1. business and industrial

NEDBANK SMALL BUSINESS SERVICES
MANAGEMENT GUIDE
INTRODUCTION
Do you feel adequately equipped to set up and run your own business? Are you
a strategist, merchandiser, marketer, producer, human resources manager and
financial expert? A few of all of the above skills are required to set up and run
your own business.
The task of establishing and managing your own business can be overwhelming.
This business management guide will assist you in setting up and managing your
own business effectively.
The following may be some of the issues you are wrestling with right now:
SECTION A
HOW DO I VENTURE INTO MY OWN BUSINESS?
1. Starting your own business
1.1. Deciding on a registered name for your business.
1.2. What form of business should I set up?
2. Buying an existing business
3. Buying into a new or existing franchise
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SECTION B
When you have set the business up or have decided to purchase an existing
business, there are various obligations to fulfil. Following this
step-by-step business management guide will equip you for success in your
new venture.
1. How do I go about preparing my business plan?
1.1 Confidentiality agreement
1.2 Details of your organisation
1.3 Details of your product/service
1.4 Analysis of your market
1.5 Key strategic options
1.6 Why would the business succeed?
1.7 What is your basis for growth?
1.8 The marketing plan
1.9 The production plan
1.10 Organisational plan
1.11 Financial plan
1.12 Strategy
1.13 Action plan
2. What are my obligations now that my business is ready to begin
trading?
2.1 Value-added tax (VAT)
2.2 Regional Services Council (RSC) levies
2.3 Business tax
2.4 Your own tax
2.5 Employees tax
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2.6 Unemployment Insurance Fund (UIF)
2.7 Skills Development Levy (SDL)
2.8 Workmen’s compensation
2.9 Insurance and assurance
3. Staff issues
4. How do I go about financing the operation?
5. What will the bank look for in assessing an application for finance?
6. How do I analyse my own financial statements?
7. What controls do I need to have in place?
8. What risks should I be aware of?
9. What should I consider if I am looking to expand my business?
10. How do I plan for my retirement?
SECTION C
Other matters to consider for your business
1. Black economic empowerment
2. Donations tax
3. Capital gains tax
4. Retention of records
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SECTION D SMALL BUSINESS SER VICES calendar
SECTION E SMALL BUSINESS SERVICES dictionary
SECTION F Useful website addresses
SECTION A
There are three ways of venturing into your own business:
1. Starting your own business
1.1 Deciding on a registered name for your business
1.2 What form of business should I set up?
2. Buying an existing business
3. Buying into a new or existing franchise
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SECTION A
YOU HAVE DECIDED TO START YOUR OWN BUSINESS! WHAT NEXT?
1.1 Your first priority is to decide on a registered name for your new venture. The
name of your business should clearly identify what you are offering. It should give
your customers a clear indication of what your business is all about.
1.2 You will then need to decide on what form the business will take. Each of the
following structures has its own limitations and merits, therefore the decision will
depend on the nature and complexity of your business. It would be best to
consult with a lawyer or accountant when making this decision, taking into
account the growth and expansion
plans for the business.
Sole
Partnership
Proprietor
Close
Private
Corporation
Company
(CC)
Who ow ns the
You ow n and
A partnership
A close
A private
business?
run the
can have
corporation
company can
business and
betw een 2
can have
have betw een
make the
and 20
betw een 1
1 and 50
decisions.
partners
and 10
shareholders
(natural or
members
and a
legal).
(only natural
minimum of 1
persons).
director.
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Complexity
A simple form
A simple form
A more
A very
of trading
of trading
complex form
complex form
of trading
of trading
Legal
Founding
No legal
Must fulfil the
Must fulfil the
formation
documents
requirements
requirements
requirements
requirements
are not
but a legal
of the Close
of the
necessary.
partnership
Corporations
Companies
agreement
Act.
Act.
must be in
place.
Legal status
Accounts
No separate
No separate
Separate legal
Separate legal
personality
personality
personality
personality
from the
from the
from the
from the
ow ner
partners
members
shareholders
Should be
Should be
An accounting
A firm of
kept but no
kept but no
officer must
registered
formal audit is
formal audit is
be appointed
accountants
necessary.
necessary.
to prepare
and auditors
financial
must be
statements
appointed to
annually but
audit the
no formal
financial
audit is
statements of
necessary.
the company
annually.
They need not
be published.
Taxation
You, as the
The
Enterprise
Enterprise
ow ner of the
partnership is
pays tax
pays tax
business, pay
not taxed and
according to
according to
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Liability
tax. You need
partners pay
company tax
company tax
to register
tax in their
rates and w ill
rates and w ill
with the South
personal
pay secondary
pay STC on
African
capacities.
tax on
the distribution
Revenue
Partners need
companies
of
Service
to register as
(STC) on the
profits
(SARS) as a
provisional
distributions
(dividends)
provisional
taxpayers with
(dividends)
made to
taxpayer.
SARS.
declared to
shareholders.
members. The
The company
CC must be
must be
registered as
registered as
a provisional
a provisional
taxpayer, as
taxpayer, as
must the
must the
members.
shareholders.
No protection
No protection
Members can
Shareholders
of limited
of limited
enjoy limited
can enjoy
liability. The
liability, each
liability, the
limited liability
risks of
partner is
assets and
as the assets
business
personally
debts of the
and debts of
extend to all
responsible
CC are its
the company
personal and
for debts
ow n property.
are its ow n.
business
incurred by
assets.
the business.
It is important to note that a close corporation can be converted to a
private company and vice versa.
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Now that you have decided on the structure of your business, you will need to
consult with a legal expert with regard to setting up the enterprise, submitting the
necessary forms and preparing the necessary agreements before you begin
trading.
You will then need to prepare a business plan for the planning stage of your
business in order to set your objectives and determine how you will achieve
them. This is an integral part of your business and can never be ignored.
2. BUYING AN EXISTING BUSINESS
The most important aspect of buying an existing business is that you research
the opportunity thoroughly with the help of a good accountant and lawyer. You
need to be sure that you know what you are buying in order to obviate
unexpected surprises when the sale has been finalised.
SOME CRUCIAL ELEMENTS TO CONSIDER IN YOUR DECISION TO BU Y A
BUSINESS:
2.1 Ask the question - Why is the business for sale?
The answer to your question may be obvious when the seller is emigrating or
retiring but less obvious in other circumstances. Do not accept anything at face
value and test its validity if you have any doubt.
2.2 Find out what form the business is trading in.
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If the business is trading as a close corporation or private company, there is
perpetual succession with a change of members/shareholders. You will need
to do some investigation regarding the entity. A check with the Information
Trust Company (ITC) or a copy of a bank report from current bankers will give
you some indication of the trading history.
2.3 Request annual financial statements and the most recent management
accounts. If you are buying the business from a private company, insist that
you receive audited financial statements. Insist on a copy of bank statements
for the same period. Be cautious in accepting anything older than three
months when making your decision.
Request a copy of the past three years’ tax assessments and VAT returns.
2.4 What are you buying?
You need to be clear on what is actually for sale, for example:
- Assets
Current assets would include current debtors, stock and
equipment, plant and machinery.
- Request a list of the movable assets and physically inspect
them.
Insist on confirmation that these assets are paid up or obtain
outstanding lease agreements and current statements.
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- Request a list of debtors if applicable to the sale in order to
assess their quality and to assess the risk of potential bad
debts at any stage. Analysing the age of the debtors would
give you a good indication of the controls within the business
regarding the collection of outstanding accounts. Be careful
of buying existing debtors. You are at less risk if you can
start afresh at the date of sale unless, of course, they are
AAA-rated debtors. The inventory value at cost must be
determined, with a physical inventory count on the day the
sale becomes effective.
- Liabilities would include creditors:
o Request a breakdown of creditors and check their
ageing. Be cautious of buying creditors of an existing
business as they can easily be disguised. If possible,
ask that creditors be settled as at the date of sale so that
you can start afresh.
- Goodwill
This is the intangible asset of the business, the brand value
that the existing owner has built up over time. It includes the
brandname, customer base and intellectual property that
contributed to the success of the business.
- Property
This can be fixed property owned by the business. It would
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be best to have a formal valuation done. A deeds office
search would verify and confirm ownership.
- Contingent liabilities:
o Check on any outstanding contingent liabilities (any
guarantees or obligations to third parties) and any current
contracts in force.
- Loan accounts and shares.
If the business does not own its premises, review the current lease agreement to
determine the expiry date of the agreement and any renewal conditions.
Staff are vital to any e xisting business, so you need to investigate the following:
-
Which staff will remain in the business and who will have to
be replaced?
-
Check the standard employment contracts, pension and
other retirement benefit arrangements.
-
Check what incentive and bonus schemes are in place.
-
Check what trade union agreement or collective bargaining
agreements are in place.
2.5 What is a fair price to pay?
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This could be the subject of much debate as the seller could believe the business
is worth more than you are willing to pay. At the end of the day, the more
research you have done, the more negotiating power you will have.
There are many ways of valuing a business and, once again, your accountant will
add great value in this process.
The following could help you as a guideline in assessing the worth of the
business:
Step 1
Look at the true earnings of the business and decide on what you
think is a fair rate of return to expect.
This will give you a super profits value.
Step 2
Determine the intrinsic value of the business by subtracting its
liabilities from its assets. This gives you the net asset value of the
business.
2.6 Do your own investigations
-
Check that the business is licensed and has all the necessary
permits etc.
Check that all payments are up to date.
-
Check if there are compliance requirements and if these have been
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met.
-
Talk to suppliers. This is a good way to assess how the business
has been run and is also a good way to check the accuracy of the
financial information given to you.
-
Talk to key staff, as this will give you a good insight into the
business.
Once you have decided to go ahead with buying the business, you should
consult with your legal consult with ant/a tax expert/your accountant to best
structure the agreement having regard to tax efficiency and legal
requirements. You will also need to consider the following:
-
Ad vertising the sale in the Government Gazette.
-
A restraint of trade agreement so that the seller cannot open another
business in close proximity and place your business at risk.
-
Ensure that you have legal recourse to the seller should any form of
misrepresentation appear after the date of sale.
A business plan will need to be prepared if you are buying an existing business in
order to set your own objectives and plan how you will achieve these. This is an
integral part of your business and can never be ignored.
BUYING A NEW OR EXISTING FRANCHISE
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A franchise is a business that involves the granting of a license by a franchisor to
another party (the franchisee), which entitles the franchisee to trade under the
established trade name.
Some of the advantages of buying a franchised business are:
-
Buying an entire business concept that has been researched
thoroughly thereby minimising your risk.
-
Buying into an established brand name. Brand equity in a business
is the most difficult thing to create.
-
Induction and training in all aspects of running the business.
-
Trading in a business where operational efficiency already exists
due to tried and tested methods by franchisors. This prevents you
from incurring costly mistakes in an attempt to achieve operational
efficiency.
-
The franchisor will provide you with the necessary skills and
technology to run the business.
-
Your cost of supplies is normally lower as you receive discounts
normally only offered to larger businesses because you are buying
under the franchise name.
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-
Specialist assistance is offered e.g. labour consultants, market
research and product development.
-
There is proven quality control in your product.
-
Financial assistance is frequently offered by the franchisor in
setting up.
Some disadvantages of owning a franchise are:
-
It limits your personal initiative as you are obliged to trade in line
with the franchise head office’s initiatives and strategies.
-
Your startup costs are normally higher to keep within the corporate
identity.
-
Royalties, which are a percentage of your turnover payable to the
franchisor, are an extra expense and can range between 9% and
11% for an established franchise.
-
You are obliged to keep in line with the advertising and promotions
set by the franchisor.
A business plan will need to be prepared if you are buying an existing franchise
or setting a new one up in order to set your own objectives and plan how you will
achieve these. This is an integral part of your business and can never be ignored.
Some additional aspects to consider when buying a franchise:
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1.
Consult with a legal professional who specialises in franchises to
scrutinise the franchise agreement before you sign.
2.
If possible, choose a franchise registered with the Franchise
Association of South Africa (FASA). FASA e xists for the following
purposes:
-
Promotes the concept of franchising;
-
Issues guidelines for the operation of franchise systems;
-
Applies a code of ethics to the industry;
-
Promotes franchises in the small business community;
-
Maintains a data base of all franchises;
-
Provides education on franchise matters;
-
Represents franchises in dealings with the government, the media
and the public; and
-
Publishes useful handbooks on various aspects of franchising.
