, in which case it is seven months. Any balance with interest is then paid following assessment.

Furthermore, the company’s financial year also determines when the annual financial statements are due. These annual financial statements are used for compliance purposes, as well as by investors and other stakeholders, such as banks and other creditors, to understand business operations and to assess a company’s performance.  

But perhaps most importantly, financial year end is the crucial time for business owners and managers to thoroughly analyse business performance and make important decisions. This is made possible by an accurate and timely financial year end that produces accurate and reliable financial statements. 

So how can your company best prepare for the looming financial year end?

Tips for financial year end success

• Identify the important deadlines and the activities that must be completed by each date, such as data processing and reporting deadlines, the tax return and payment dates, and the annual financial statements submission dates. 

• The difference between a successful year end close and a stressful one is accurately managing the accounts all year, keeping the bookkeeping up-to-date and correctly and timeously completing each month-end. 

• During year end closing, accounts must be checked carefully for discrepancies, omissions and human errors as these can be costly in consequences. Every rand must be accounted for and all supporting documentation available for a possible tax audit. 

• Thorough and accurate inventory checks to determine stock levels, consumables and assets on hand will produce up-to-date asset registers for accurate balance sheets, and that will inform asset purchase decisions, depreciation expense claims and capital gains tax calculations. 

• Current accounts payable reports will allow accurate budgeting for accounts to be settled before financial year end; while up-to-date accounts receivable reports allow payments to be chased and income due to be collected within the current financial year. 

• Tax planning involves structuring the company’s finances to ensure the company pays only the tax that is legally required to be paid. This might involve accelerating transactions into the current year or delaying transactions into the next financial year to better manage tax liabilities. For example, a company might make asset purchases, pay annual subscriptions earlier, make donations before year end, delay issuing invoices where permissible, or consider writing off debtors or assets before the year end. Any such measures must be lawful, consistent in application and able to pass a possible tax audit, so professional advice is essential. 

• There are tax changes each year and these could include new or amended deductions or concessions for small business, so be sure to speak to your accounting and tax advisor to ensure all possible tax breaks are considered before finalising the financial statements. 

• Backup and store business information – including registrations, financial information and customer data – in a secure off-site location. 

Reap the maximum benefits of an accurate and successful financial year end

An accurate and successful financial year end will produce reliable and timely financial records and reports that provide a holistic view of the financial health of the company, enable proactive tax planning, and ensure tax audit readiness. 

The annual financial reports detail the company’s assets and liabilities, profit and expenses, and cash flow. Reviewing annual financial statements will reveal if adjustments are required, such as more sales or fewer expenses, as well as where adjustments must be made and how much adjustment is required in the year(s) ahead. 

As such, financial statements are key tools for business owners to strategise for the future, plan, structure, invest and grow, and are often required by stakeholders such as banks and other creditors, potential investors and business partners to obtain an overview of the company’s financial performance and opportunities for growth and improvement. 

In addition, accurate and reliable annual financial statements produced over the years provide an essential record for any potential investor or buyer of the company in the future and also ensure the appropriate value of the entity from the owner’s perspective.

“At the heart of the strategy is a strong belief…that systemic problems require systemic solutions”

Fiona Muray and Ray Reagans, MIT Sloan associate deans

Businesses usually spend the last quarter of the year reflecting on how they have done and using the lessons learned in planning for the year ahead, while also keeping a keen eye on government’s financial plans as revealed in the budget – which will be tabled this month.

The 2021 calendar year has been tougher on the private sector than any other time in memory due to the global pandemic. A study by Wits University on accounting and governance in the context of covid-19  suggests that the danger of the covid-19 pandemic and resultant restrictions on businesses is the knock-on effects and  the negative impact in the short-to-medium term and short-to-long term, rather than the immediate impact.

The knock from 2020, when the pandemic was first declared, was apparent in the first half of 2021 – with record breaking rates in demand for capital and liquidations.

So how did the businesses who made it through 2021 do it?

1. Proactive accounting and governance

Good quality accounting and governance with qualified finance professionals helped these companies navigate through the storm. Particularly in addressing the necessary extra expenses involved in setting up remote working and communication systems and equipment for their staff and even, in some situations, the costs of Personal Protective Equipment.

2. Loans 

The South African Reserve Bank reported that “Year-on-year growth in total loans and advances extended by monetary institutions to the domestic private sector accelerated slightly between March and October 2021, after slowing markedly since the onset of the national lockdown. The gradual lifting of lockdown restrictions boosted the demand for loans by companies in particular, although growth remained subdued.”

3. Good saving habits

Reducing spending on anything but necessities was essential during the pandemic, and it is interesting to note that South African saving trends were at an 11-year high by the end of the Second Quarter of 2021. This was amid fears of an uncertain future due to the ongoing covid-19 pandemic and the rate remained high towards the end of last year. The South African Reserve Bank said that the high rate was driven up by higher savings by companies and households.

4. Embracing digital 

Businesses that survived and even, in some circumstances, flourished during the global slowdown, used the opportunity as a means to be innovative and embrace digital, and where appropriate and possible, they developed or expanded their online offerings. This included keeping their essential staff busy by investing in systems to enable them to work remotely.

The CEO of IBM, Arvind Krishna famously said, “When we look at the usage of AI and cloud, I think it is especially going to accelerate also not just us, but how our clients are going to go on their digital transformations. And I believe this crisis is only going to accelerate that as we go over the next few months.”

Ask a professional for tips on how to use these lessons effectively as the pandemic continues.

“The implied policy rate path of the Quarterly Projection Model indicates an increase of 25 basis points in the fourth quarter of 2021 and further increases in each quarter of 2022, 2023 and 2024.”

Lesetja Kganyago, SARB Governor

After cutting interest rates by 275 basis points to record lows in response to the economic crisis brought about by the COVID-19 lockdowns, the South African Reserve Bank (SARB) recently announced the first interest rate hike in three years. The vote was split 3-2, indicating conflicting sentiments within SARB as it looks to address inflation fears while supporting a recovery.

At its November 2021 Monetary Policy Committee (MPC) meeting, the SARB hiked its main repo rate from a record low of 3.50% by 25 basis points to 3.75%, citing growing concerns about upside inflation risks. 

The repo rate hike came earlier than many economists had expected, and certainly earlier than consumers and business had anticipated. 

It also signals a turn in the interest rate cycle, with further increases forecast by SARB for each quarter over the next three years. While such a normalisation in rates is to be expected, its early arrival and likely extent surprised many.

Some economists estimate hikes of 150 basis points over the next two years, with others expecting around 250 basis points within the next 18 months! It is generally expected that increases will continue until pre-pandemic levels are reached at around 6.5%.

Of course, when interest rates are changed, it has a ripple effect throughout the broader economy. This is because low rates make it more affordable to borrow money, which encourages consumer and business spending and investment, and can also boost asset prices. Rising interest rates have the opposite effect. 

It is important for business owners to understand how interest rate increases can affect and influence how their companies operate and perform, because of course businesses generally depend on a healthy economic environment to thrive. 

Smaller businesses in particular feel the effects of changing interest rates more keenly because they have lower cash reserves and are generally more vulnerable to economic shocks. 

However, if you understand the impact of interest rates on your business, you can adjust to interest rate changes to protect yourself from negative effects. 

Let’s start off then by analysing the possible impact of higher interest rates on your business –

What might the impact be on your business?

