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So far Bruce Wade has created 224 blog entries.

The 9 Hats of an Entrepreneur –Non Executive Director

First, let me explain what the difference is between an Executive Director and a Non-Executive Director is and what their hat looks like. Any board of an organisation is made up of paid staff and outside consultants. The Executive Director heads the organisation; they have day-to-day responsibility for the processes and procedures of the business and draw a salary for this.

A Non-Executive Director sits on the board and is a non-salary person but has responsibilities that include Strategy, Performance, Risk and People.

Every business needs Non-Executive Directors, or as we call them, consultants of Business Coaches. They are people who sit in on meetings and are able to speak into the life of the business with their experience and non-emotional, unbiased opinions. It is critical to have such a hat in your business. We get too close to the trees to see the wood and often fail to move beyond our current blinked vision. Allocate someone who has experience in your field and who have gone places you wish to go to and appoint them to your board as a Non-Executive Director. Give them the hat and allow them to use it as they see fit. We find that to network with such people or to join a think tank or community is hugely beneficial to any business. It does take a humble Manager and Share Holder to stop and listen to what is being said, but the entrepreneur will gladly seize these ideas and run with them.

By |2018-04-09T10:50:15+02:00April 9th, 2018|Entrepreneurship|0 Comments

VAT efficiency, maximizing the 1% increase

We continue discussing the issue of the VAT and its implications for your business. Today we look at how you can make your business VAT efficient, especially with this VAT increase already in effect.

If you are a VAT registered company, it will be VAT efficient to ensure that as much as possible your suppliers are VAT registered. I have come across many VAT registered businesses who have no VAT registered suppliers at all except their bank of course. This meant that whatever they charged to their clients on the tax invoices as VAT Output was what they were meant to pay to SARS. Therefore they never set –off some of this Output VAT with Input VAT; thereby reducing their VAT payable.

The disadvantage is that if in any VAT period, you purchase a lot of inputs for a project that will only be invoiced in later periods upon completion; you will end up paying the maximum VAT on the little invoices that you have raised for your clients. If on the other hand, the suppliers had been VAT registered, this may have resulted in little VAT payable or even a VAT refund from SARS. This defeats the benefit of the VAT. As per its definition, VAT is meant to be a tax paid on the value added to the output goods from input goods. In plain words, your Output/Sales less Input/expenses (VAT) is =Value Added x15% is the VAT payable.

Purchasing from non-registered suppliers also means that the business has to charge higher prices as their costs a relatively higher compared to having purchased from a VAT vendor. This may make the company’s products more expensive and thus less competitive, reducing demand for the products/services. This, in turn, means that the company’s output VAT is higher, not only making its products more expensive but also resulting in them paying more Output VAT to SARS. Whereas, if they had purchased supplies from VAT vendors, their prices would not have changed as a result of a VAT increase, their prices would still have been competitive and they would owe SARS less.

In these challenging times of adjusting to the VAT increase, it pays for a business to figure out ways of being VAT efficient. This will go a long way in saving than some Rands and will also reduce their VAT burden as VAT paid will be in line with business production activities.

By |2018-04-04T11:38:34+02:00April 5th, 2018|Entrepreneurship|0 Comments

Financial Management – When is income really income?

Over the next few weeks, we’ll be looking at the various pieces of the puzzle that are the financial statements, so that you understand where to look for something, where information should go, and what you can get out of the information presented. Today we’ll look at INCOME, which is at the top of the income statement, usually the place people start.

Not all receipts (into the bank account) are income. This is important to understand, especially if you are managing your business from your bank account. Some receipts are the payment from your customers for your product/service, but receipts may also be of interest earned, repayments of a loan you’ve given, or reimbursement of expenses you’ve paid. The last two should be set off against the original payment and not recorded as income in your financial statements.

In accounting terminology, there are 3 main categories of income:

  • Sales of your product or service (which is obviously the most important for most businesses)
  • Passive income generated on your assets, this includes interest on your bank accounts, interest charged on loans given to others, dividends on investments, charges for using your equipment or vehicles, amongst others
  • Other income, this is income that is not generated by the business, such as grants or donations or profit on disposal of assets

In your annual financial statements, there will be a line for each of these, if relevant. However, from a management point of view, you may want to break them down further and reflect a number of lines for sales in your management statements. You may have separate product lines, divisions, or locations. It can be useful to see the sales at this level to understand what is working in your business. Many accounting packages allow you to print a report showing the sales per product/service, which can be very helpful to review regularly.

Although income will be summarised in your annual financial statements, management should be engaging with the income at a more detailed level on a regular basis to assist in making business decisions.

Next week, we’ll look at cost of sales and the meaning of gross profit.