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As South Africa does not have specific legislation governing franchises, FASA
has devised a code of ethics for the governing of franchise businesses.
3.
Consider the costs of opening a new franchise or buying an existing
one.
4.
Beware hidden costs.
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SECTION B
When you have set the business up or have decided to purchase an existing one,
there are various obligations that you are required to fulfil. Following this step-bystep business management guide will equip you for success in your new venture.
1. How do I go about preparing m y business plan?
1.1 Confidentiality agreement
1.2 Details of your organisation
1.3 Details of your product/service
1.4 Analysis of your market
1.5 Key strategic options
1.6 What will make the business succeed?
1.7 What is your basis for growth?
1.8 The marketing plan
1.9 The production plan
1.10 Organisational plan
1.11 Financial plan
1.12 Strategy
1.13 Action plan
2. What are my obligations now that my business is ready to begin trading?
2.1 VAT
2.2 RSC levies
2.3 Business tax
2.4 Your own tax
2.5 Employee’s tax
2.6 UIF
2.7 SDL
2.10 Workmen’s compensation
2.11 Insurance and business assurance
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3.
Staff issues
4.
How do I go about financing the operation?
5.
What will the bank look for in assessing an application for finance?
6.
How do I analyse my own financial statements?
7.
What controls do I need to ha ve in place?
8.
What risks should I be aware of?
9.
What should I consider if I am looking to expand m y business?
10.
How do I plan for my retirement?
SECTION B
HOW DO I GO ABOUT PREPARING MY BUSINESS PLAN?
You are now ready to start the planning stage of your business. The tool that any
business should use for this task is a business plan. It is a road map which will
outline the goals and objectives of the business and serves as its resumé. It
states where you are now, where you want to go, how you will achieve your
vision and why you ha ve chosen to tackle the opportunity in a specific way. Many
small businesses neglect this part of their planning process as they see it as a
non-essential task, but without one you might not achieve the success you are
striving for. Every business should have one and it should be updated
periodically in line with your one-, three- and five-year plan for your business.
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Time spent on your business plan at the outset is time and money saved later.
Simply put, a business plan is an outline of objectives and goals and it defines
how you are intend to achieve them. Take the time to prepare the plan, as it
could identify any pitfalls before they occur, and update it as you move along
your journey. It could also help in acquiring additional financial and operational
resources, if required.
The level of detail in the business plan will depend on the nature and complexity
of your venture.
The business plan will help you to assess your opportunity objectively and
answer critical questions, some of which are:
-
What are the ingredients for survival in the industry?
-
What are the key ingredients for success?
-
How much time is required to build the business?
-
How can I ensure the business will be profitable?
-
How and when is it appropriate to ‘harvest’ my business?
The key components of a business plan are as follows:
1.
Confidentiality agreement
2.
Details of the organisation
−
Your mission statement
−
Your vision statement
−
Organisational objectives
−
Organisational values
3.
Details of your product/service
4.
Analysis of your market
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−
SWOT analysis, looking at the business internally and externally in
order to identify the strengths, weaknesses, opportunities and
threats.
5.
Key strategic options
6.
Your sustainable competitive advantage
7.
Basis for growth
8.
The marketing plan
−
Stating your marketing objectives and sales forecasts
−
Developing your marketing strategies
−
The marketing budget
−
Marketing action plan and controls
9.
The production plan
−
Your competitive advantage
−
Location and layout
−
Production process and plan
−
Production capacity
−
Scheduling
−
Supplies and inventory
−
Equipment to be used
−
Production budget
10.
Organisational plan
11.
Financial plan
12.
Strategy
13.
Action plan
1.1
Confidentiality agreement
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If you intend to circulate the business plan to outside parties (your banker,
a potential investor or shareholder), you may want to consider attaching a
‘confidentiality agreement’ to protect your intellectual property. An e xample
of a confidentiality agreement is given below or you could consult with a
legal expert to assist in drawing up such agreement for you. An yone who
reads your business plan should sign this beforehand.
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Confidentiality agreement
I… … … … … … … … … … … … … … of
… … … … … … … … … … … … … … ..
hereby acknowledge that information contained in the business plan
of … … … … … … … … … … … … … … … … … … … (name of your
business) is confidential to the owners of the … … … … … … … … …
… … … … … … … . (name of your business).
I hereby undertake not to use and to keep secret and confidential all
such information and shall not permit or allow the same to be
disclosed to any other persons or person.
Signature… … … … … … … … … … … .Date … …… … … … … ..
1.2 The organisation
Now you are ready to begin with the hard work encompassed in your business
plan by applying your mind to setting the business up – the first step in making
your business a success.
This section of the business plan helps to structure the core of your business. It
gives an overview of the activity, structure and history of the business, where it is
going and who will be involved. The following areas should be addressed:
- Registered name
- Founders
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-
Business structure
−
The legal structure and form
−
Who are the owners of the business and, if applicable, note their
percentage interest.
−
If the business is organised around a corporate structure, who are
the directors (and their voting rights), who is the chairman and if
there is a shareholders’ agreement provide a brief overview.
-
Commencement date of operation
-
Principal activity of business
-
History
−
What major events/milestones have occurred to date, what results
have been achieved so far, what has the management team
achieved?
-
Mission statement
−
The mission statement defines what your business is or wants to
be. It is the organisation'
s reason for existence.
Some of the questions you should ask yourself in preparing your
mission statement are:
What business or activity are we engaged in?
Who are we involved with?
Where are we taking the business now and in the future?
Why are we undertaking this particular business/activity?
-
Vision statement
The vision statement provides the overall direction in which the
organisation should be heading; it keeps all parties in the
organisation on the same track towards the defined goals.
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-
Organisational objectives
These should flow from your mission statement. The specific
performance measures can now be quantified in measurable
performance targets.
-
Organisational values
Values represent what the organisation and its people stand for and
are
the
underlying
principles
that
shape
and
guide
the
organisation’s interactions with suppliers, distributors, customers,
employees, investors, community and other stakeholders.
1.3.
The product/service
This section should provide an overview of your product(s)/service,
including the following information:
-
A brief description of your product/service in terms of its function
and its unique application.
-
What is the status of the product/service e.g. does it still need to be
developed or is it at a commercialisation stage?
-
A description of how the intellectual property is protected, who
owns it and what consideration was paid for it.
-
How does the product/service satisfy a need? What benefits are
there to the consumer and what are the principal markets?
-
What is the unique selling proposition for your product?
-
Who has tried or assessed the product/service and what was their
feedback? Has it been tested?
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-
Are there any substitutes for the product/service?
-
How do the main features of the product/service compare with
those of your competitors?
-
A brief history of what your team has achieved in enhancing the
product/service to make it more suitable for the chosen market.
1.4 Market analysis
The strategic analysis section of the business plan summarises the data
you have collected on your business and its environment. From this data
you will be able to identify the strengths and weaknesses of the business
and the opportunities and potential threats in the environment. This
process is called a ‘SWOT’ analysis.
In order to complete the SWOT analysis you will need to answer the
following questions, based on an assessment of the business internally
and externally.
-
What are the organisation's strengths and weaknesses?
These are identified from analysing the business internally in order
to identify those factors that influence how well or how poorly your
business can service the needs of its customers and stakeholders.
-
Does your product/service have a sustainable competitive
advantage?
-
What is the source of your sustainable competitive advantage?
-
What are your strengths?
-
What is your business not good at?
-
What areas require development?
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-
What opportunities and threats face the business?
These are identified from analysing the business externally to
identify those factors that affect your business e.g. economic
variables such as inflation and foreign exchange rate fluctuations.
Opportunities can be exploited and pursued while threats can
damage, constrain or destroy your business!
It is worth noting that internal factors can be controlled from within your
business whereas you have no control over external factors but must be
aware of their potential impact on your business.
The SWOT analysis should be presented in summary form after you have
done a thorough analysis of the internal and external environment.
In analysing the organisation’s internal environment, the following areas
should be investigated:
-
Primary activities of the organisation
-
These would include all activities associated with supplying
your product/service to your customer from start to finish,
including production, delivery and marketing.
-
Support activities
-
These would include activities such as human resources and
financial management.
-
Firm infrastructure
-
Financial analysis
-
Financial ratios are a good tool to use because they allow
you to compare your company with industry standards.
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-
Organisational culture and leadership
-
Organisation’s reputation
In analysing the business externally, the following areas must be taken
into account and their potential impact on your business should be
understood:
-
Macroeconomic environment, which deals with the state of the
economy nationally and internationally. This would include aspects
such as interest rates, inflation, foreign exchange rates and gross
domestic product growth. These are all indicators of the state of
health of the economy.
-
Technological innovation affects most products and services as well
as the way in which they are created and produced. This in turn has
enormous cost implications, which could impact your offering and
business.
-
Social trends encompass demographic and cultural changes.
These changes may pose significant challenges to your business.
-
Changes in the political and legal environment may inhibit or
enhance the freedom of a business to continue its activities.
-
Developments in the global environment may have positive or
negative implications for your business. Are there any trade
restrictions between two countries that may impact your potential
customer or supplier base?
An industry and market analysis specific to your business will enable you
to answer the following questions:
-
Is there really an opportunity for your business in the industry?
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-
What are the industry characteristics?
-
What are the characteristics of your target market?
-
In what shape is the market you will be operating in?
-
What is the profile of your customers?
-
Will customers want to buy what you have to sell?
-
Who are your major competitors and what are their strengths
and weaknesses?
1.5 Key strategic options
Key strategic options are developed from an assessment of the interactions
between the main strategic strengths, weaknesses, opportunities and threats.
The SWOT analysis completed by you will provide the basis for developing the
‘key strategic options’ for your business. The tools listed below can be used to
separate strategic issues from operational issues.
ISSUE FROM SWOT
OPERATIONAL IN
STRATEGIC IN
ANALYSIS IDENTIFIED
NATURE
NATURE
When will this issue
Now
After two years or more
Small
Very significant
‘impact’ on the
organisation?
How great an impact will
this issue have on your
business?
How
broadly
issue
will
affect
this Will affect some parts of
your the business
Will affect all of the
business
business?
How great is the risk
Small
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Big
29
attached to ignoring the
issue?
Will strategies to address
Minor change
Major changes
the issue involve
changes in
product/services, pricing,
promotion, personnel or
business?
Now that you have identified the main strategic issues, you are able to formulate
strategies to address them. Firstly, you need to identify any interactions between
the issues you have noted on your short list and determine if any strategy can be
put in place to combat them. The following table may be of assistance in this
regard.
Step 1. Identify interaction between:
Step 2. Formulate strategies to take
advantage of interaction
Key strength and opportunity items
What strategy can be formulated that
will build on this strength item to take
advantage of the opportunity item?
Key strength and threat items
What strategy can be formulated that
will build on the strength item while
reducing the threat item?
Key weakness and opportunity items
What strategy can be formulated that
will either negate this weakness or
develop this weakness into a strength
so that the threat item is reduced?
1.6 Why will your business succeed?
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You will now need to consider and document your sustainable competitive
advantage. What is your business’s competence? Why will customers buy from
you? Why do your think your business will succeed? Why are you better than
your competitors and will your product and product design meet these
requirements?
Sustainable competitive advantage is the value your business will create for its
customers. It allows you to perform above average and to outperform your
competitors. It is important for you to identify your competitive advantage in order
to plan how you will compete in your market. This should be done in conjunction
with your SWOT analysis.
1.7 What is your basis for growth?
The final issue to consider in formulating the overall strategic direction of the
business for the next three to five years is how your business can grow. Your
business can grow in various ways but ultimately it will depend on your
customers and your offering. You could consider the following growth strategies:
TYPE OF GROWTH
STRATEGY
WHAT IS IT? HOW DO I
GO ABOUT
IT?
Market penetration
This is an increased
1. Price incentives on a
usage of your existing
sliding scale
offering in your existing
according to usage
customer market.
2. Building on an
additional service
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with the existing
offering - bundling
your
products/services
3. Identifying
alternative uses for
your existing offering
4. Increasing your
promotional effort to
attract clients from
your competitors
New market development This is an increased
1. Developing new
usage of your product in
geographical markets by
new markets.
expanding regionally,
nationally or
internationally
2.Developing new market
segments
by obtaining
referrals or by advertising
in alternative media
forms
3. Converting potential
clients who currently do
not
use
product/service
your
by
offering free trial use of
your offering or by finding
alternative
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uses for your offering
which may be
attractive to them.