When interest rates are low, consumers tend to borrow more money, and also to spend more on products and services, because they have more disposable income.

As interest rates rise, consumers with debts ranging from home loans to vehicle finance to credit cards and personal loans will pay more interest to all those creditors. In South Africa, where the debt repayment to income ratio is as high as 66.7% (2021: Q2) when interest rates are at historic lows, interest rate increases can be problematic. 

An increase in interest rates typically impacts consumer spending habits negatively, because with their debt costs increasing across their credit lines, they have less disposable income to spend on products and services. 

The impact of a change in interest rates on customers varies from business to business. In a rising rate environment, consumer-driven businesses often see a reduction in sales. Companies that make luxury goods are hit hardest when interest rates rise because most customers first cut back on non-essentials when their disposable income decreases.

• The impact on your cash flow

• This impact on consumer spending and the resultant reduction in sales is likely to affect cash flow in businesses across the board as their customers simply have less to spend.

• In addition, just like consumers, nearly every business has outstanding loans, and when interest rates rise, those loans also become more expensive – both immediately and over the longer term.

• Typically, these loans are longer term debts that will take years to pay off, so any increase in the interest rate on those loans means carrying the debt for longer and paying far more.

• Higher credit costs will also impact a company’s cash flow, compounding the effect of reduced consumer spending. 

• What about your access to credit?

• Higher interest rates make it more difficult – and more expensive – to take out new loans to cover unexpected expenses or to fund the expansion of a business. 

• Higher loan repayments on existing debt will also reduce business profitability, which can make securing new loans even more difficult. 

• This can curtail the growth of a company for months or even years.

• The impact on your business planning

• Reduced sales, constrained cash flow, and the cost and difficulty of obtaining credit caused by rising interest rates must impact your business planning. 

• Of course, with changing interest rates it is more difficult to ascertain the cost of future borrowing and the cost of existing business loans on a variable rate, which makes it harder to plan your company’s finances. Nevertheless, the expertise of a professional can assist in adjusting your business planning. 

• In addition, projects which were viable during low-interest rate periods may no longer be viable due to the cost of – and constrained access to – loans, as well as reduced cashflow and consumer demand. Companies might decide not to start new projects or expansions during periods as interest rates rise, which hampers business growth.

How to buffer your business

• Consider the impact on your customers and how your business can offer more value for money as their disposal incomes tighten. 

• It is important to factor in the effect of interest rate increases on budgets and cashflow, both immediately and over the next three years.

• Review your business loans and other borrowing to ascertain affordability as interest rates increase using a business loan rate calculator. 

• Consider refinancing some of the business loans while interest rates are still low to help stabilise the debt load. 

• Consider locking in the lower interest rates now to ensure loans will cost less as the interest rates increase over the next three years. 

• Re-evaluate projects or expansions planned for the next few years and the impact of interest rates increases on the viability of these plans. 

“Success in a hybrid work environment requires employers to move beyond viewing remote or hybrid environments as a temporary or short term strategy and to treat it as an opportunity”

Vice President of Gartner, George Penn

The gradual transition from the conventional office environment to a remote, tech-savvy workforce has been topical in various industries for a while. However the pandemic has  accelerated acceptance of the reality of remote working.

The recent Digital Corporation in South Africa 2021 study, conducted by IT research organisation World Wide Worx with the support of Syspro, Dell Technologies, Intel and Cycan, looked into the hybrid work place model among enterprises in South Africa. It found that a third of respondent companies did not foresee their workforce returning to the office environment. 

The hybrid workplace is an operating model incorporating both remote and in-office working. This is made feasible by cloud computing together with collaborative tools such as direct messaging tools like WeChat, WhatsApp and Facebook Messenger, as well as task management tools like Asana, Google Workspace and Trello. 

The above-mentioned research also analysed the spending habits and investment trends of companies concerning hybrid environment technologies, among other things. 

Budgeting is a critical consideration in remote working. Cloud computing – an important aspect of hybrid working, is second only to business intelligence, which is software designed to retrieve, analyse and report data for business improvement, in terms of budgeting for specific technologies in South Africa, according to the report 

“Spending is surprisingly uniform across numerous operational categories, from computers and cyber-security to accounting and ecommerce,” says Arthur Goldstuck, CEO of World Wide Worx and principal analyst on the project.

Furthermore, remote working involves tax considerations for both employees and employers – an area best tackled only with professional advice.

For example, employers are often requested to issue letters confirming that employees performed their duties mainly in a home office and the difficulty is that the employer has to vouch that all requirements were met.

In general, the hybrid workforce debate is of particular interest to SMEs, particularly since they may be able repurpose the savings of reducing office space and overheads. 

The three pillars of a functional hybrid working model

The University of Cape Town’s Graduate School of Business lists the following pillars as vital to a functional hybrid working model:

1. Trust: This is the foundation of the employee-employer relationship. The working model requires both parties to actively work on making it a success.

2. Practicality: The nature of the business offering should determine the inner workings of the model and budget.

3. Organisational policy: Policy needs to complement the working environment. 

Take professional advice on how hybrid working can impact your business’ bottom line.

“Cloud is about how you do computing, not where you do computing”

Author and former CEO of tech company VMware, Paul Maritz

“Working in a cloud” favours companies of all sizes, specialising in different trades, and allows them to manage their work according to their own preferences of operations. The “cloud” is simply a server facility.

Smaller businesses looking to adopt cloud computing and digitalising their workload would need to make sure that all members involved in the value chain are properly connected to the internet at times they’d need to perform their duties. However, as South African small businesses become more reliant on the internet – the reality of the three “economic disablers” affecting this country creeps in from time-to-time. These are copper theft, load-shedding and poorer quality internet connectivity.

Small companies looking to adopt cloud computing should be aware of these shortcomings, which are a current reality in the South African economy, and plan around them.

There are digital solutions companies that provide and host cloud computing as a Business-to-Business offering (B2B), for example eNlight Cloud and AWS Cloud Services. However, there are also other software solutions and applications which companies frequently use that have capacity to host cloud computing services without extra charges. For example, Google Workspace gives multiple users the opportunity to work on documents, images, presentations, calendars, sheets and slides, among other things, remotely. All they need is to be granted access through a Gmail account, which is available to the public free of charge.

Working in a cloud has notable benefits, and these include…

• The availability of data in real-time, without the involvement of the originator of the file/data.
  
• Remote working, particularly during the Covid-19 pandemic where social distancing is advised.
  
• Businesses are able to save on expenses such as logistical costs.
  
• The time used to travel can rather be dedicated to work, which could increase productivity. 

The disadvantages associated with cloud computing on the other hand include…

• South Africa’s digital migration is limited by a lack of computer literacy as discussed here. This is predominantly among the older workforce. This is exacerbated by limited access to digital solutions, with only 52 percent of South Africans using phones and internet regularly, according to a report on the country’s digital divide published by the University of Cape Town.
  
• Read Huawei’s article on the lack of proper connectivity in Sub-Sahara Africa, which could disrupt operations/production. There is a low rate of access to the internet in South Africa in general, with only 37 percent of households having regular access to the internet according to the Mail & Guardian.
  
• There is an increased risk of sensitive information being accessed by unauthorised individuals. 

Don’t get left behind, take professional advice on how cloud computing can benefit your business and save you money on operating expenses.