By |2018-04-10T09:25:57+02:00April 3rd, 2018|Financial Management|0 Comments

I run a business and I have never submitted tax what should I do 

Every business that is liable for tax under the Income Tax Act, 1962 is required to register with SARS as a taxpayer within 21 days of becoming liable.  This registration can be done once for all different tax types (VAT, PAYE etc) using the client information section link on the SARS website.

If a business has been running and not paying tax it will have to register as a taxpayer as soon as possible. SARS does not only impose penalties for late registration and late submission of tax returns it also imposes penalties for late registration where the company should have registered as a taxpayer. The more the company delays in registering for tax and submitting returns the bigger the liability might just get. In the case that the business has been making losses, nil returns will be submitted for the years where no tax returns were done. Penalties and interest may be charged by SARS for the years where tax is payable to SARS.

In the event that the company finally registers as a taxpayer and all outstanding returns are submitted with the result being amounts due to SARS including penalties and interest and the taxpayer cannot settle the amounts at one go, payment arrangements can be made with SARS.

If your business finds itself in a situation where registration as a taxpayer was not done in time, the best will be to seek professional advice.  Call SARS and speak to a consultant who will gladly assist or you can walk into any SARS branch closest to you or speak to your accountant or tax practitioner. They will be able to assist with the registration and submission of all outstanding tax returns.

By |2018-03-28T12:45:56+02:00March 28th, 2018|Entrepreneurship|0 Comments

Don’t get caught with mothballs in your wallet

‘Cash is king’, says everyone to a small business owner. It’s not a platitude, it is true. It doesn’t matter what your sales are if your customers haven’t paid you.

As a business owner, you have it down to a fine art the ability to pay your creditors at the last minute, while chasing your debtors furiously. You’ve mastered the art of putting people off just a few more days so you can pray earnestly that enough money comes in, just in time. You are the King/Queen of last minute and stretching the last cent.

Imagine, it’s one of THOSE months, and you get a call from your accountant reminding you that your provisional tax is due in 2 weeks’ time. After you’ve sat down, had a zanex or a cup of coffee, you scroll through your contacts list to see who you can call, what plan you can make, how you can scrape to get the cash ready in time. As you know, SARS are the worst creditors, they really make you pay if you are late!

Is this your reality? It shouldn’t be. You know exactly what you need to have in the bank to make it through the month, but do you know what the annual (once a year) costs are, and when to expect them? Things like subscriptions, licence fees, membership fees, provisional and income tax, annual financial statements, etc. The annual costs should be included in your diary at least a month in advance to avoid any surprises.

It is also important to plan for these large amounts. Seldom do you have the spare cash lying around just when you need it? It is important to set aside a contribution towards the cost each month. If you provide for it now, regularly and without fail, the money will be there when you need it. And put the provision in a separate bank account so you’re not tempted to use it!

Give us a call if you need some assistance establishing what costs you need to keep track of and how much you should set aside for them.

By |2018-03-27T10:18:49+02:00March 27th, 2018|Financial Management|0 Comments

The 9 Hats of an Entrepreneur – Chairman

I was once appointed to a management board of a Non-Profit Organisation and duly elected Chairman. It has become an interesting journey finding my place as Chairman of a board of an organisation that I do not work in on a daily basis. What is the role of a chairman? What do the other board members and the staff expect of me? And how do I get along with the CEO?

The Chairman’s hat is a large and often heavy one to wear. It is woven with responsibility and procedure and can often bring about long discussions and uncomfortable decision making. Any organisation from the smallest to the multinational needs someone to play the chairman role and wear the hat. Not having a chairman is like going on holiday without a map. Maybe fun and exciting for a while but soon you will be lost and have no sense of direction.

In my experience, it is always good to get the Entrepreneur and Chairman hats to chat at length to discover the possibilities or opportunities of the business before you bring in the Manager and Share Holder. This allows for expansion before fear sets in. If you do not have a Chairman in your business then take it upon yourself to wear the hat or hire a consultant or coach to wear it for you.

By |2018-03-26T09:06:59+02:00March 26th, 2018|Entrepreneurship|0 Comments

VAT continued

Following our blog last week, we see that VAT is set to increase to 15% from the 1st of April 2018 following the Minister of Finance’s budget speech. This will not be a simple task like many would have imagined where one will just change the rate in their accounting package and continue capturing.  It is a complex process that requires much attention, planning and time to execute smoothly.

Companies will have to initially accommodate two VAT rates due to timing and cut-off periods, when were the goods delivered or services rendered and in the case of credit notes that might have to be issued after the 30th of March 2018 for goods or services rendered before the 1st of April 2018.  Some invoices will have the two rates, looking the example of cell phone service providers where subscriptions are charges in advance and call are charged in arrears. The biggest complication will be in April where some companies will have VAT of 14 % on income and expenses and VAT of 15% on income and expenses.