New
development
product This strategy is aimed at
1. Developing new
introducing new/varied
features for your
products to your existing
product/service
customer market.
2. Developing variations
to your e xisting
product/service
3. Developing new
products/services
aimed at your existing
customer market
Diversification
This strategy entails the
1. Backward integration
introduction of a new
e.g buying an accounting
offering to a new
recruitment agency
customer market.
2. Forward integration e.g
buying a business that
would make use of your
services
3. Using your existing
distribution network e.g.
selling additional types of
products/services
through
your
current
distribution network. This
maximises
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economies of scale.
4. Stability development
e.g. buying a
declining business
with the objective of
turning it around to
make it profitable.
5. Mo ving into a
completely new
customer market with
a totally different
product.
Market penetration and new market development strategies are seen as low-risk
strategies as they are easy to implement and you will be familiar with the
requirements. New product and diversification strategies have a higher risk as
they contain an element of the unknown. Bear in mind that the rewards of a
business are determined from your risk vs. return. Whilst too much risk may put
your business at unnecessary threat, it is also worth mentioning that no one
makes money the easy way without taking any risk at all!
1.8 The marketing plan
Now that you are clear on what you want to do and how you are going to do it,
you will need to decide how you are going to persuade your chosen customer
market to buy/use your product/service. This is a very important step. There is no
use in designing and producing your offering if no one is going to buy it.
The key components of your marketing plan would be:
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1.8.1 Stating your marketing objectives and sales forecasts
1.8.2 Developing your marketing strategies
1.8.3 The marketing budget
1.8.4 Marketing actions plans and controls
1.8.1 Stating your marketing objectives and sales forecasts
-
Ensure that your marketing objectives fall within the context of your
mission statement and are consistent with your vision statement.
-
Be realistic, you must be able to deliver.
-
Give time frames for your objectives and sales forecasts.
-
State the assumptions about your customers and competitors
which form the basis of your objectives and strategies.
-
Quantify your objectives.
When formulating your sales forecasts it is a good idea to develop
three different scenarios with which to work. It is also imperative to
provide a five-year forecast. These could be:
1. The most likely results
2. Best-case scenario
3. Worst-case scenario
1.8.2 Developing your marketing strategies
Your marketing strategies will encompass the 4P’s of marketing – product,
place, price and promotion. They will revolve around how you plan to
penetrate and develop your chosen market and how you will grow your
customer base by delighting them and exceeding their expectations.
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PRODUCT
How will your product be presented?
PLACE
How will your product be distributed to
your customers?
PRICE
What is your pricing strategy?
PROMOTION
How will you promote your product so
that your customers will know about it?
1.8.3 The marketing budget
You need to detail what it would cost to get your offering to your customer
in terms of your marketing plan. Expenses incurred in these areas will flow
into your financial forecasts. Some of these expenses could include:
-
Market research
-
Packaging and distribution
-
Brochures
-
Ad vertising
1.8.4 Marketing action plan and controls
The marketing action plan will provide details for the implementation of the
marketing plan. State in priority order the tasks required, who is
responsible for executing the tasks, the relevant costs to complete the
tasks, and due dates for completion. Control factors to monitor the
components and activities of the marketing plan should also be detailed
i.e. customer satisfaction levels, competitor activity, customer buying
trends.
1.9
The production plan
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You need to decide how you plan the production of your offering and what
resources will be required to get it to the customer. Production strategies
focus on how to produce quality products and services at the right place,
right price and right time. They also focus on how to competitively deliver
the product/service to your customer. They will also create a competitive
distribution network that delivers in good time.
The key components of your production plan will be:
1.9.1 Competitive advantage
1.9.2 Location and layout
1.9.3 Production process and plan
1.9.4 Production capacity
1.9.5 Scheduling
1.9.6 Supplies and inventory
1.9.7 Equipment to be used
1.9.8 Production budget
1.9.1 Competitive advantage
Earlier in your business plan you identified your sustainable competitive
advantage and what sets you apart from competitors in the industry. This
needs to be carried forward in all aspects of the production plan. A
manufacturing business has to consider quality in an efficient manner
throughout the production process, from the receiving of materials to the
final delivery of the product/service to the customer. This applies similarly
to a service industry. People, procedures and policies all form the basis of
a service business and quality must be reflected in all aspects of your
production plan. Not only do you need to start with a competitive
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advantage but it needs to be maintained and constantly improved.
Examples of the areas you could focus on to develop a competitive
advantage include:
-
distribution network
-
brandname
-
service network
-
reliability
-
product development
-
price competitiveness
-
staff training
1.9.2 Location and la yout
In the case of a service business or manufacturing business, location will
be influenced by access to raw materials used in producing the product as
well as the ability to deliver the endproduct to your customer. You have to
assess what will be best for your product/service and what is important to
get the right product/service to the right customer at the right time.
Proximity and availability of skilled or trained labour is vital.
The plan and layout of the plant or service facility can be in the format of a
drawing. It should show an arrangement of plant and equipment for
production or delivery to occur with maximum ease. It should indicate the
flow of activities from input, production and storing to delivery of the
endproduct/service.
1.9.3 Production process and plan
It all begins with the customer placing an order. For the production
process and plan, you need to plan the production process systematically.
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The easiest way to do this is by means of a flow chart and from there you
can determine the timing and costing for each process or part thereof.
1.9.4 Production capacity
Capacity planning begins with the demand for the various products and
services your business intends to produce. You will need to consider
production capacity in conjunction with the products and services to be
offered to your market as well as the production processes.
1.9.5 Scheduling
Scheduling is influenced by the customer’s need for delivery and the
delivery of raw materials/services from your suppliers. You need to equate
these two factors and ensure there is sufficient lead time to allow for
delivery in good time. This needs to be assessed in conjunction with the
planning process and in particular with your staffing requirements so that
your customer’s waiting period is kept to a minimum, if any.
1.9.6 Supplies and inventory
This will give you a clear indication of the required lead time for the
delivery of raw materials and what stock to keep on hand. This will affect
your cash flow and financing requirements and is a very important part of
the control mechanisms in your business. Without tight controls over raw
materials and finished products, you could face the threat of uncontrolled
wastage, theft and an unnecessary amount of cash being tied up in
finished products in storage waiting to be sold.
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1.9.7 Equipment to be used
This will depend on the production process and the output and efficiency
requirements of the business. You need to research your input
requirements in order to produce/deliver/fulfil your customers’ needs.
1.9.8 Production budget
The expenses in this budget will flow to your financial forecasts later on in
the business plan. Your production budget could look like this:
Production
expense details
Month
Month
Month
Month
Actual
Budget
Variance
1
2-3
4-11
12
Ytd
Ytd
Ytd
Product
costs
Manufacturing
overheads
Quality
assurance
Information
Systems
Capital
expenditure
items
Equipment
purchases
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This should also be done on an annual basis going forward.
1.10
The organisational plan
Now that you have resolved the product/service, marketing and production
aspects of your business, you are ready to consider the people issues.
Areas to address include the following:
-
Brief resumés of the management team
-
Development of performance standards, measurement and
feedback
-
Job and work designs
-
Occupational safety issues
-
Recruitment and induction strategies
-
Reward systems
-
Staff training needs analysis
-
Staffing requirements
-
Strategies for encouraging innovation in the organisation
-
Wage expense details
-
Other relevant human resources issues
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To quantify your business plan, it is necessary to draw up a budget which
include associated expenses, for example:
Organisational
expense
Month
Month
Month
Month
Actual
1
2
3-11
12
Ytd
Budget Variance
Ytd
Ytd
details
Administrative
Wages
Incentives
Recruitment
Training
Occupational
safety
Other
TOTAL
1.11
The financial plan
This is the final part of your business plan and consolidates the strategies
you have established earlier in the plan. This section of the business plan
can be complex so it might be a good idea to consult with your accountant.
The following items need to be addressed in your financial plan:
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1.11.1 Financial history
This would apply to a continuing business.
1.11.2 Underlying assumptions
These assumptions, which arose from your
research, formed the basis of your financial
projections.
1.11.3 Breakeven point
You will need to determine your breakeven
point, based on sales volumes, variable costs
and the level of fixed expenses.
1.11.4 Sensitivity analysis
This would flow from your SWOT analysis,
providing the worst-case, most likely and bestcase scenarios. It is known as a cash flow
analysis.
1.11.5 Key financial ratios
You can derive these from your financial
statements
and
industry
standards,
and
comparisons should also be given.
1.11.6 Funding and expansion plan You need to determine how you are planning
to
source
the
funds
required
to
begin
production and how these funds will be spent.
You should also include information about
timing, what type of funding you require and
how the funds will be repaid.
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1.12
Strategy
Given that you are just starting out, it may seem bizarre to consider what
to do with your business eventually. The fact of the matter is that we all
have to get out of business at some stage. Age or health could force this
or your objectives could change over time. Hence, you need to devise
‘harvest’ strategies to maximise your gain now in order to eventually
dispose of the business with a maximum return.
Possible harvest strategies could include the following:
1. Transfer/sell your business interests to siblings or other family
members.
2. Appoint managers to manage and run your business and use the cash
generated to pursue other activities - you could decide to embark on a
cash cow.
3. Initial public offering – a stock exchange listing
4. Merger/Acquisition
5. Outright sale of the business in the open market
6. Management buyout (MBO) – Sell the business to management
7. Employee share ownership scheme. This would entail selling some of
the equity of the business to employees.
Each of the above harvest strategies would take your business in a different
direction and require different actions whilst you are managing it.
1.13 The action plan
The last aspect required to complete the business plan is the action plan. This is
a
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44
list of tasks required to be implemented in order to achieve the objectives you
have set out in your plan. Tasks need to be allocated to specific team
members/outside resources, completion dates set, and follow-up dates and
defined costs determined. Tasks should also be prioritised.
Key to the successful execution of a well-defined business plan is the
establishment of a definite action plan where individuals are held accountable,
regular review sessions are held and further action is taken.
Example of an action plan
Revision date
… … ..
Task priority
WHAT IS THE
Responsibility for
To be completed
TASK?
ensuring task is
by
completed
Finance
A
1. Identify sources
M Guthrie
27 January 2004
B
2. Letters of
M Guthrie
15 February 2004
introduction
Manufacturing
B
1.Obtain suppliers’ K Lottreaux
17 February 2004
quotes for
comparison
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Marketing
A
1.Develop
R Patterson
31 January 2004
B
strategies
J Herman
25 February 2004
2.See distributors
Well done ! You ha ve now completed the planning stage of your new
venture.
2.
WHAT ARE MY OBLIGATIONS NOW THAT MY BUSINESS IS READY
TO BEGIN TRADING?
Legal issues - Licensing, registration and statutor y obligations
You are now ready to get the business registered and licensed so that you
can start trading and creating wealth.
2.1
VAT
VAT is an indirect tax charge on most transactions. The current rate
is 14%.
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If your business renders taxable supplies/turnover of R300 000 or more
per annum, you will need to register for VAT and so become a VAT
vendor. This means that you will add 14% onto your sales and in turn pay
it over to the SARS in the form of output ta x. This also means that you can
claim the VAT back on your purchases for materials, capital equipment
and any other expenses incurred by you as long as you have a tax invoice
from your supplier. Even bank charges are vatable and may also be
claimed as an input credit from SARS in your VAT return.
Businesses who do not turn over R300 000 per annum may, however,
elect to register for VAT. You should consult with your accountant as there
are advantages and disadvantages in doing this as long as your turnover
is over R20 000.
What to do to register?
You can obtain a VAT application form from the SARS website or your
local SARS office.
The following must be attached to your application:
-
Copies of the IDs of the owners of the business
-
A letter from your bank confirming the details of your bank account
-
A cop y of your registration certificate/founding statement if a close
corporation or company is being registered
-
A cop y of the partnership agreement, if applicable
-
A cop y of your business plan showing financial forecasts
-
A letter from your accounting officer confirming that they will be
acting on your behalf
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Remember, certain products are ‘VAT exempt’ or ‘zero rated’. On VAT
exempt products no VAT may be claimed back or paid and on zero-rated
products no VAT may be added onto the selling price, but VAT may be
claimed on the expenses that went into the production of these products.
You will not be able to claim VAT on all your expenses and you should
make yourself familiar with these exceptions at the outset. Your local
SARS office will be able to assist in this regard.