“Almost overnight the internet has gone from a technical wonder to a business must”

Bill Schrader

No matter the size of your business or what industry you are in, building and maintaining an effective website should be at the heart of all your planning. The internet has become an essential part of everyday life and having a presence online is extremely important for anyone conducting business in 2021. According to a recent survey conducted by Weebly, 56% of the consumers surveyed said they don’t trust a business without a website. 

A website provides a business with numerous benefits, even those businesses who may not think this is the case. Websites expose businesses to a wider audience, provide leads to people already interested in your service, and help save on advertising costs, but only if they are done right. 

A website that exists, but that is unattractive, unhelpful or simply impossible to find will instead do damage to a brand. As a customer’s most likely first port of call for a business, it is essential it reflects the service and diligence put into all other aspects of the enterprise. Here’s how you make that happen.

1. Buy a good domain name

On the surface choosing a domain name may seem like a simple thing. Most people will immediately focus on their brand name and leave it at that, but what if your brand name doesn’t make it clear what you do or has already been taken by another company?

In the instances above it might be wise to reflect your industry in the domain name. If your travel company is called Bob’s, using the domain name BobsTravel tells potential customers more about what you do, and also gives you one key word that helps the client stumble upon you when searching for their new holiday.

Apart from the simple name it’s also important to remember to keep the domain name as short as possible to make it easier to remember. Those with fewer than 15 characters or 3 words have been shown to be easier for people to memorise. It is also important to avoid using numbers, hyphens, double letters, and special characters to avoid misspelling, which also applies to making the name easy to pronounce. The simpler it is, the more likely your clients will remember what to put into their browser.

2. Focus on the platform

Choosing which platform to build your website on is going to be critical to its success. The platform you choose will depend entirely upon the kind of website you are looking for. A simple business card style website might be built using online website builders, but as soon as you need anything more it would be wise to consult a professional web design company to ensure your needs are properly met. 

For starters the business owner will want to consider the platform’s ability to correctly display the website on a variety of new and old browsers. Having a website where some browsers are not supported is a good way to frustrate your potential clients.

Mobile responsiveness is also critical for a website to be effective. According to the most recent Media Nations Report by British regulator Ofcom, the average adult now spends five hours and 40 minutes looking at their phone every day. Needless to say, this means your business’ mobile website must offer a positive user experience so the platform you choose must integrate seamlessly with mobile browsers.  

According to Steve Grey, Creative Director of web design company Plastic Duck Armada, other things to consider include the platform’s ability to scale at a later date. Building a site that can easily be added to as your company grows allows you to upgrade for lower cost in the future. It doesn’t make sense to build a website that needs to be thrown away a year later simply because it won’t include a feature you now desperately need.

“Maintenance is something very few people consider,” says Grey who explains that as technology advances sites will need to be updated to keep up with the new developments in browsers and web searching technologies. 

“Is there a high cost involved in updating your platform? How easy is it? Can someone in-house be trained to do it? This is all going to have a long term impact on how much the site costs and how effectively it runs,” he explains. 

Likewise he says people should consider how easy it is to upload new information to the site. 

“Do you need a blog? Is that system intuitive? Can you update it regularly by yourself or do you need to now hire someone to do it?” asks Grey. 

The final thing to consider according to Grey is the plug-ins and themes which can alter the look of your site. If you want to update the appearance of the site in a few years, do you need to scrap everything and start again, or is it simply a matter of buying a new theme? 

“Ultimately this all comes down to cost and time. With a little forward planning and choosing the right platform you can actually save a lot of money,” says Grey.

3. Make it easy to find: SEO

Search Engine Optimisation (SEO) refers to practices that help your website appear and rank on search engines. This is one of the most important issues to consider when building your website as, according to WebFX, organic searches through search engines now drive more than 50 percent of all website traffic. As a comparison, paid search only drives 10 percent of site traffic, while social media takes credit for just five percent of website traffic.

Your ranking on Google is influenced by a number of factors, all of which must be considered when building a website. Perhaps the most surprising of these is the speed at which your website loads – no matter how good they are, websites filled with large images and videos are getting bumped down the rankings. Ensuring your site is enriched with meta descriptions, and that its tags, images and text are all reflective of your business and the industry will ensure it is found more easily by your potential clients.

Making sure these are optimised requires you to do keyword research on which words you should use to better help Google understand what it is you do, and therefore send the right people to your site. Correctly linking your pages and sharing your site map with Google and the other search engines, to put the site on the right searches.

4. Security is important

According to the Washington Post, global losses from cybercrime skyrocketed to nearly $1 trillion in 2020 and these losses are only growing each year. It is therefore vitally important to protect the integrity of your website and therefore your brand name.

This can be done by creating strong passwords that include random characters, capitals and numbers and are at least 15 characters long to avoid brute force attacks. Updating your site regularly will prevent hackers from exploiting weaknesses and bugs in the code, while running regular backups will allow you to quickly restore the site should it be hacked anyway. Anti-malware software will stop web scanning, DDoS attacks and remove any Malware, which does manage to infect the site. Finally installing SSL will encrypt data transferred between you and your users thereby preventing hackers from reading and exploiting it.  

5. Keep it easy to use

There is nothing more intimidating for a customer visiting a new site than non-intuitive, cluttered web pages. Keeping things open, clear and easy to read will reduce the pain points for customers, while also helping them to find what they are looking for.

The ideal website has five or fewer tabs at the top to navigate and each page should also offer a clear way to get back to the homepage, as often Google searches may take your reader to a page on your website other than the homepage. 

Limit the use of fonts, colours, and GIFs, which can distract and pull the eyes away from the focus of the webpage. Short paragraphs and bullet points also make the information easier to read.

The whole point of your website is to get people to contact your business or to buy something. It’s perhaps surprising then how difficult information can be to find. If your business depends on people being able to contact you or call your sales team, put that information where customers can find it easily. Don’t be afraid to put contact information where it can be found, even at the top of the homepage, so that visitors don’t have to search for a phone number or address if they want to contact your business.

Similarly, if the company uses social media to connect with customers, social media links should be in the website header or footer where they can be easily found.

On sites where ecommerce is an option, the average cart abandonment rate is a staggering 69.57%, meaning most users don’t complete their orders after setting products aside. The most common issues are all linked to complexity and a lack of information – unexpected extra costs, members-only checkout, and a lengthy checkout process. Keeping it simple is clearly the right choice in every circumstance.

6. Market your website

Marketing your website is going to be essential if you want to climb in the search rankings and increase the number of brand new clients it attracts. While social media and paid Google adverts are common ways to market sites it’s usually the more subtle things that climb a site up the rankings and ultimately affect profitability. There are numerous cheap and free tools on the internet that can help with getting the website in front of the people who need to see it as well as helping them once they are on the site. These include, Google My Business, HubSpot, BuzzSumo and MailChimp. 

While social media only accounts for 5% of all web site traffic it is an area that is completely in your hands as business owner. Using a good social media management tool and properly engaging with clients and followers is a great way to attract new business and owners should not ignore it. There are numerous cheap or free social media management tools to help put up the correct posts and monitor their success, such as Hootsuite, Sprout Social and Buffer.

Take professional advice on formulating your business plan with a website at its core, using these simple tips to ensure that it helps drive sales and boost profitability. 