Companies, however, have the option to increase their prices simply because the VAT act allows or keep the prices the same but that would mean absorbing the tax costs hence less income from the same price. Companies can opt not to increase their prices for various reasons some being to maintain business relations or to attract more customers but that does not mean they will be immune to the 1% VAT increase from the authorities.

Despite all these companies will have to be ready to comply with the rules. Making the necessary changes immediately is advised considering the amount of work that is estimated to go into this transition especially for big companies with a lot of transactions. Please consult your accounts for assistance with this.

By |2018-03-20T14:43:03+02:00March 21st, 2018|Uncategorized|0 Comments

Your business should perform like an athlete

How do you define performance in a business; more specifically how do you define financial performance? Good performance is very easy to recognise for sports people or athletes. There is a target that they are working to beat; say their last marathon time, or their personal best, or the world record, or even just their rival’s score. It is obvious when they have performed well and when they have underperformed. It’s also obvious from the celebration – the fist pump in the air or the lap with the flag.

What can we learn from the world of sports when it comes to the financial performance of our companies? The most under-rated lesson is to CELEBRATE good performance or even just better performance. We are motivated to achieve more, to do better, when we recognise the work that has already gone into our performance and identify the things that have gone right or are working well. Celebrating also gives us a moment to stop and reflect on what we have changed/improved that has made all the difference, and imagine how to do more of that thing.

Another lesson from the world of sports is how to tell if performance is good or bad. There is always a TARGET that the person is trying to reach. In business we often consider performance to be the profit of the company. In fact, the income statement (showing the profit) is now called the Statement of Financial Performance. Setting a target for the profit of the company is a good idea. However, it is also important to look at the variables/elements that generate that profit, as they all need to work together to reach the target you have set. Consider setting realistic targets for your costs, for your turnover, for specific products. What about the management teams, sales people and internal processes that are necessary to achieve your goal performance?

Set up a meeting with our financial management team and we will help you to identify the cause and effect relationships in your financial flow, to establish where you should set targets for improved financial performance.

By |2018-03-19T16:51:57+02:00March 20th, 2018|Financial Management|0 Comments

The 9 Hats of an Entrepreneur – Share Holder

Think for a moment how you would act or react if you had equity in another business? What sort of input would you like to have in the way the money is spent on R&D and marketing or wasted on yet another batch of pink T-Shirts for the next convention. Now consider your own business, I assume you have equity in this? Why then do we ignore the way we often waste our resource just because we have the authority to do so. The Share Holder’s hat needs to be worn all the time to assist in the distribution of funds and budget compilation and approval. How different would you run your business if you have 30% equity invested in say me? I would require regular financial reports and discussions about where my money is going. When any person owns 100% of their business they seem to throw this hat away or hang it up on a peg of non-concern.

It is very interesting to see how this changes when a loan is required and some form of equity or surety is signed. Then all of a sudden the papers fly and new reports are produced. Take time out today and put on your Share Holder’s hat and consider what you would say to the business manager about how they are running your business. Then go look in the mirror and have a board meeting.

By |2018-03-19T15:02:58+02:00March 19th, 2018|Entrepreneurship|0 Comments

The VAT Effect

One of the most common buzz words in South Africa right now is the VAT increase. Individuals and corporates are wondering what effect this will have on the bottom line and if they will be able to cope with the consequence. We discuss the basic history of VAT and implications of this increase and how the VAT system works.
The origins of VAT date back to 1919 in Germany. France later introduced production tax; a form of VAT which was replaced with the producer’s income-based tax in 1948 and consumption tax in 1954.
The Statement of Standard Accounting Practice (SSAP, 1993) defines VAT as “a tax on the supply of goods and services which is eventually borne by the final consumer but collected at each stage of the production and distribution chain.”
VAT is charged on the supply of all goods and services made in the course of a business by a taxable person unless they are specifically exempt. VAT is levied at each stage of the supply chain, from the manufacturer to the wholesaler, to the retailer, taxing the value added by businesses at each point in the chain. For instance, raw wheat becomes more valuable as it moves along the supply chain to eventually be manufactured into bread or whatever the end product may be. This reinforces the principle that VAT is a tax borne by the end user in the economy, which are households. The increase in VAT from 14% to 15% increases inflation, as every supplier in the value chain adds 1% to their price, and thus the end user bears the brunt of that multiplied price increase.
Businesses are required to register for VAT if their turnover of taxable goods &/or services is above a given threshold, which is currently R1million. A registered business will pay input tax; which is VAT on its purchases and in turn, charges Output tax; which is VAT on its sales. VAT is not a business expense for a registered vendor, but a cost that is ultimately passed on to the end-consumer when they buy the final product. Vendors thus act as collection agents, collecting the tax on behalf of the government.

By |2018-03-15T13:56:13+02:00March 15th, 2018|Strategy|0 Comments
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