You will need to submit a VAT return to SARS by the 25th of the month
following the end of your tax period. SARS will set out your tax periods for
you once you have been registered as a vendor. If you do not submit your
return or make payments in good time, penalties will be levied by SARS
on your business.
2.2
RSC levies
Two types of levies are applicable:
1. The service levy is calculated at the applicable rate on all remuneration
paid to employees of the business and on drawings by the sole proprietor
or partner of a business.
2. The establishment levy is calculated at the applicable rate based on
he turnover of your business (excluding VAT).
Monthly returns need to be completed and submitted to your local
Regional Services Council and payment made monthly by the 20th in
respect of the previous month. Levies are allowed as a tax deduction for
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income tax purposes. Interest will be levied on late payments and
submission of returns.
Certain types of organisations (e.g.non-profit and charitable organisations)
are exempt from registration for these levies, so it would be good idea to
contact your local Regional Services Council before beginning your
operation.
2.3 Business tax
If you are a sole proprietor or partnership:
A sole proprietor and partnership does not have separate personalities
from the owners of the business and therefore does not need to register
for tax. You, the sole proprietor or partner, will pay tax in your own right
on the profits.
Close corporations or private companies have separate legal
personalities from the members/shareholders and have to register
independently with SARS as provisional taxpayers. The current tax rate for
close corporation/company is 30%. For small business corporations the
current tax rate is 15% on the first R150 000 and 30% on taxable income
exceeding R150 000. If you feel your business qualifies for the small
business corporation relief from SARS, check with your accountant as
certain types of business are excluded. The current turnover limit is R5
million. Members/shareholders may draw the remaining profits in the close
corporation/company by means of a dividend. This is tax free in the hands
of the member/shareholder, but the close corporation/company must pay
12, 5% on the net dividend in the form of STC.
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The close corporation/company therefore pays a flat tax rate of 30% on
taxable income and a further 12,5% STC on any dividend declared to its
members. The annual SARS assessment will coincide with the financial
year-end of your company. Your ta x return must be submitted to SARS
within 60 days of this date.
Your business will be required to make provisional tax payments at the
following stages during the year:
-
Six months before your company’s financial year-end
-
At your company’s financial year-end
-
Six months after your financial year-end if your ta xable
income exceeds R20 000
-
Seven months after your financial year-end if it falls at the
end of February annually.
2.4
Your own tax
As a sole proprietor/partner/member of a close corporation or director of a
company, you will need to register as a provisional taxpayer with SARS to
make your own tax payments on drawings taken by you from your
business.
Your individual year of assessment ends on the last day of February each
year. You will be required to make provisional tax payments by 31 August
and 28 February each year and if your ta xable income exceeds R50 000
also on 30 September each year.
2.5
Employee’s tax
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As soon as you employ staff, you will need to register as an employer.
What does it mean to be an employer?
-
Your responsibility as an employer involves keeping a record of all
remuneration paid to employees and all employee’s tax deducted
from their remuneration
-
You must pay the employee’s tax to SARS within the prescribed
time.
-
You must obtain all employee information on the prescribed IRP 2
form supplied by SARS.
-
You will have to calculate standard income tax on employees
(SITE) at the end of each tax period and collect any SITE
underdeducted or refund any SITE overdeducted. It is your
responsibility to calculate SITE and make sure that the correct
amount is deducted from the employee’s remuneration.
-
An IRP 5 must be issued to every staffmember to whom you have
paid a salary and from whom you have deducted tax during the
year. This is a summary of the employee’s tax deducted and paid
during the year. This must be done at the end of February each
year. If a staffmember leaves during the year, an IRP5 must be
issued then instead of on 28 February. A copy of the completed
IRP5 must be sent to the SARS office.
What tax do employees pay?
-
Pay-as-you-earn (PAYE) ta x must be calculated on employees’ ‘net
remuneration’ according to the tables prescribed by SARS. PAYE is
payable on an excess above R60 000 (currently) of an employee’s
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remuneration. This threshold figure can change from time to time
depending on the Minister of Finance, who declares adjustments in
his annual budget speech in February.
‘Net remuneration’ is an employee’s gross
remuneration including fringe benefits less allowable
deductions.
-
SITE is payable on the first R60 000 of an employee’s annual
remuneration according to the annual tables prescribed by SARS.
PAYE must be paid over to SARS within 7 days of the end of the
month within which the tax was deducted. An EMP 201 form must
be completed and submitted to the SARS office together with the
payment.
-
Remember, PAYE is payable on any allowances, e.g. travel
allowances, granted to staff.
2.6
UIF
This fund provides benefits for unemployed workers. You will need to
register for UIF any staff who work for you for more than 24 hours a
month. The contribution amount is 2% of the employee’s earnings. The
staff member contributes 1% and your business contributes the remaining
1% in addition to their remuneration.
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You will need to pay this monthly to the UIF/SARS within 7 days of the end
of the month and submit your return on a SARS EMP 201 form. You will
also need to notify SARS of any staff who leave during the year and the
effective date of their termination of service with the Fund. Failure to make
payment and submit returns in good time will result in penalties and
interest being levied.
A ‘blue’ card is no longer issued to employees who are members of the
Fund. This card has been replaced by a regulated form issued to the
employer by SARS as proof that employees are members.
2.7
Skills development le vy
The Skills Development Levies Act, Act 9 of 1999, established a
compulsory levy payable by most businesses for the purpose of funding
education and training. SARS is responsible for collecting these levies
from you. The amount payable is calculated as being 1% of your gross
remuneration paid to staff. (This includes staff below the tax threshold.)
A monthly return on the prescribed EMP 201 form must be submitted to
your local SARS office monthly by the 7th after the month-end.
2.8
Workmen’s compensation
The Workmen’s Compensation Act requires employers to insure their staff
against accidents or illness that could result in death or disability while
working
for
your
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business.
Remember,
your
staff
53
are the most important asset of your business. Therefore, you are both
legally and duty-bound to protect them. You must register with the
Compensation Fund and make annual contributions based on a
percentage of the annual remuneration paid to your staff. The assessment
rate depends on the nature of your business and is determined annually
by the Compensation Fund.
This protects you as an employer. You will be covered in the event of an
accident or injury while the employee is on duty and you are also
protected against any civil claims arising from injury or alleged negligence.
2.9
Insurance and assurance
Insurance is an essential aspect of your business. Your insurance broker
will be able to assess what is important to cover and at what level. The
various aspects of short- term insurance include the following:
-
Fire
-
Buildings
-
Office content
-
Business interruption
-
Accounts receivable
-
Theft
-
Money
-
Glass
-
Fidelity
-
Goods in transit
-
Business all risks
-
Accidental damage
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-
Public liability
o Product liability
o Defective workmanship
o Employer’s liability
-
Stated benefits
-
Group personal accident
-
Motor vehicle
-
Asset (plant, machinery and equipment)
-
Electronic equipment
-
Stock
-
Fixtures and fittings
-
Sasria
If you are financing assets, the bank will insist on confirmation from your
broker/insurance company that your business assets are covered by your
short-term insurance policy. They may also ask that their interest as
financiers be noted on the policy in the event of damage to the assets and
a subsequent claim.
Business assurance
It is recommended that you consult with a professional broker to assess
your assurance requirements in respect of your business, its owners and
key staffmembers. Some areas to be investigated include:
1.
Deferred compensation
This benefit is offered by employers to selected employees. It is a sum of
money that will be settled in terms of an agreement between the employer
and
employee
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at
a
certain
date
or
on
55
occurrence of a specific event. This is facilitated through an assurance
policy.
2.
Keyman assurance
This is assurance on the life of an employee to compensate the business
in the event of their premature death. It guarantees that the business will
be compensated for any disruptions to the business, it will protect any
existing credit facilities you have in place and provide funds for the
recruitment and training of a replacement.
The amount of assurance on the life of a key person in order to protect the
business against potential loss is always a difficult decision. Unlike an
asset, it has no set value. Aspects you could take into account are:
-
Annual salary
-
The number of years it will take for a replacement to reach the key
person’s current level of profitability, taking into account the
potential losses to the business while this process occurs.
3.
The costs of replacing a key person.
Buy-and-sell agreement
This is an agreement whereby the parties of a business enter into an
agreement upfront to effect life policies on each other’s lives. This is to
protect the business against untimely deaths (or disabilities) so that the
surviving parties can buy the affected party’s interest in the business.
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4.
Restraint of trade agreement
These are frequently used by businesses to protect themselves against
employees who want to leave and set up business in competition. The
amount of cover put in place must bear some relationship to the potential
damage that an employee could inflict on the company.
5.
Loan account cover
Debit loan accounts (loans made by the company to shareholders,
directors or employees) and credit loan accounts (loans made by the
shareholders to the company) in a company can be covered by
assurance.
3
Staff issues
The Basic Conditions of Employment Act, Act 75 of 1997
The Act (replacing the Basic Conditions of Employment Act, Act 3 of 1987,
and the Wage Act, Act … .. of … .. ) came into effect on 1 December 1998
and sets out the basic conditions of employment.
Some of the issues covered by the Act include:
-
Conditions of employment service
-
Ma ximum working hours
-
Maternity, annual and sick leave
-
Particulars of the termination of employment
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-
Payment
of
remuneration,
deductions
and
other
statutory
requirements concerning the payment of contributions to different
funds.
-
Monitoring and enforcement of the law and legal proceedings.
It is imperative that you are familiar with the contents of the Act and its
implications for your business. If not managed appropriately, certain
situations could result in unnecessary money and time being spent.
Employment Equity Act, 1998
The Employment Equity Act is intended to create equal opportunities and
fair treatment within the work place for previously disadvantaged
individuals. It sets parameters for employment equity and provides
guidelines regarding the treatment of staff and unfair discrimination.
You should be familiar with the Act and its implications for your business.
4.
How do I go about financing my business?
What do I want to achieve and how do I go about it? The next issue to
consider is how to finance the venture to get it up and running.
Different needs for capital could be as follows:
1.
Start-up finance to get the business going
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2.
Finance to keep the business running in its various stages
3.
Finance to expand or re-engineer an existing business
There are two different forms of finance to consider:
4.1
1.
Debt finance
2.
Equity finance
Debt finance
This is the provision of finance by outside parties e.g. a bank who will not
have any interest in your business and will be paid on a contractual basis
through interest payments and capital repayment.
Different types of debt finance could be as follows:
1.
Overdrafts
2.
Debtor finance/factoring
3.
Asset-based finance
-
Instalment sale agreements
-
Lease agreements
-
Rental agreements for your assets
4.
Term loans
5.
Property finance
It is essential that you match the term of the finance with the purpose.
What is finance required
Duration of finance
for?
requirements
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Facilities available
59
Working capital
Short term
Debtors Stock
Creditors
Overdraft facility
Debtor finance
Short term
Overdraft
Terms with your
suppliers
Plant and equipment
Medium term
Asset-based finance
Vehicles
-Instalment sale
Setting up costs
-Lease
Renovation of premises
- Rental
Term loan
Property finance
Long term
Mortgage
Let’s look at some of the forms of finance:
1
Short-term finance
1.1
Overdraft
An o verdraft is a facility, payable on demand, granted by a bank on your
current account for your short-term financial requirements. This facility
could cover the purchase of your initial stock and your debtors and would
fluctuate once your trading funds are received.
1.2
Debtor finance/factoring
This is normally done by a debtor finance company whereby you are
granted a loan against the funds tied up in your debtors book.
2
Medium-term finance
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Type of asset
finance
INSTAL MENT
Tax implications
SALE
assets are being
Provided
used
VAT implications
the VAT is
in
capitalised
the upfront.
production
of
Ownership of
asset
You become the
owner of the asset
once the debt is
settled.
income,
depreciation and
interest
payable
are allowed as a
tax deduction.
LEASE
Full lease
VAT is
Ownership
payments are
capitalised
in the bank and at
claimable
upfront.
the
end
vests
of the
against pre-tax
term of the lease
income of the
you may elect to
business.
buy it from
the
bank, sell it, return
it to the bank or
refinance it.
RENTAL
Full rentals are
VAT is payable
Ownership
claimable
on each rental
in the bank and at
against pre-tax
payment.
the
end
vests
of the
income of the
term of the lease
business.
you may elect to
buy it from
the
bank, sell it, return
it to the bank or
refinance it.