“Mobile devices, high-speed data communication, and online commerce are creating expectations that convenient, secure, real-time payment and banking capabilities should be available whenever and wherever they are needed”

Chair of the Federal Reserve of the United States, Jerome Powell

South Africa is already a cash-heavy economy as it is and this reliance on cash is financially and socially costly for the economy. This cost alone is estimated at approximately R88 billion per year. This number is calculated by the Payments Association of South Africa (PASA) and is derived from consolidating the costs to consumers, businesses, banks and the SARB and is made up of both direct financial and indirect social costs. “The direct financial costs primarily relate to transactional fees incurred by end-users, the costs of printing cash, the supply of cash, and the maintenance of the expensive cash infrastructure (ATM’s, branches and cash centres). The social indirect costs relate to unnoticed factors like time wastage, investment opportunity lost, inflation, crime and others”, according to the Association.

“Fintech” solutions such as tap-to-pay, interbank instant deposits, eWallet, PayPal, Snapscan, Zapper continue to grow in popularity, primarily because of considerations around minimising exposure to Covid-19 and social distancing. 61% of respondents interviewed during the survey cited social distancing as a driver for digital commerce. 

General Manager at Business Partners Limited, Jeremy Lang says “In this new ‘less-cash’ society, the worst thing that any SME can say to a customer is, ‘I don’t accept that method of payment.’ This means that South African businesses are under significant pressure to adapt and evolve their mentality towards digitisation. It is a change for the better, for a number of reasons and we urge all SMEs to get onboard and use digitisation as a way of establishing a competitive advantage going forward.”

Cashless transactions come with the following benefits:

1. Increased safety

Cash exposes the user to higher risk due to the physical exposure to a third party. There is a high risk in holding cash, where users are at risk of theft and leakage. In the current Covid-19 environment, the less contact with cash the better due to safety reasons. 

2. Cashless is more convenient

Another major appeal in cashless commerce is the convenience of having your “money” in a central depositary that you have access to at any location and time, without having to physically count it.

3. SMEs can keep better records of their transactions

A paper trail of every digital transaction lives in a cloud – and can therefore be accessed by either the account holder or the financial service provider should there be a need to reference the transaction in future.

4. “Cash Is Expensive for South Africa” 

This is according to the Payments Association of South Africa. In its “Modernised Real-time Electronic Retail Payments: A Case for Change for South Africa” report, there is a Cost of Cash to Businesses section, which states that “when assessing the cost of accepting payments for businesses, cash is largely perceived as cheaper than card-based payments (POS and QR codes).”

“However, businesses often do not account for all the costs associated with accepting cash payments (e.g. the risk of theft, leakages, infrastructure costs for safes, tellers etc.) over and above the costs associated with depositing this cash. On average, for smaller businesses, cash deposit fees are about 1.5% including the fixed base costs, which is significantly lower than the average merchant service fees (MSF) for accepting card payments. However, if we include the indirect costs of cash acceptance utilising the same proportion of indirect costs for the cost of cash to consumers, then the true cost of cash for businesses increases to approximately 3.4% for small businesses,” it clarifies.

Take professional advice on the best and safest ways to take advantage of the cashless transactions trend.

“The gig economy is empowerment. This new business paradigm empowers individuals to better shape their own destiny and leverage their existing assets to their benefit”

John McAfee

The modern world of work was already changing by the time Covid-19 hit. The “gig economy” had taken hold and numerous apps allowed employers to connect with freelancers more easily to get small jobs done quickly. The work from home culture, which was necessitated by the virus, only reinforced for business owners the idea that their employees need not be on site and there has been a veritable boom in the use of freelancers across all industries.

A recent LinkedIn study of small businesses in the U.S. found that “51% of sole proprietors have used freelancers and intend to hire more, while 58% of companies that have 2-20 employees and 66% of companies with 21-200 employees plan to hire more freelancers in the future”. The reason for all this is flexibility. With full time employment becoming a serious commitment for employers, freelancers are picking up the slack. But, with so many people taking chances and selling skills they don’t have, how does one go about building a reliable team of high-quality freelancers and get the most out of them?

Here are five tips.

1. Determine your needs

It may seem like an obvious first step, but working out exactly what work needs to be freelanced and which to keep in-house is important. Knowing what skills you are looking for, and just when you need them available will also make it more likely you will find a freelancer who matches with your vision.

While freelancers can offer flexibility and their productivity is generally much higher than in-house staff, they can also be more costly, and knowing which work you can easily manage and which should be left to an expert will both save money and ensure you are maximising your resources.

Make a list separating the important tasks, and the ones you can’t do, and those you could reasonably manage with your existing employee complement. Determine just how many people it will likely take to complete each assignment and work out just who needs to be brought in to complete the most important tasks first.

Secondly it’s important to ask yourself just what you want from a freelancer. Is it important that the freelancer works alongside you? Do they need to come into the office, or do you just need them available during your work hours? What skills do they need? Must they be bilingual, own their own transport, or be familiar with your communications platforms and systems? Once you understand your needs you can move on to actually finding someone who is right for the job.

2. Finding freelancers

Finding freelancers is similar in many ways to finding permanent staff. The first thing to do is ask around and get recommendations from people in your industry. Those people who come recommended already have a track record and you know they won’t need additional training. Failing that, there are a number of social media groups and apps where freelancers advertise their skills and employers can advertise jobs. A quick online search should easily help you find those that cater to your industry and needs.

Once there, you will need to post a job listing. You have already determined your requirements so that listing should be as comprehensive as possible to ensure only the people who are interested and have the relevant skills apply. Make sure to include a clear description of exactly what the job entails, how many hours you need and by when, what it pays and how payment is made. Do you pay at the end of the job, upon complete satisfaction, or within 30 days of completion? 

The more details you can give the better.  For example, when contracting a social media manager, outline which platforms they will be managing and how many posts a month you expect.  Writers need to know whether to send ideas or write based on topics you assign, and how many words you hope the stories will be. Website developers need to know about the purpose of the site, the functionality and also how much tech support you expect once the site is live. A research analyst will need to know whether they are simply collecting and collating data or making recommendations on it as well.  An administrative freelancer will need to know exactly which tasks are being handed over and the scope of their powers in handling them.

Once you are in touch with someone, ask to see their portfolio of past work. That work should then match with your requirements. Being a designer who works on logos and animations doesn’t automatically make you a good web designer. Does the freelancer have experience in exactly the type of project you need? 

The second thing to look at on a potential freelancer’s portfolio is the tone of the work. If you’re looking for a technical writer beware a portfolio full of social media management or lifestyle feature articles. The freelancer needs to have examples of just what you are looking for before you commit. Ideally, you’ll see strong samples in a range of styles as this is a good sign that the freelancer is versatile and adaptable.

3. Start small

No matter how well recommended a freelancer is, the smart business manager knows to start them on small tasks. The benefit of a freelancer is that you aren’t immediately locked into a long term relationship, so use that to your advantage and get them going on less crucial tasks so you can evaluate their performance and potential. Freelancers who excel at the small things, meet deadlines and maintain a professional outlook can then be trusted to move on to the bigger and more important jobs without any anxiety on your part. 

Starting on a smaller job will also take less of your time in managing the freelancer and ensuring the work that comes in is as you expect it. It’s easy to forget that while freelancers may be highly skilled people, your company has its own quirks and ways of doing things and your expectations are in line with that. Initially it will take more time to manage the freelancer, explain the jobs and ensure things are being done the way you like it. A good freelancer is open to constructive feedback on his or her work, will be happy to make the necessary changes for you and will adapt their work quickly to your situation. Hopefully then, when it comes time to assign them to the more critical projects, they will already be in step with how you work.