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The Credit Agreements Act (Act … . of … … ) will determine the maximum
period of the loan, depending on the nature of the asset, which changes
from time to time. Residuals or balloon payments could also be
incorporated into the structure of your agreement. This would ease your
cash flow. However, interest is calculated on the full residual/balloon
payment until it is due for payment, which could prove to be more
expensive.
2.2
Medium-term loan
A term loan is finance granted over a period of three to seven years with a
structured repayment plan. You could consider applying for a term loan
from a bank for one of the following reasons:
6. Renovations to premises
7. Buying or setting up a business
A bank would normally require collateral to secure the loan.
2.3.
Long-term finance
Commercial and industrial property loans are granted in the form of
mortgage bonds. This form of finance may be required to purchase an
existing property or develop a new one.
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4.2
Equity finance
Equity finance refers to capital injected into the business by the owners.
Money used to finance a startup venture is often referred to as seed
capital. This can take the following forms:
1.
Capital invested by the owners
2.
Loans made to the business by the owners
3.
Capital invested by outside parties
4.
Retained earnings in the case of existing businesses.
This is money invested in a business in return for part of the business.
The return is in the form of income or a return on capital.
1.
Capital invested by the owners
In startup ventures, the founders of the business are expected to provide
‘hurt’ money. If you put your own money at risk in your business it shows
outsiders that you are serious about what you are embarking on and that
you expect a greater return on your money than you would receive if you
invested elsewhere.
2.
Loans made to the business by the owners
These are often represented in the balance sheet of a business as
members’/ shareholders’ loan accounts. These have to be repaid, based
on the terms laid out by the owners, and may be interest bearing. This
interest, which is paid to the owners for their loans to the business, is a tax
deductible expense. A members’/ shareholders’ loan account may also
arise from profits made by the business but not taken by the
members/shareholders when reinvested in the business.
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3.
Capital invested by outsiders
External finance could be another form of equity finance. These are funds
sourced from ‘business angels’, i.e. people who invest in your business
and provide capital in return for a return on their capital. Business angels
do not expect a share in your business.
5
WHAT WILL THE BANK REQUIRE FOR AN APPLICATION FOR
FINANCE?
In assessing your application, the following aspects are taken into
account:
1. The owners of the business and their financial strength.
2. What experience/qualifications do they have?
3. How long has the business been in existence?
4. Nature of your business and the type of industry you are invol ved in.
5. Who are your customers?
6. Who are your suppliers?
What documents should I provide the bank with?
1. Financial statements/management accounts if the business is already
trading
2. Statement of assets and liabilities for the owners of the business.
3. A copy of your business plan if you are requesting funds to set up the
business.
It is common practice for the bank to ask for security for your facility.
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Security is collateral, which could be in the form of an investment,
assurance policy or equity in your property. This is requested to ensure a
greater commitment from you to meet your obligations in terms of the
facility and also to reduce the risk for the bank. Common sources of
security are as follows:
1. Personal suretyships from the owners of the business. This is where an
individual undertakes to repay a loan if the borrower does not repay it
when called upon to do so.
2. Covering mortgage bonds over property. A bank might register a
covering mortgage bond over a property to secure a facility, provided there
is sufficient value in the property.
3. Notarial bond over movable assets. This is similar to a mortgage bond,
but the underlying assets for the facility are movable. This form of
collateral is not favoured by banks for normal borrowings.
4. A bank can take cession of investments such as listed shares, bank
deposit accounts, unit trusts and investments.
5. A bank can take cession of assurance policies, provided they have
sufficient cash values to secure borrowings.
6. A bank may also take a cession of your debtors book as security for
finance. The bank’s exposure would be based on the calibre, quality and
age analysis of your debtors book. A percentage of the total debtors book
is normally granted as a facility.
6.
How do I analyse my financial statements? What do I look for?
What is a balance sheet and what does it mean to m y business?
A balance sheet is a snapshot of your business at a given moment
(normally your financial year-end). It details the non-trading side of your
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business i.e. assets, liabilities and the net worth of the business. Current
assets include cash at bank, stock and debtors, while fixed assets include
buildings and equipment. Liabilities are split into current liabilities (must be
repaid within one year) and long-term liabilities, which would be longterm
loans and the finance on properties, equipment etc.
The difference between the assets and liabilities is the net worth of your
business.
What is an income statement and what does it mean?
This is a profit or loss statement reflecting your trading record for a given
period. It is a good idea to produce this on a monthly basis so that you
can identify problems and address them in good time. The income
statement shows your sales and costs and determines a net figure at the
end of the period showing a profit or loss.
What is a cash flow projection?
Cash flow is the life-blood of your business. A lack of control in collecting
outstanding money, even if you are making your sales targets, could
paralyse your business. The cash flow projection will show when money is
flowing in and out of your business and will highlight the existence of
additional funding requirements.
Example of a balance sheet and income statement of a hypothetical
close corporation
NODDY’S CC
Income statement for the year ended 31 December
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2003
2002
R’000
R’000
Gross revenue
3 074
2 567
Cost of sales
2 088
1 711
Gross profit
986
856
Expenditure
568
553
- Selling expenses
100
108
- General and administrative expenses
194
187
35
35
- Depreciation expense
239
223
Profit before taxation
418
303
94
64
Profit after ta x
324
239
Retained profits at beginning of the year
221
167
Retained profits at end of year
545
406
- Lease expense
Tax
Balance sheet for year ended 31 December
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2003
2002
R’000
R’000
Property, plant and equipment
2 374
2 266
Current assets
1 155
953
289
300
363
288
3 529
3 219
Members’ interest
100
100
Distributable reserve
545
406
Members’ loans
1 241
1 263
Borrowings
1 023
967
Trade and other payables
382
270
Taxation
238
213
ASSETS
Non-current assets
Inventories
Accounts receivable 503 365
Bank balances
Total assets
MEMBERS’ INTEREST AND LIABILITIES
Members’ interest and reserve
Non-current liabilities
Current liabilities
Total members’ interest and liabilities
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3 529
3 219
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6.1
What is leverage?
Leverage results from the use of fixed operating and financial costs by the
business to maximise the returns to the owners of the business. Changes
in leverage result in a change in the level of return to the owners and
associated risk. Generally, increases in leverage result in increased return
and risk, whereas decreases in leverage result in decreased return and
risk for the owners. The amount of leverage in the capital structure of a
business (the mix of long-term debt and equity maintained by the
business) can significantly impact on its value by affecting return and risk.
These risks are almost completely controlled by management e.g. the
fixed-costs assets. Because of its effect on the value of the business, the
owner must understand how to measure and evaluate leverage, especially
when attempting to create the best capital structure. Your accountant will
be able to help you with this and give you the optimal capital structure
within which your business will best operate.
6.2
Breakeven analysis
Breakeven analysis is probably one of the most important ratios you will
use in planning and assessing the outcomes of different cash flow
scenarios. It will determine the level of operations necessary to cover all
your operating costs and will also evaluate the profitability associated with
different levels of sales.
At the breakeven point, your earnings before interest and tax will be zero.
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The first step in determining the breakeven point is to divide your
expenses into fixed and variable costs. Fixed costs do not depend on your
sales e.g. rental and lease agreements, while variable costs vary directly
with sales e.g. cost of supplies.
Breakeven = Total fixed costs
Selling price – variable cost
e.g. Let’s assume that, for our example above, Noddy’s CC has fixed
operating costs of R2 500,00 and its sales price per product is R10,00. Its
variable cost per unit is R5,00.
Breakeven = R2 500,00
.
= 500 units
R10,00 – R5,00
This means that, before it makes one cent of profit, Noddy’s has to sell
500 units to break even and cover its fixed overheads.
6.3
How ‘liquid’ is my business?
The liquidity of a business is measured by its ability to meet its short-term
obligations as they fall due. Remember, for all three ratios, the higher the
value, the more liquid the business and the better you are equipped to
meet your short-term debts. Having said this, there is a cost involved for a
business to be liquid. This is because current assets are less profitable
than fixed assets and current liabilities are a more expensive source of
financing than long-term financing. This needs to be actively managed for
your business to operate at its most efficient level.
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The three basic measures of liquidity are:
-
net working capital
-
the current ratio
-
the quick (acid-test) ratio
6.3.1 Net working capital
Although not an actual ratio, this formula is often used to measure the
overall liquidity of a business. It is calculated as follows:
Net working capital = current assets – current liabilities
The net working capital for Noddy’s CC is :
R1 155 000 – R144 000 = R1 011 000 for 2003
This figure is not used in comparing the performance of different
businesses but is useful for internal control.
6.3.2 The current ratio
The current ratio measures the liquidity of a business and the ability of the
business to meet its short-term debts.
Current ratio =
Current assets
Current liabilities
The current ratio of Noddy’s CC for 2003 is:
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R1 155 000 =
1,86
R620 000
The current ratio acceptability is normally 2, but this varies for different
industries. It means that you have two times cover for current assets for
every current liability.
It is also useful to note that, if a company’s current ratio is 1, its net
working capital is zero. If the current ratio is less than 1, it will have a
negative net working capital.
6.3.3 Quick (acid-test) ratio
This formula also measures the liquidity of a business but excludes
inventory from the formula. Inventory is not taken into account as it is
generally seen as the least liquid asset in a business. This is because
inventory sometimes consists of partially completed items, obsolete items
and special-purpose items and is often sold on credit, which means it
becomes a creditor before being converted into cash.
Quick ratio
=
Current assets less inventory
Current liabilities
The quick ratio for Noddy’s CC is :
R1 155 000 – R289 000
=
1,40
R620 000
A quick ratio of 1 or more is generally acceptable depending on the
industry you operate in. This ratio provides a better measure of overall
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liquidity only when the inventory is not easily converted into cash in a
business. If the inventory turns over frequently for your business, it would
better to gauge your performance using the current ratio.
6.4
How do I analyse the activity in my business?
Acti vity ratios can be used to assess the speed with which current
accounts i.e. inventory, debtors and creditors are converted into cash in
your business.
You can use the following formulas:
-
Inventory turnover
-
Average collection period
-
Average payment period
-
Fixed-asset turnover
-
Total asset turnover
6.4.1 Inventory turnover
This measures the activity and liquidity of the inventory of a business. It is
calculated as follows:
Inventory turnover
=
Cost goods sold (cost of sales)
Inventory on hand
For Noddy’s CC the inventory turnover will be:
R2 088 000 =
7,2
R289 000
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The resulting figure is only useful when compared with that of similar
businesses in the industry or with the past inventory turnover of your
business. An inventory turnover of 20 would be acceptable for a grocery
shop, but an inventory turnover of 4 would be more acceptable for an
aircraft manufacturer.
6.4.2 Average collection period
This formula is useful when evaluating credit and collection policies in your
business. The formula is calculated as follows:
Average collection period =
Debtors
Average sales per day
=
Debtors
Annual sales/360
The average collection period for Noddy’s CC is:
R503 000
=
58,9 days
R8 539 000 (R3 074 000/360)
Therefore it takes on average 58,9 days to collect money from a debtor.
This formula is only meaningful in relation to the terms granted by the
business to its debtors. If, for instance, Noddy’s CC extends only 30-day
terms to its debtors, an average collection period of 58,9 days indicates
that the debtors book is poorly managed and stricter controls could be
implemented. Of course, the longer collection period could result from an
intentional relaxation of credit term enforcement due to competitive
pressure. If the business had a 60-day credit term arrangement with its
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debtors, the average collection period of 58,9 days would indicate that
good controls are in place to manage the debtors book. It is worth
mentioning that the longer your average collection period, the more
expensive your inventory holding cost.
6.4.3 Average payment period
The average payment period is calculated as follows:
Average payment period
=
Creditors
Average purchases per day
=
Creditors
Annual purchases/360
The difficulty in calculating this ratio stems from the need to find your
annual purchases as this is not a part of your financial statements.
Ordinarily, purchases are estimated as a given percentage of your cost of
sales. If we assume that Noddy’s CC’s purchases were equal to 70% of its
cost of sales, its average payment period would be:
R382 000
70% x R2 088 000/360
=
R382 000
=
94,1 days
R4 060 000
These figures are only meaningful in relation to the credit terms granted to
the business. If Noddy’s CC was granted on average 30-day credit terms
by its suppliers, the 94,1 days would indicate poor management of the
payment of its creditors. If the business generally has a 90-day credit term
arrangement with suppliers, this would indicate that strict controls are in
place with regard to creditor payments. If a business is looking to
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source outside finance, prospective lenders would be particularly
interested in seeing what the outcome of this ratio would be as it would
give an indication of your recent payment history.
6.4.4 Asset turnover
This ratio measures the efficiency with which your business has been
using its fixed or income-producing assets to generate sales. The formula
is calculated as follows:
Fixed asset turnover
=
Sales
Property, plant and equipment
The fixed-asset turnover for Noddy’s CC for 2003 would be as follows:
R3 074 000 =
1,29
R2 374 000
Therefore the business turns over its net fixed assets 1,29 times a year.
Generally higher fixed-asset turnovers are preferred, since they reflect
greater efficiency of fi xed-asset utilisation.
6.4.5 Asset turnover
Total asset turnover indicates the efficiency with which the business uses
all its assets to generate its sales. Generally the higher the total asset
turnover of the business, the more efficiently its assets are being used.
This measure is probably of greatest interest to management as it
indicates whether the operations of the business are financially efficient.
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Total asset turnover
=
Sales
Total assets
The value of Noddy’s CC’s total asset turnover for 2003 is:
R3 074 000 =
0, 87
R3 529 000
Therefore the business turns over its assets 0,87 times a year.
6.5
Analysing debt within your business and what it means
The debt position of a business indicates the amount of other people’s
money being used to generate profits. Prospective lenders are particularly
interested in the degree of indebtedness and ability to repay debts, since
the more indebted the business, the higher the probability that it will be
unable to satisfy the claims of all its creditors. Management of the
business must be concerned with indebtedness in recognition of the
attention paid to it by other parties and in the interest of keeping the
business solvent.
In general, the more debt a business uses in relation to its total assets, the
greater its financial leverage (the magnification of risk and return
introduced through the use of fixed-cost financing such as debt). In other
words, the more fixed-cost debt a business uses, the greater will be its risk
and expected return.
There are two types of debt measurement:
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6.5.1 The degree of indebtedness measures the amount of debt relative to other
significant balance sheet items.
6.5.2 The ability of a business to service debts refers to its ability to make
contractual payments required on a scheduled basis over the life of a debt.
There is also a coverage ratio which prospective lenders would assess
before lending money to a business. This measures the ability of a
business to meet contractual interest payments e.g. on a lease.
6.5.3 Times interest earned ratio
6.5.1 Debt ratio
The debt ratio measures the proportion of total assets financed by the
creditors of the business. The higher this ratio, the greater the amount of
other people’s money being used to generate profits.
Debt ratio
=
Total liabilities
Total assets
The debt ratio for Noddy’s CC for 2003 is:
R2 884 000 =
0,8172
=
81,72%
R3 529 000
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This indicates that the business has financed 81,72% of its assets with
debt. The higher this ratio, the higher the financial leverage of a business
i.e. the greater the risk and potential return for the business.
6.5.2 Debt-equity ratio
The debt-equity ratio indicates the relationship between the long-term
funds provided by creditors and those provided by the owners of the
business. It is commonly used to measure the degree of financial leverage
of the business and is calculated as follows:
Debt-equity ratio
=
Long-term debt
Owners’ equity
The debt-equity ratio for Noddy’s CC for 2003 is:
R1 023 000 =
0,5424
=
54,24%
R1 886 000
Therefore the long-term debts of the business are only 54,24% as large as
the owners’ equity. This figure is really only meaningful in light of the line
of business. Businesses with large amounts of fixed assets, stable cash
flows, or both, typically have high debt-equity ratios, while less capitalintensive businesses, those with volatile cash flows, or both, tend to have
lower debt-equity ratios.
6.5.3 Times interest earned ratio
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The times interest earned ratio measures the ability of the business to
make contractual interest payments. The higher the value of this ratio, the
better able the business is to fulfil its interest obligations. If you are
applying for outside finance for your business, the bank will be particularly
interested in this ratio as it will give them an idea of how you will pay them
back.
The time interest earned ratio is calculated as follows:
Times interest earned
=
Earnings before interest and tax
Interest
Applying this ratio to Noddy’s CC yields the following value for 2003:
Times interest earned
=
R418 000
=
4,5
R93 000
As a rule, a value of at least 3 and preferably closer to 5 is suggested.
This means for Noddy’s CC that if its earnings were to shrink by 78%, the
business would still be able to pay its interest obligations. This is a good
margin of safety for the business.
6.6
Analysing the profit of your business
The profitability of a business can be assessed relative to sales, assets or
equity. Without profits a business would not be able to attract outside
capital and, moreover, present owners and creditors would become
concerned about the future of the business and their ability to reco ver their
funds.
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The ratios used to measure the profitability of your business are:
1.
Gross profit margin
2.
Operating profit margin
3.
Net profit margin
4.
Return on total assets (roa)
5.
Return on equity (roe)
6.6.1 Gross profit margin
The gross profit margin measures the percentage of each sales amount
remaining after the business has paid for the cost of its goods. The higher
the gross profit margin, the better and the lower the relative cost of goods
sold. The ratio is calculated as follows:
Gross profit margin =
Sales – cost of goods sold =
Gross profits
Sales
Sales
The value for Noddy’s CC gross profit margin for 2003 would be:
R3 074 000 – R2 088 000 =
R3 074 000
R986 000
=
32,1%
R3 074 000
This figure is lower than the gross profit margin of 33,3% for 2002 and the
owners would need to investigate the reasons for this decline.
6.6.2 Operating profit margin
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The operating profit margin measures what are often referred to as ‘pure
profits’ earned on each rand sold. Operating profits are pure in the sense
that they ignore any financial or government charges (tax and interest) and
measure only the profits earned on operations. A high operating profit
margin is preferred. The operating profit margin is calculated as follows:
Operating profit margin
=
Profit before taxation
Sales
The value for Noddy’ CC is:
R418 000
=
13,6%
R3 074 000
A comparison with industry norms would be valuable in this case.
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6.6.3 Net profit margin
The net profit margin measures the percentage of each rand of sales
remaining after all expenses have been deducted. The higher the net profit
margin, the better for the business. The net profit margin is a commonly
cited measure of the success of a business. ‘Healthy’ net profit margins
differ considerably across industries. A net profit margin of 1% or less
would not be unusual for a grocery store, while a net profit margin of 10%
would be low for a retail jewellery store. The net profit margin is calculated
as follows:
Net profit margin
=
Net profits before taxation
Sales]
Noddy’s CC net profit margin for 2003 is:
R418 000
=
13,60%
R3 074 000
A comparison with industry norms would be valuable in this case.
6.6.4 Return on total assets (roa)
The return on total assets, which is often called the return on investment of
the business, measures the overall effectiveness of management in
generating profits with the available assets. The higher the return on total
assets, the better.
The return on total assets is calculated as follows:
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Return on total assets
=
Net profits after taxation
Total assets
Noddy’s CC return on total assets in 2003 is:
R324 000
=
9,18%
R3 529 000
This shows that the return on its investment is 9,18%
A comparison with industry norms would be valuable in this case.
6.6.5 Return on equity (roe)
The return on equity measures the return earned on the owners’ equity in
the business. Generally, the higher this return, the better off the owners
are. Return on equity is calculated as follows:
Return on equity
=
Net profits after taxes
Owners’ equity
This ratio for Noddy’s CC in 2003 is:
R324 000
R1 886 000 =
17,18%
A comparison with industry norms would be valuable in this case.
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7.
WHAT CONTROLS DO I NEED TO HAVE IN PLACE?
Having the right controls and systems in place could be decisive for the
success of your business. The only way to keep track of how your
business is performing is to introduce an effective bookkeeping method
with accurate financial information.
There are basically three facets of control that need to be implemented
and maintained at all times.
Internal controls
This is your system of checks and balances to ensure that all actions in
your business are in accordance with your business objectives, e.g.
ensuring production line efficiency by monitoring quality and consistency.
A typical control would be to monitor the number of defective products
produced.
Administrative controls
These methods and procedures facilitate management and planning and
the control of your operations, e.g. management of your debtors book,
analysis of its age, and collection of outstanding monies.
Accounting controls
These are methods and procedures implemented in your business to
authorise transactions, safeguard assets and ensure the accuracy of
financial records, e.g. weekly/monthly physical inventory count.
7.1
Inventory
Due to the movable nature of inventory your controls over this asset need
to be extremely tight. A monthly inventory count is a minimum
requirement. Should you be in an industry where inventory moves daily, it
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would be advisable to do daily inventory counts. Unfortunately the
temptation to steal exists in any business.Exercising tight controls will
reduce the risk and temptation to steal.
Bear in mind that it can take a multiple of turnover to create a fraction of
the net profit.
Exercising strict ‘receiving’ controls and inventory input controls as well as
regular stock counts will assist in minimising potential losses.
7.2
Debtors
It is very attracti ve to gain new customers and grow your business, but the
quality of the customers is vital to positive growth. Whenever you decide to
provide credit payment terms to your customers, it is imperative that you
apply these controls:
− Request your bank for a ‘full general’ report on your potential customer,
indicating their payment ability over the period of credit you wish to grant.
You could be offering your customer 30 days, 60 days or 90 days. Bear in
mind that the longer you provide credit, the more expensive your product
becomes as you are now financing your customer’s purchase. You need
to factor this into your product cost when determining your pricing.
− Analyse your debtors book on a monthly basis to ensure that customers
are paying within the agreed period. Should a customer ‘slip’ from 30 days
to 60 days, it is the first sign that there may be payment difficulties. Ensure
that you contact these customers immediately in order to make new
arrangements regarding the outstanding balance.
The two key messages regarding debtors are:
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− It is of no benefit to your business to have a huge debtors book with few
customers paying.
− You finance your debtors book. The higher your debtors book, the higher
your cost, hence the more costly (to your business) your product.
7.3
Creditors
From a cash flow perspective it is attractive to gain as much credit as
possible, but the ‘evil day’ will come when you will have to pay outstanding
accounts. This is an efficient mechanism to create short-term liquidity for
your business, but it should not be allowed to run out of control. As
attractive as credit terms are, you need to maintain sufficient control to
ensure that your creditors can be settled by the business at any time. This
is a common cause of insolvency among many businesses.
Control is necessary to ensure that your short-term creditors never exceed
your short-term debtors and your cash flow is sufficient to meet all shortterm obligations.
7.4
Role of the financial officer
Your accountant and/or financial manager plays an integral part in your
business and you should nurture the relationship. Their role should
encompass the following:
7.4.1 Financial management
Weekly/Monthly reports should be produced showing the activity of the
business so that any errors can be identified in good time for rectification
and any opportunities identified as well. Monthly income statements
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should be produced as well as management accounts to enable you to
manage your business.
7.4.2 Financial competence
-
All controls to be efficiently implemented and maintained.
-
Financial requirements to be determined in good time to
prevent a cash flow crisis.
-
Effective management of monthly accounts, creditor
payments and debtor collections.
7.4.3 Another view
It is strongly recommended that a qualified financial adviser or accountant
be appointed to review your financial statements periodically. In managing
a business, one often has a single view of the operation which can hamper
the identification of opportunities and threats. Having ‘another view’
creates an additional, objective perspective of your business, which
invariably provides refreshing input.
7.4.4 Financial review
This is the role of your accountant who will conduct an annual review of
your financial accounts and business plan.
7.5
Budgets
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Budget forecasting is an effective planning tool. It forms the basis of
marketing, sales and operational effectiveness, which creates parameters
within which to achieve your desires, goals and objectives.
Budgets are based on historical data as well as future strategies.
The various budgets to draft are as follows:
Sales budget
Operating expenses budget
Purchases budget
Capital expenditure budget
Cash flow projection
8.
WHAT RISKS SHOULD I BE AWARE OF?
8.1
Competitors
The need to monitor competitor activity is paramount. Competitors may be
enhancing a product and the manufacturing, marketing or delivery thereof,
which could result in your business losing market share. A further
advantage of competitor analysis is the knowledge gained. You may well
identify an opportunity in your competitor’s business that may be exploited
or enhanced, which would result in an increased market share for you.
8.2
Pricing
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A regular review of your pricing strategy will enable your business to
remain competitive in the market place. Some review questions are as
follows:
−
Is my product competitively priced?
−
Do I need to make product, process or marketing adjustments to
ensure competitive pricing?
−
Is my product priced too competitively, i.e. too low?
The answers to the above questions may necessitate in a review and
change to your current strategy.