4. How much should you pay?

Determining what to pay is one of the trickier aspects of hiring a freelancer. Given that they could conceivably come from anywhere in the world and have totally differing levels of expertise, working out what to offer for the right person can be hard. Generally, freelancers are paid either an hourly rate, or a rate per project. The latter is probably the easiest as both sides already know going in what they can expect to pay or receive upon completion and there are no nasty surprises. 

The freelancer’s experience and expertise, project complexity and timetable, and the project’s ultimate value to you all affect price, but in the end you should look at your own budget and allow that to determine the level of freelancer that the job will attract. What is it worth to you and your company for this job to be done well and on time? That’s what you should offer. 

5. Treat them well

Now that you have found a good freelancer, and have them aware of just what you need, it’s important that you maintain the relationship. High quality freelancers are eventually inundated with work and if they need to chase payments each month, or haggle to get their rates, or are otherwise treated badly your work will fall down their list of priorities and eventually they may end up firing you – remember they do what they do, because they also like the flexibility of not being locked into a single arrangement.

Paying punctually, and well, communicating clearly and not making impossible demands has the opposite effect and will see your freelancer value your contract, and go the extra mile in ensuring you get what you need, when you need it.

“If everyone is moving forward together, then success takes care of itself“

Henry Ford

Initiating, setting up and launching a new, typically, small business is a challenge and can be a lonely journey to growth and, hopefully, success. 

Could developing a partnership or co-operative with like businesses be a pathway to growth and profitability?

How do you describe your business?

Truly understanding how to properly describe what your business is can make the difference between success and failure. This is an important consideration for both the entrepreneur and potential customers. Is a company that uses a truck(s)/bakkie(s) to move goods around simply a moving company or is it in reality a logistics organisation offering a range of transporting options? A proper description can put what the organisation really is in proper perspective for those who are looking for a supplier of goods or services.

Next, ask yourself “Are there other products or services that relate to what my business does and should we pool our resources?”

The story of a plumber and how he grew his business

Consider, for example, the construction industry. Not the big guys but those who supply into that industry. Tradesmen such as plumbers, carpenters, electricians, painters, plasterers and so on.

Some years ago a plumber who had a good reputation (an essential element) for both the quality and timing of his work wanted to grow and develop the operation. He had a team working with him but found it difficult to scale up the business.

Because of his standing (reputation) in both the residential and commercial construction industry, he had been asked, from time to time, to recommend other tradesmen of similar quality. He turned those requests into a growth business. He approached the artisans he had worked with who had proved to be reliable and for whom he had a good regard and suggested they join his business. He explained how it would work.

He would find the work for them and refer them to the client. This was in respect of all the trades servicing and supplying the industry. He took a small percentage of the fee/charge for the following benefits he offered these tradesmen:

• Work sourcing,

• Administration for them (and their teams if they were more than ‘one-man bands’),

• Handling all the finances, banking, submission of regulatory returns

• Sourcing of supplies for them where necessary,

• Managing their payrolls and attendant administration,

• Other issues.

Of course, there was a simple written agreement between his little company and those who contracted with his business.

The consequences of this “pooling” of talents and services

• His business grew in influence, reach and demand as its reputation grew,

• There was a growing demand from tradesmen to join his operation, and he was able to be selective in deciding with whom he would develop relationships,

• Because of the aggregation of supplies he sourced he was able to obtain quantity discounts. He retained part of these savings which went to meet the costs of his business with the balance being passed on to the tradesmen contracted to his operation,

• The individuals who contracted with his business were able to scale up their operations as they were introduced to suitable lucrative and reliable contacts who paid their bills on time and in full,

• Eventually, some decided to go on their own. This was always his expectation, that once they were on a sound footing they would develop their own operations further,

• He was able to turn his full attention to growing the broader operations even though he kept his hand in his original plumbing operations,

• Finally, he was never greedy and kept his focus on growing both his and his cooperative partners’ businesses.

His operation grew exponentially and after many years he retired a well-off man who had the satisfaction of having contributed to the well-being and success of others in a tough industry.

What do you need to consider?

Once you have determined exactly what your business really can be described as, consider whether there are any other businesses that relate more or less naturally to your operations. 

Is there an opportunity for you to ramp up your operations to offer relevant services to these businesses to grow both their and your operations and provide your business with additional income streams?

The construction industry example used here is but one where collaboration could lead to growth and improved performance and income generation.

“Do you know the difference between education and experience? Education is when you read the fine print; experience is what you get when you don’t”

American singer and social activist, Pete Seeger

Microinsurance refers to an area of cover made accessible to low-income individuals and businesses at relatively low cost. Within the South African context, they originally dealt heavily with funeral insurance. Since 1 July 2018, in terms of the Insurance Act of 2017, microinsurers were allowed to offer additional product offerings. 

The Insurance Act introduced a new microinsurance license category. Now microinsurers may be profit-making, not-for-profit or co-operatives. This has brought stability to the sector and even opened up the market, and extended the list of options.

Legislation included a time cap on contract terms of 12 months for life insurance and a “No Waiting Periods” law for policies covering accidental death or disability, as well as credit risk policies.

The importance of the microinsurance sector for local SMEs

A South African Microinsurance Case-Study, which was conducted by the University of the Western Cape (UWC) for the International Labour Organisation, surveyed SME operators to assess the risks that they face and then explored the possibility of insuring those risks. 

It concluded that “there is an important, albeit limited, role for microinsurance (especially life insurance)” among SMEs. The case study assessed the risks SMEs face in totality, from operational to employee benefits. 

The avoidable financial risks negligent SMEs face

Given the many companies advertising funeral cover, employees of SMEs should first find out if such cover is offered as an employee benefit to avoid making unnecessary contributions to their own policies given the payout caps in the event of a claim.

Accordingly, SMEs which contribute to their employees’ life insurance and/or funeral policies as benefits, run the risk of wasting money should they not fully understand the regulations relating to these policies. This should be fully discussed with employees as the impact of the R100 000 cap on life and/or funeral cover affects SMEs which offer these employee benefits directly to staff. For example, if an employee is covered by multiple funeral policies and a claim is filed, the insurers will scrimmage and divide the R100 000 cap liability among themselves. Regardless of the policies’ individual values, not a single rand will be paid beyond that amount. 

These are usually taken out as group covers. Communicating with employees is vital as there is no need for multiple funeral policies if the R100 000 aggregate sum is reached.

Advantages of using microinsurance over traditional insurance

• They provide cover at lower premiums.

• No exclusion is allowed due to pre-existing health conditions for funeral and credit life insurance policies.

• Excesses only concern the non-life insurance policies.

• Authorisation and payment of claims are not allowed to take more than two business days.

• SMEs that have microinsurance cover for employees have them as group schemes with less admin and red tape as compared to traditional insurance.

Disadvantages of using microinsurance

• Many microinsurance schemes are said to have relatively poor viability and sustainability, so products require more scrutiny in order to be considered safe.

• SMEs need to be aware of the cap of R100 000 maximum payout in the life and funeral insurance category and the R300 000 cap in the non-life category.

• Products are usually not comprehensive in the non-life category.