8.3
Inflation
Inflation has become a part of South African business life and has a
significant impact on consumer spending. Monitoring the movement of
inflation will enable you to assess the consumer’s propensity to spend.
Should inflation rates move down, it would suggest an easing of interest
rates and hence a propensity for consumers to borrow and spend more.
The converse applies in an environment of increasing interest rates. For
example, a retailer would have a good indication as to whether or not a
profitable festive season could be expected if inflation rate movements
were understood. Again the direction of inflation (up or down) may
necessitate a review and change to your current strategy.
8.4
Foreign exchange
This is particularly important to import and export businesses. If your
business imports or exports products, supplies, parts or materials, its
profitability could be severely impacted by movements in exchange rates.
An importer of goods would be negatively impacted by a deterioration in
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the rand, as the imported goods would cost more. An example will
illustrate the impact:
Month One
1 000 units imported at USD1,00 per unit @ R6,40 = R6 400,00
Month Nine
1 000 units imported at USD1,00 per unit @ R7.10 = R7 100,00
This would result in a loss of R700,00 on that consignment of goods,
which directly impacts on your unit cost. The impact of a strengthening of
the rand would have the converse effect.
Conversely an export business will be positively affected by a deterioration
of the rand. An e xample will illustrate the impact:
Month One
1 000 units exported at USD1,00 per unit @ R6,50 = R6 500,00
Month Nine
1 000 units imported at USD1,00 per unit @ R7,50 = R7 500,00
This would result in a net gain of R1 000,00 on the same consignment of
goods. The impact of a strengthening of the rand would have the converse
effect.
The movement of exchange rates could well require a reassessment of
your current strategies and necessitate change in order to remain
competitive.
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9
WHAT SHOULD I CONSIDER IF I AM EXPANDING MY BUSINESS?
9.1
Funding
As your business begins to grow, the need for additional cash resources
increases greatly. The decision as how to finance the growth is vital to the
success of the business. There are several forms of funding, namely:
−
Loan funds from the members, directors or sole proprietor
−
A capital injection from a new shareholder
−
A bank loan.
All of the above ha ve an associated cost. Loan funds require the owners
of the business to forego their hard-earned cash. A new shareholder
requires the current owners to part with a share of the business. A bank
loan costs you interest. The key message in this regard is to assess the
real cost of the additional funding requirement. A bank loan may appear to
be the most attractive option as the owners of the business do not forego
personal funds nor do they lose any portion of the business. However,
your business may not be able to fund the additional interest expense,
which may cost you the entire business in the long run.
9.2
Market potential
Investigate whether the market has the propensity to sustain your intended
growth. You do not want to scale up resources, equipment and machinery
and discover at a later stage that the market does not exist for your
projected sales.
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9.3
Capacity and resources
Ensure that your business has adequate resources to produce sufficient
supply to meet the expected demand. These resources are supplies and
materials, staff and training, equipment and machinery, marketing,
distribution channels and process efficiencies.
9.4
Legislation
Ensure that you are aware of any legislative changes that will impact on
your business. Labour legislation has been amended regularly in the last
decade, which could have a significant impact on your business.
9.5
Economy
Economic data is released on a regular basis and provides you with an
indication of the economic growth rate of the country. Again, this is
indicative of the propensity for consumer spending, which would impact on
your intended growth plans.
9.6
Return on investment
The most important aspect of your growth plan is to ensure that you have
an acceptable return on your investment. Your business needs to ensure
that the return on your investment outperforms the cost of your funding.
The guidance of an accountant/financial adviser would assist in projecting
a cash flow analysis that would provide your business with an acceptable
return on investment.
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When planning for any form of growth in your business it is strongly
recommended that a review of your business plan be conducted to ensure
that every aspect of your business is adequately equipped to meet the
demands of your planned growth.
10
Retirement planning
You need to start planning for your retirement early on and update your
financial plan as your business grows and expand. This area of a person’s
life is neglected at their peril. There are many different retirement vehicles
available. A credible financial adviser will assist you to plan for your future.
Your personal retirement plan should be updated annually.
Do you have a valid will and, if so, is it up to date? Are your affairs in order
for your survivors if you were to pass on tomorrow? These are questions
we dread asking ourselves, but they are vital.
Firstly, a valid will is essential to ensure that your survi ving family will be
cared for as you would have wished and that your intentions for their
future are carried out. Financial tax planning is also essential. You can
start from a early age, minimising the tax (estate duty) payable on your
estate so that the maximum benefit is left to your survivors. You are
currently granted an abatement of R1 500 000,00 on your estate on your
death and the balance is taxed in the form of estate duty at a current rate
of 20%.
It is a good idea to consult with your financial adviser about various
options to minimise the growth in your personal estate and to limit the
estate duty payable on your death.
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SECTION C: OTHER MATTERS TO CONSIDER
1.
1.
Black economic empowerment
2.
Protecting your intellectual property
3.
Donations tax
4.
Capital gains tax
5.
Retention of records
Black economic empowerment (BEE)
It has been established that South Africa requires a focused BEE strategy
to achieve ‘broad-based’ economic empowerment of black persons
(blacks, Coloureds and Indians). This will lead to growth, development and
stability in South Africa.
Some of the key objectives of the BEE strategy are as follows:
1.1
Increase in the number of black people who own and control existing and
new businesses.
1.2
Increase in the number of new black businesses.
1.3
Increase in the number of black people in executive and senior
management positions of businesses in all sectors.
1.4
An increased proportion of ownership and management of economic
activities in community and broad-based businesses i.e. trade unions,
employee trusts and collective enterprises.
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1.5
An increase in the ownership of land, assets, improved access to
infrastructure, acquisition of skills and participation in productive economic
activities in under-developed regions.
1.6
Enhanced and shared economic growth.
1.7
An increase in income levels of black persons and a levelling of income
between and within different race groups.
It is imperative that you are aware of the content of the BEE strategy and
its implications for your business.
2
Protecting your intellectual property
The law provides for the protection of your intellectual property through the
following vehicles. It is imperative that you consult with an attorney who
specialises
in
patents, copyrights,
trademarks,
registered
design
trademarks and licensing thereof if you feel that it is relevant in your
business.
2.1
Patents
The Patents Act, Act 57 of 1978, regulates patents. A patent is issued by
the Patent Office for 20 years and protects your invention from anyone
who intends of copying it.
2.2
Registered designs
The Designs Act, Act 195 of 1993, can protect specialist designs from
anyone who intends copying it.
2.3
Trademarks
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A trademark means words or a design unique to the goods or services of a
business that distinguish it from other suppliers or manufacturers.
Trademarks can be registered over these words or designs for 10 years.
2.4
Copyright
The law of copyright protects literary, musical and artistic works, computer
programmes, broadcasts, sound recordings and films.
2.5
Licensing
This is a right given by an owner of intellectual property to another party
by means of an agreement for the use of the intellectual property.
3.
Donations tax
Donations tax is payable by any individual living in South Africa on the
gratuitous disposal of property. Principal exemptions include the following:
-
Donations between husband and wife
-
Donations to charitable, ecclesiastical and educational institutions
-
Casual donations up to R10 000 per annum by donors other than
natural persons
-
Donations by natural people exceeding R30 000 per annum
-
Donations outside South Africa, subject to certain conditions
Donations tax is payable within three months of the donation at a flat rate
of 20%.
4.
Capital gains tax
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Capital gains tax is payable on the disposable of assets that take place
after 1 October 2001. This applies to all assets, including offshore assets.
The amount of the capital gain to be taxed is calculated as the difference
between the proceeds of the sale and the base cost of the asset. The
base cost of an asset refers to the cost of acquiring the asset, including
costs thereof.
In respect of natural persons, a R10 000 per annum exclusion applies and
the exclusion is R50 000 in the year of a natural person’s death.
The capital gain is included in the taxable income of person/entity who
made the capital gain and taxed at the normal income tax rates applicable.
5.
Retention of records
It is important to note that records pertaining to your business must be
kept for periods specified by SARSR for inspection at any time. Any
documentation relating to potential capital gains tax transactions should be
retained indefinitely. The time frames for other documents are as follows:
5.1
Books of prime entry
-
Cash books, ledgers, asset registers, journals and all supporting
schedules to these accounts should be kept for 15 years.
-
Vouchers, bank statements, invoices and statements, goods
received notes, salary registers, sales tax records, tax returns and
tax assessments should be kept for five years.
5.2
Employee records
-
Expense accounts, payrolls, tax returns etc. should be kept for five
years.
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-
Accident reports, training records, staff records should be kept for
three years.
5.3
Statutory and share records
-
All business documentation, such as certificates of change of
name, founding statements and articles of association, should be
kept indefinitely.
-
Registers of directors and officers, directors’ interests, members,
pledges and bonds and details of all company share transactions
should be kept for 12 years.
SECTION D
SMALL BUSINESS SERVICES calendar
VAT return
25th day of the month following
the end of the tax period
RSC returns
20th, monthly
UIF
7th, monthly
PAYE
7th, monthly
SDL
7th, monthly
Workmen’s compensation
31 March
IRP5 forms
29 April
End of financial year for
End of February
individual tax payers
Individual tax returns due
End of Ma y
Close corporation and private
60 days after financial year-end
company tax returns due
Provisional tax returns due for
31 August
individuals
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1st
28 February
2nd
30 September
3rd
Provisional tax returns for close
corporations and private
companies
Six months before financial
1st
year-end
2nd
At financial year-end
3rd
Six months after financial yearend (seven months, if the
financial year-end is February)
Annual budget speech
February annually
Medium-term budget speech
October/November annually
GDP supply-side figures
Quarterly in February, Ma y,
August and November
Monetary Policy Committee
Scheduled for 2004:
meetings
1. 26, 27 February
2. 21 and 22 April
3. 9 and 10 June
4. 11 and 12 August
5. 13 and 14 October
6. 8 and 9 December
South African Reserve Bank
Quarterly in March, June,
Quarterly Bulletin
September and December
SECTION E SMALL BUSINESS SERVICES dictionary
A
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Accounting controls
Methods and procedures implemented in your
business
for
authorising
transactions,
safeguarding assets and ensuring accuracy of
financial records
Accounting equation
Accounting ratios
Assets = Liabilities plus equity
Measurement techniques used to analyse and
compare the performance of businesses
Accrual
An accounting term which acknowledges that
an expense has been incurred but is not yet
due for payment e.g. interest calculated
monthly but only paid quarterly
Acquisitions
A business acquires a target business which
complements their current product/service
offering
Administrative controls
Methods and procedures that facilitate
management, planning and the control of your
operations
All risks
Applies to accidental damage cover provided
by an insurance policy e.g. damage caused by
a flood or fire
Assets
These are items used in the production of
income for a business by offering a service or
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producing products. They have a monetary
value and are owned by the business.
Audit
An
examination
accounting
and
records
verification
of a
business
of
the
by a
registered accounting and auditing firm. This is
compulsory for a private company.
B
Backward integration
A form of a diversification strategy e.g buying
an accounting recruitment agency
Balance sheet
A snapshot of your business at a given
moment (normally your financial year-end). It
details the non-trading side of your business
i.e. assets, liabilities and the net worth of the
business. Current assets include cash at bank,
inventory and debtors
while fixed assets
include buildings and equipment. Liabilities are
separated into current liabilities (must be repaid
within one year) and long-term liabilities which
would be long-term loans and finance on
properties, equipment etc.
Balloon payment or residual
A pa yment due at the end of an instalment sale
agreement/lease
agreement
or
rental
agreement. This results in lower repayments
and can aid cash flow but is a more expensive
option.
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Bank reference
An enquiry made to a bank about the ability of
a business to meet a specified commitment
over a period of time
Back-to-back guarantee
A guarantee issued by the issuing bank to a
beneficiary bank as collateral for banking
facilities granted by the beneficiary bank of a
mutual client
Backward integration
This is a form of diversification for growing a
business, e.g. buying a company that would
make use of your current offering.
Bill of lading
A document issued by a shipping company to
the shipper which acts as an acknowledgement
that the goods are on board the ship. It
provides details of the goods, ship and port of
destination. It evidences
the
contract of
carriage and conveys title to the goods.
Break-even
Will
determine
the
level
of
operations
necessary to cover all your operating costs and
will evaluate the profitability associated with
different levels of sales. A break-even analysis
focuses on the relationship between fixed
costs, variable costs and profit.