Seek professional assistance to find the best microinsurance options available in order to avoid being trapped by the fine print.

“The pessimist complains about the wind. The optimist expects it to change. The leader adjusts the sails.”

John Maxwell

To be a good leader in the small business environment a person needs to possess a variety of skills, understand themselves and recognise areas where there is room for improvement. The leader’s abilities will be the main driver for growing the business. An effective leader is required to not only guide a company from a financial perspective, but also to build a team that is accountable and designed to get results. On the surface this sounds like a simple statement, but here are the five main skills that it takes to develop that end goal.

1. Motivation

Leadership is not just about charting the right business course. At the end of the day, profit and loss will be determined by the strength of the team working in the company and by how motivated they are to do their very best. 

A recent study conducted by Dr Kou Murayama at the University of Reading found that when people are motivated, they learn better and remember more of what they have learned.

Great business leaders are capable of establishing a positive culture in their organisation, and to do that they need to lead from the front. A true leader needs to exemplify the values they want to instil in their employees and motivates their team through their passion and accountability. That said, a leader cannot believe that they alone will be able to inspire their employees to greatness and they should not diminish the value of rewards in motivation. Simply adequately rewarding your team with good salaries and other non-monetary bonuses and offers can inspire them to do better work. 

According to recent findings in a cognitive neuroscientific study by Adcock, Thangavel, Whitfield-Gabrielli, Knutson & Gabrieli, rewards enhance learning, focus and enthusiasm due to the modulation of hippocampal function by the reward network in the brain.

Motivation then is a blend of the character of the leader, the culture within the company and the rewards being offered in return for effective and productive employees. A good leader needs to take all that into account to get the most from their team.

According to Kara Kelly, Executive Director of CompleteContents.com, “Leadership is not about who is in charge. It’s about making sure your team stays focused on the goals, keeping them motivated and helping them be the best they can be to achieve those goals. This is especially true when the risks are high and the consequences matter.”

2. Communication

Good, honest communication with both employees and clients is one of the key pillars to small business success. The leader is the one primarily responsible for developing a good communication system and culture within the organisation and for ensuring employees are able to effectively communicate the necessary information, opportunities and problems they perceive to the right people, quickly and easily. Forbes reports that one of the simplest ways new businesses collapse is through either a lack of communication or through too high a complexity level of communication. 

Employees should feel empowered to communicate directly with those in charge if they perceive problems or notice opportunities and should be rewarded for doing so, and feedback to both employees and clients should be frequent and simple. 

A bad communication system is one that generates numerous, complex reports that have to travel through a chain of command before it reaches the right person. Leaders should focus on being accessible, communicating more simply and more often to ensure all parties are fully aware of what needs to happen, and the details associated with it. Your lowest level employees and clients don’t need 60 page reports filled with complex graphs and algorithms explaining what you are going to do– a quick message to outline targets and how they will be achieved, by which deadline is far more effective.

3. Passion

The best leaders are absolutely passionate about what they do and their company as it’s impossible to become successful at something that one does not care about. Before starting an endeavour a business leader needs to seriously ask themselves if what they are doing is something they are passionate about. The early years of a business are filled with grind, difficulty and setbacks and tackling all this without passion for what you are doing is close to impossible. 

Passion for a business also has numerous other positive side effects for it such as drawing the right consumers, building networks with similarly minded individuals, and creating authenticity that your audience (suppliers, customers and employees) will identify with. 

But obviously not all businesses are born out of passion for the product. Not many plumbers for example will say that the one thing they always wanted to do when they left school was work with pipes and bathroom fittings! These leaders find their passion in other places and inspire themselves by perhaps knowing that they are providing necessary and helpful services to people in need, that they are doing good, providing for their families or giving themselves, and their employees, the kind of lifestyles they all really want. Finding genuine passion for your business, from whichever source, will ultimately be one of the biggest factors in also discovering success. 

4. Interview Skills

In the early days of a business being able to find and recruit true talent can make or break a company. An entrepreneur needs to be their own Human Resources department and discovering and nurturing true talent is therefore absolutely essential. Finding the right candidates begins when determining what kind of candidate is truly needed in the company. All too many job adverts claim to want someone who is a “copywriter, graphic designer and SEO specialist, who dabbles in social media and has three years agency marketing experience”. These adverts show a clear lack of leadership in the company, because unicorns with that kind of diverse experience are extremely rare, and clearly the roles the company really needs filled have not been considered carefully enough. 

Defining exactly what it is a company needs will allow the entrepreneur to advertise the position effectively, remunerate fairly and therefore attract the right kind of person into the role.

After attracting the right candidates to an interview, the intelligent small business employer will then focus on a few key things at the interview stage. Interviews should focus on “behaviour based interviewing” or interviews that focus on examples of past behaviour and achievements. What the interviewer is looking for is someone who can effectively work and deliver unsupervised as they won’t have the capacity to watch over that employee 24/7. A good trick is to send in someone you trust to have a casual chat with the employee while they are waiting for their interview, or when you need to “step out” for a few minutes. This employee will be more likely to get a sense for how the person really is and determine if there is good chemistry.

Understanding a potential hire’s motivations for taking a job is also critical. You need to know this person is as passionate as you are about making your company work and isn’t just in it for the money or, looking to fill a short-term role. In the end, you want to ensure whoever you hire will be there a few years to limit the necessary training and wasted time and expense employee churn can create.

5. Education and personal development

People who choose to go into business for themselves usually do so for a number of reasons that range from years spent in an industry, to having a good idea, or simply wanting to try something new. Whatever the reasons it’s safe to say that the skills they have at the start of the business are usually not the ones they are going to need in the future as the company grows and expands. A crucial aspect of building a successful business is in the entrepreneur making sure that they are as qualified as possible to meet the upcoming challenges of the company and planning ahead so they aren’t caught off guard.

It is therefore essential that any business leader, but particularly those in start-ups, continue to educate themselves on their industry and in business. The more skills a leader has, and the more they understand their company, legislation affecting their industry, new developments and the competition, the more chance they have of making it to the end game. The answer is simple, never stop learning, and encourage a culture in which this is true of each employee in your business. 

As John F. Kennedy said, “Leadership and learning are indispensable to each other.”

“Generosity is a virtue, but unlimited generosity is a fast route to bankruptcy”

Bret Stephens

Healthy cash flow is what keeps a company afloat. The ability to pay suppliers and staff, without risking the future of the business, entirely independently of expected new payments, is vital for any enterprise to keep going.

In this era of regular redundancies and corporate collapses, managing your cash flow is the most important aspect of managing your business. Key clients and customers getting into difficulties and potentially failing puts serious strain on your own company’s ability to stay afloat. The six tips below should help you stay solvent even if your biggest clients bow out.

1. Secure the debt upfront

Firstly, to talk “prevention rather than cure” for a moment, seek advice on taking some form of security for your debt (a cession of the client’s debtors perhaps) upfront. As we shall see below, being a “secured creditor” gives you a much better chance of at least partial recovery in the event of liquidation than being a “concurrent creditor”.

2. Request upfront payments as standard

Still talking prevention, requesting payment up front can often feel like a rude or difficult thing to do. You may fear offending clients by implying they will not pay, or you don’t want to scare new business away by asking them to trust you to deliver. At the end of the day upfront payment is about trust; and asking for someone to pay you before you deliver may feel wrong. It does, however, have many advantages.

Apart from ensuring you will not be taken for a ride by fraudulent clients, asking for payment up front also protects against failure of those clients. The worst situation you can find yourself in is one in which you have done work, and now owe your own suppliers, only for the payment not to come through. Asking for money up front means this will never happen and questions around scaring off clients are generally unfounded. Of course, your own suppliers may already be asking you for upfront payment, especially in the current environment.

If a client has decided to work with you, they have likely done their research and are already trusting you to deliver within certain time frames and deadlines that they themselves need to meet. Generally there is also an understanding that costs will be incurred by you to meet their requirements. Asking for upfront payment is therefore a relatively small pain point in this transaction and upfront payments are therefore common in trade businesses, or creative enterprises where payments may need to be made in order to start a job. 

If you still feel uncomfortable asking for the money up front, at least ask for a deposit and progress payments.  Be prepared to pause work on projects if payments are late before you incur additional expenses.

Particularly if it is your standard policy, you need not feel you are discriminating against any one client. In the long run your cash flow will be healthier for it.

3. Win new clients

The first, and most important, thing to do to protect your company from going under when a client fails, is to have as many clients as possible. Diversifying your client base means you are not as dependent on that one client who may be struggling. It sounds like obvious advice, but there are business owners who, once that one big client is secured, sit back on their haunches and live the easy life servicing that goose that lays the golden eggs.

It is important then to never stop marketing, or hustling for new business, and this is particularly important when that one big client goes under. One person’s misfortune is another’s gain, and your client’s failure is going to have a ripple effect through their industry. Somewhere, one of their competitors may find some space to grow. By marketing yourself and your products/services you may find your business in the perfect position to pick up that work when they start expanding.

So while it’s important to focus on the clients you have now, it’s also important to start planning as early as possible for a future without one or more of them. If you landed one big client, the chances are you can land another.

4. It’s time to become strict

No matter how long you have been dealing with a client, the second you suspect they may be struggling financially it’s time to alter the terms of your arrangement. Protecting your business needs to be your number one priority. If you had the client on a 90 day payment plan, move that to 30. Stop paying for things on their behalf and secure payments wherever possible up front. Suspend projects until payments are received. If your product or service is key to their operations they will find a way to pay in advance, and if it’s not, well your payments would have been first on the chopping block anyway. There is absolutely no sense continuing work and spending good money chasing bad.

5. Negotiate early and be willing to sacrifice

As soon as a client indicates that they are in financial distress it’s time to look at your books and decide just how much of what they owe you is essential and how much you could reasonably lose. Then negotiate as below, because when a company goes into liquidation there are three types of creditors and which kind you are will determine just how likely you are to get all or a portion of your money back during the winding-up process.

Preferent creditors include employees of the company, who are owed wages, and of course the tax authorities. 

Secured creditors are those that have liens/security on the debtor’s property (such as the bank that loaned the company money to buy a factory taking a cession of debtors). 

Unsecured (“concurrent”) creditors include those that provided the company goods or services, such as suppliers and contractors, without taking any security. Unsecured creditors will be the last to get paid in any bankruptcy process and are therefore most likely to lose everything. Getting at least some of that back before the process begins is therefore the best you can hope for.

Once you become aware of a client’s financial difficulties, making them an attractive offer may help get something into your accounts. A good offer would be to ask for a 30% payment now with an offer to extend payment on the rest to a later date. An alternative would be to ask for 50% payment now in return for wiping out the remainder of the debt. The earlier in the process you do this, the more likely you are to get something back and don’t be afraid to be pushy. Keep lines of communication open and send frequent reminders. Most people feel bad about letting down their vendors and making sure you are front of mind will also encourage them to pay you out first.

A client’s financial difficulties could also result in their going into business rescue. This will mean that no payments may be demanded by creditors until (if) they trade out of business rescue back into health. So being aware of how your customers are doing is essential. This also applies to your suppliers as the failure of a key supplier may be a real problem for your business.

6. Do a Cost-Benefit analysis

When your client has actually gone into business rescue or liquidation it’s time for you to decide whether you are going to pursue your claim. This can be an expensive and time consuming process and the amount of debt involved will need to be measured against the costs and time chasing it. 

In a practical sense, you need to look at the value of the client company, how many assets they have and what chance there is that there may actually be any money to recover. Then look at how much time and money you can spend chasing that money. Again beware of spending good money chasing after bad.

To be in line for some payment in a liquidation, you will need to submit your claims with proof at the first meeting of creditors which will be scheduled by the liquidator, which sounds like an easy decision to make. You must be careful, however, because if there are not enough assets in the company to satisfy the cost of liquidation, anybody who proves a claim at a meeting of the creditors may be called upon to contribute to the costs of liquidation. Check first with the liquidator and find out if there is a danger of a contribution being levied on concurrent creditors.

Only go as far along in the process as you are willing to, based on costs, efforts and the money you reasonably expect to recover. There is little sense spending good money to chase bad. Often your time will be better spent looking for a new client. 

“What counts in life is not the mere fact that we have lived. It is what difference we have made to the lives of others that will determine the significance of the life we lead”

Nelson Mandela  

Nelson Mandela, our former president and world-renowned human rights champion, was born on 18 July. Fondly known as Madiba or Tata, his life was an inspiration to the world and he received more than 250 public honours, including the Nobel Peace Prize.

Why Mandela Day and why 67 minutes?

 In recognition of his immense contributions, 18 July was declared Nelson Mandela International Day by unanimous decision of the UN General Assembly in 2009. It is more than a celebration of his life and legacy; it is a global movement to honour his life’s work and to change the world for the better.

On his 90th birthday, Madiba said: “It is time for new hands to lift the burdens. It is in your hands to make of our world a better one for all.” 

This call-to-action started a worldwide movement for social change, led by the Nelson Mandela Foundation which said: “Nelson Mandela has been making an imprint on the world for 67 years, beginning in 1942 when he first started to campaign for the human rights of every South African. By dedicating 67 minutes of their time – one for every year of Mandela’s service – people can give back to the world around them and make a contribution to global humanitarianism.” 

No matter how small your action, Mandela Day is about changing the world for the better, and celebrating the idea that each individual has the power to transform the world, the ability to make an impact.

Top tips for making an impactful contribution 

• Align your company’s contribution with your vision and mission
• Focus your contribution around your product or service or expertise
• Make it a long-term commitment with an authentic contribution that will have a lasting impact
• Focus on your company’s immediate community 
• Include your staff from the start 
• Collaborate – invite your suppliers, clients and even competitors to participate in your 67 minutes initiative
• Advertise and market your 67 minutes initiatives – on your website, in the local newspapers and on social media using the hashtag #MandelaDay. 

Ideas for Your 67 minutes 

Madiba himself believed that education is what makes the greatest impact. He said: “Education is the most powerful weapon which you can use to change the world.” 

For many companies, offering scholarships, internships, apprenticeships and mentorships is an excellent way to help change the world while reaping many benefits, including tax incentives and access to well-trained future employees. 

Businesses can also simply contribute to the official Mandela Day Each1Feed1 campaign or join in a community initiative.

Companies can also link into the Mandela Day Global Network, a community of organisations, government, corporates and individuals that partner with the Nelson Mandela Foundation to drive Mandela Day and pursue its objectives. It is a base for the strategic partnerships of organisations with common goals aimed at globally coordinating efforts, sharing information and linking the needs to resources.

There are so many ideas…

• Dedicate 67 minutes to brainstorm and plan your company’s formalised contribution going forward
• Give your staff 67 minutes of paid time off work to support a charity or organisation of their own choosing 
• Spend 67 minutes as a team painting, cleaning and maintaining a school, clinic or library
• Take 67 minutes to clean up the street or the local park, or volunteer to help out at a soup kitchen or animal shelter
• Kick-off a project to plant 67 trees or a community garden over the coming year
• Host a fundraiser such as a breakfast, fun walk or even a golf day to raise funds for a local cause
• Donate your 67 units of your products, service or expertise to a start-up company or a local charity organisation
• Pledge to donate R67 for each R50 raised for a cause by employees, clients and suppliers 
• Donate 67 blankets, food parcels, rugby or football kits, bicycles or computers to a school, church or a local organisation
• Make company resources, such as delivery vehicles or computers, available to organisations when not in use (e.g. over a weekend)
• Host a party for emergency workers and volunteers, or treat a group of underprivileged kids or the elderly to a fun day.

What are the benefits to your business? 

Social contributions improve not only the lives of the project’s beneficiaries but also of those who are involved –

• Creates an opportunity to link your business to a cause aligned with your corporate identity and business strategy 
• Improved brand recognition through association and positive media coverage
• Placing your company in a positive spotlight improves corporate reputation and creates a competitive edge with regard to attracting and retaining investors, clients, suppliers and employees
• Increased customer loyalty: consumers are attracted to companies that contribute to a greater cause, as it allows them to feel they are making an indirect impact just by supporting your company and brand
• Higher employee satisfaction: a common cause for the greater good is an excellent way to bring employees together to make a difference as a team.

Download resources for businesses, schools, organisations and individuals, or a full Mandela Day toolkit, at https://www.mandeladay.com/  or visit  the Nelson Mandela Foundation for more information.

“Even if you are on the right track, you’ll get run over if you just sit there”

Will Rogers

In the hostile business environment in which we find ourselves, every small advantage could be the difference between success and failure. While traditionally companies and their shareholders have looked at profit and the cold hard numbers for determining the current and future success of a business, there are many other non-financial measures, which can give as clear a picture as to just how strong a company is. These non-financial measures can provide clarity and context for the financial KPIs (key performance indicators), while at the same time offering a way to see whether your business is living up to its mission statement and vision in a way that the numbers cannot. 

If looked at carefully these measures can help illuminate your business’ strengths and weaknesses, while also pointing to areas which may be affecting business performance. 

Here then are four significant non-financial performance measures every business owner should be analysing.

1. Efficiency and Delivery

The profit margin may look good, but what it cannot do is tell you just how hard you are working for that profit, or where things can be improved. How you choose to examine your company’s efficiency and delivery will depend strongly on exactly what service you are offering. For those in manufacturing an excellent statistic to look at is the “Product Defect Percentage”, which can be worked out by dividing The Number of Defective Units in a Given Period by The Total Number of Units Produced in the Same Period. This combined with a general Efficiency measure, which in the manufacturing industry can be measured by analysing how many units are produced every hour and the plant’s uptime percentage, can give you a very clear idea of inefficiencies in the system.

Deadline-driven companies and those in the transport or logistics industries may want to look more closely at their “On-time Rate”, being the percentage of time products were delivered on time as scheduled. Dividing the Number of On-Time Units in a Given Period by The Total Number of Units Shipped in a Given Period will give you your “On-Time Rate”.

Customer support tickets are also a wealth of information. How many new tickets are opened, how quickly they are closed and how many go unanswered are all valuable when calculating customer satisfaction as well as flaws in your processes.

2. Customer retention and conversion rates

Your customer is obviously the backbone of your business. Keeping them happy will result in success, and likewise their dissatisfaction can result in bankruptcy. Tracking the pure numbers of clients that you have, and their loyalty will give you a good indication for the coming year. Did you gain new clients, and did your old ones stay with you? Answering no to either of these questions highlights problems. If you are getting in lots of new clients, but not managing to keep them then you need to look at costs, quality and service levels, because your PR and marketing are clearly working. Alternatively if you have a core of very loyal customers, but are struggling to find new work, then what is needed is additional budget on getting your name out there.

Using the formula, Customers Lost in a Given Period divided by the Number of Customers at the Start of a Period, will give you your Customer Retention Rate.

Further to this is just how successful your team is at closing a sale once that customer is through your door. Are you making sales, or winning pitches? Just how regularly? The formula for working out your conversion rate is: Interactions with Completed Transactions divided by Total Sales Interactions. If this is going up then your sales team is working optimally, but a declining conversion rate may hint at the need for morale boosts within the sales team, or even additional training. 

3. The power of promotion

Every business owner will know that the word of mouth and customer recommendations are the single best way to increase business and yet very few entrepreneurs or new businesses will track this statistic. It requires a little work but setting up a “net promoter score” survey is a good way to gain feedback from your customers or clients.

There are principally two kinds of net promoter score surveys, ones that focus on a customer’s loyalty to the brand, known as a “relationship survey” and ones that want to analyse a customer’s experience at a specific event known as a “transactional survey”. While the latter will allow you to drill down into the details of each customer contact point, it is the former which will give you a stronger overall impression of the reputation of your brand. 

This survey should be a maximum of 4 or 5 questions to avoid fatigue and increase responses. These questions should all focus on whether people enjoy interacting with the brand, where their problems may be, and a final question can ask how likely they are to recommend the company with a score out of 10. 

The likelihood that customers will recommend a brand to others can be worked out by assigning people who score the company a nine and higher as promoters and those who score it six or lower as detractors. Then take the Number of Promoters and minus the Number of Detractors to find your Net Promoter Score.

Don’t forget to leave a comment box at the bottom of your survey and ask whether the customer wants to be contacted. People may have additional insights that your survey doesn’t cover.  

4. Maximising your workforce

Staying ahead in business depends on your employees and getting the most out of each person’s skills will greatly benefit your bottom line. Retaining good staff is an important part of the business as in the long term having experienced and knowledgeable employees will make everything else work more smoothly at the company.

High performers need to be identified and retained. A good business owner is always aware of the company’s “High Performer Turn Over Rate”. This statistic reveals the company’s ability to firstly attract, but also more importantly retain, good employees. Your High Performer Turnover Rate can be calculated by dividing the Number of High Performers Who Departed in Past Year by The Number of High Performers Identified.

If you find your company is leaking high performers and the turnover rate is higher than you would like, it would be wise to work out just why this is happening. Your company’s “Salary Competitiveness Ratio” will give you an idea of whether people are leaving for money. You work it out, by taking your Average Company Salary and dividing it by the Average Salary Offered by Competitors. 

If it’s not your salary offering, then perhaps chances for advancement have been stifled? High performers tend to be ambitious. Looking at the “Internal Promotion Rate” gives a great indication of whether staff are being allowed to grow and develop at a reasonable rate. It can be calculated by dividing the Number of Promoted Individuals by the Total Number of Employees.

No matter what you do, people will leave, so getting high performers into the company is always important. Looking carefully at the efficiency of your hiring process with regard to time and cost to recruit new employees, will also show whether your HR systems could use an improvement. Remember, every month a position is vacant means your company is running sub-optimally and losing out on profit.