Building sum insured
Relates to the costs of re-establishing your
building, outbuilding and walls together with
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permanent fixtures in the event of an insurable
loss.
Business angels
Refers to individuals who invest in businesses
without taking ownership.
Business description
This describes the nature of your business
activities.
Business interruption
Insurance which will cover your business in the
event of a loss of profits due to an interruption
to the business
Business plan
A business document which outlines a road
map for the past, present and future. It is a key
business tool.
Buy-and-sell agreement
An agreement entered into by the parties of a
business in terms of which they effect life
policies on each other’s lives. This is to protect
the business against untimely deaths
(or
disabilities) so that the surviving parties can
buy the
affected
party’s
interest in
the
business.
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C
Call account
A cash deposit banking account.
Capital
Represents the funds injected into the business
by the owners. It includes
their original
investment in the business and any profits less
any losses and is included under the long-term
liabilities of the balance sheet.
Capital expenditure
Payments made from a business for acquiring
fixed assets
Capital gains tax (CGT)
A ta x on gains made from the disposal of
assets
Cartel
A group of companies or countries who
collectively and illegally attempt to affect
market pricing by controlling production and
marketing
Cash flow statement
A part of your financial statement which
indicates the flow of cash through the business.
It identifies how cash was generated, how it
was used and what the cash situation is at the
date of the statement.
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Certificate of incorporation
This document gives a private company legal
existence.
Certificate of name change
Document issued when a company changes its
name.
CK documents
The founding statement of a close corporation
which encompasses the rules covering the
entity
CK 1
Original close corporation documents
CK2
Amended close corporation documents
Cleared
A term used to describe funds deposited into
an account, which are available for use after
the funds have completed the clearing cycle.
Cleared balance
This is the balance on your account available
for use.
Clearing cycle
The process between banks where a paying
bank is informed of an impending transaction
on an account and has a certain amount of
time to stop or return the transaction before it is
debited to the account.
Clearing house
Operates on behalf of the banking and finance
industry and facilitates
the settlement of
transactions.
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Close corporation
A close corporation can have between 1 and
10 members. The Close Corporations Act
governs it and it is commonly used for smaller
businesses e.g. Joe Bloggs Repairs CC.
CM29
Document containing the details of directors of
a private company
Company ta x
Taxation payable by close corporations and
private
companies. The
current tax rate
applicable is 30%.
Conditional sale
An agreement whereby ownership transfers to
the buyer once all contractual obligations have
been met.
Confidentiality agreement
An agreement drawn up by yourself and signed
by parties who have access to information on
your business
Copyright
The law of copyright protects literary, musical
and artistic works, computer programmes,
broadcasts, sound recordings and films.
Consignment
Shipment of goods
Consignor
The person/company who sends goods by
ship, land or air.
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Constitution
Principle laying out foundations on which an
organisation, club or society are organised and
controlled.
Contents
This includes all assets, fixtures and fittings for
the sum insured. The value is based on a
replacement costs basis.
Contingent
When one outcome is based on another having
taken place before
Contingent liability
Liabilities payable by a business on occurrence
of a
specific event e.g. a
performance
guarantee issued by a bank, payable on
occurrence of a certain event
Controlling director
An individual who, with the aid of associates, is
able to control at least 20% of the ordinary
share capital of a company.
Cost of sales
The costs incurred by a business in deriving its
turnover
Credit card
Allows you to make purchases on terms for
goods and services up to an agreed credit limit
Credit limit
A limit on a facility granted by a bank within
which you can operate freely
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Credit rating
An assessment of the lending risk associated
with a person/business
Currency
The monetary unit used in different counties
Current assets
Assets that can be converted into cash or used
within one year
Current liabilities
The debts or obligations of a business
repayable within one year
D
Deferred compensation
This is a benefit offered by employers to
selected employees. It is a sum of money that
will be settled in terms of an agreement
between the employer and employee at a
certain date or on occurrence of a specific
event. This is facilitated through an assurance
policy.
Depreciation
The annual writeoff allowance of an asset over
its useful life span
Dividend
A distribution made from the profits of a close
corporation
or
company
to
the
relevant
members/shareholders
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Draft
A written order issued and signed by one party
and addressed
to another, requiring
the
addressee to pay on demand, or at a fixed or
determinable date, the amount of the bill to, or
to the order of, a specific principal or bearer
Donations tax
A ta x payable by any individual living in South
Africa on the gratuitous disposal of property
E
Electronic funds transfer (EFT)
An electronic bank payment / transfer
Equity
The owners’ financial interest in a business
E-mail
Means
of
sending
communications
electronically
Encryption
High-level security software used for electronic
data where the data is scrambled to ensure
that it cannot be read by any unauthorised
party
Endorsement
Signing of a document to transfer title to
another party
EPOS
Electronic point of sale e.g a till at Pick’n Pay
Equity
An ownership/shareholding in a business
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Equity (Capital)
The capital provided to a business by the
owners
European Monetary Union (EMU) The framework for closer financial links
between members of the European Union
(Austria, Belgium, France, Germany, Greece,
Ireland, Italy, Luxembourg, the Netherlands,
Portugal and Spain)
Eurozone
A name given to the countries in Europe who
have adopted the euro as their national
currency
Excess
The portion of an insurance claim for which you
are responsible
Exchange rate
The rate at which one currency can be
exchanged for another at a given time
Expenses
A cost incurred by a business during an
accounting period
F
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Factoring
A loan against the funds tied up in your debtors
book, normally granted by a bank or debtor
finance company
Firewall
A security system installed on a network to
control the inflow and outflow of electronic
traffic
Fixed assets
Assets that have a life cycle longer than the
accounting period of the business. These
include property, plant and machinery, fixtures
and fittings, trademarks and patents.
Fixed deposit
A bank cash deposit account that pays a fixed
rate of interest over a fi xed period of time
Fixed interest rate
This is an interest rate agreed upon and set
during a specified period despite possible
fluctuations.
Fixed-rate loan
A loan granted repayable at a fixed interest
rate over a specific period of time
Floating interest rate
A rate on a deposit or loan that fluctuates over
time
Floor limit
A set limit above which a business must
request authorisation from the merchant/bank
for credit card transaction
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Foreign exchange
The exchange of one currency for another at
the applicable exchange rate
Forward integration
This is a diversification strategy e.g buying a
business that would make use of your services
Franchisee
A person who owns a franchise
Franchising
A franchise is a business that is granted a
licence by a franchisor to another party (the
franchisee), which entitles the franchisee to
trade under the established tradename.
Franchisor
Business which grants franchise licenses to
franchisees
Founders
Individuals who start a business
G
Goodwill
An intangible asset such as strong brandname,
reputation or intellectual property of a business
Gross profit
The difference between the sales of a business
and the cost of goods sold
Guarantee
An agreement in writing between a bank as
guarantor and a beneficiary where the bank
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undertakes to pay a stipulated amount to the
beneficiary should the client fail to perform
H
Hard currency
A freely tradeable currency such as sterling or
US dollars
HTML
The language in which all web pages are
written. (Hypertext Mark-up Language)
Hurt money
The money provided to a business by the
owner
I
Intellectual property
??
Income statement
This is a profit or loss statement reflecting your
trading record for a given period. The income
statement reflects your sales and costs and
determines a net figure at the end of the period
indicating a profit or loss.
Income tax
The tax charged on the income earned of a
South African resident
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Instalment sale
An asset-based finance contract where the
client takes ownership of the asset once the
debt is repaid in full
Insurance
Cover against an event that is not predictable
Internal controls
A system of checks and balances that ensures
all actions occurring in your business are in
accordance with your business objectives
ITC
Information Trust Company
Intangible assets
Assets of a business that do not physically
exist e.g. goodwill
Interest charged
Interest charged by a bank for the granting of a
debt facility
J
K
Keyman assurance
Assurance on the life of an employee to
compensate the business in the event of their
premature
business
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will
be
compensated
that the
for
any
115
disruptions to the business, it will protect any
existing credit facilities you have in place and
will provide funds for the recruitment and
training of a replacement.
L
Lease
Asset-based finance granted by a bank where
the business owner has the option to return the
asset, sell the asset, re-lease the asset or take
ownership of the asset once the debt has been
repaid.
Leverage
Leverage
results
from
the use
of fixed
operating and financial costs to maximise the
returns to the owners of the business. Changes
in leverage result in a change in the level of
return to the owners and associated risk.
Generally, increases in leverage result in
increased return and risk, whereas decreases
in leverage result in decreased return and risk
for the owners.
Liabilities
Obligations of the business to outsiders or
claims against its assets by outsiders
Licensing
A right given by an owner of intellectual
property to another party b y means of an
agreement for use of the intellectual property
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Liquidity
The liquidity of a business is measured by its
ability to meet its short-term obligations as they
fall due.
Loan account cover
Debit loan accounts (loans made by the
company
to
shareholders,
directors
or
employees) and credit loan accounts (loans
made by the shareholders to the company) in a
company can be covered by assurance.
Long-term liabilities
Liabilities of a business that are payable longer
than one year e.g. mortgage finance
M
Management buy-outs
MBOs enable current operating management
to
purchase
the
business
they currently
manage from the existing owners.
Monetary Policy Committee
The committee appointed by the South African
government to set interest rate policy, chaired
by the Go vernor of the Reserve Bank.
Monetary policy statements
Statements issued quarterly by the Go vernor of
the Reserve Bank which govern interest rate
policies
(MPC statements).
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Memorandum and articles
Rules, in terms of the Companies Act, within
of association
which a company operates
Mission statement
Defines what the business is involved in or
wants to be involved in. It is the organisation’s
reason for its existence.
N
Net profit
The profit remaining in a business once all
expenses have been paid
Non-executive director
A director of a company who is not involved in
the day-to-day operations of the business.
O
Offering
The product or service produced by you for
your customers
Outsourcing
When a business chooses to contract out a
specific operation to an outside party in return
for a fee rather completing the operation
themselves
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Organisational values
Values represent what the organisation and its
people stand for. Values keep the organisation
on course for what is ‘right’ and what is ‘wrong’.
Output tax
The tax payable by a vendor to SARS for VAT
charges to clients on sales
Overdraft
A lending facility granted by a bank on a
transactional account
P
4 P’s of marketing
Product, place, price and promotion
Pari passu
A legal undertaking that a bank will be placed
on an equal footing with other secured
creditors for a facility granted to a client
Partnership
The relationship between two or more people
to carry on business.
Partner
An owner of a partnership
Partnership agreement
The agreement drawn up when forming a
partnership
Patent
Protection of an invention from anyone copying
it
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Pay-as-you-earn (PAYE)
PAYE is a system used for the payment of tax
for employees. Any employee who earns over
R60 000 per annum must pay PAYE according
to the tariff tables set out by SARS each year.
Performance guarantee
A bank guarantee issued on behalf of a client
to a third party allowing the beneficiary thereof
to claim payment from the bank in the event of
the client failing to fulfil their contractual
obligations.
Power of attorney
An authority given to one party to act on behalf
of another Prime overdraft rate The interest
rate which banks and finance companies use
as a basis for their calculation of interest
charges. The base rate fluctuates periodically
in line with general interest rates as set by the
Monetary Policy Committee.
Private company
A private company can have between one and
50 shareholders with a minimum of one
director, governed by the Companies Act, e.g.
Joe Bloggs Repairs (Pty) Ltd.
Public liability
Covers your legal liability for accidental loss of
or damage to a third party’s property or for
death, injury or disease to third parties, at or
away from
the insured premises, should
negligence be proven
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Q
R
Regional Service Council levies
The levies payable to the Regional Service
Council
are
the
service
levy
and
the
establishment levy.
Registered design
Protects specialist designs from being copied.
Registered name
The name that you trade under (not necessarily
the
same
name
that
your
close
corporation/company is registered as)
Rental agreement
Asset-based finance in terms of a rental
agreement granted by a bank where the
business owner has the option to return the
asset, sell the asset, re-lease the asset or take
ownership of the asset once the debt has been
repaid
Restraint of trade agreement
This agreement prevents businesses opening
within a determined proximity of yours.
Royalties
Fees paid to the franchisor, normally based on
a percentage of your turnover
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S
SARS
South African Revenue Service
Secondary ta x on companies (STC)
The tax pa yable by a close corporation
or private company on dividends declared to
the members/shareholders. The current rate is
12.5%.
Security
Collateral which can be used to secure a
lending facility
Seed capital
The funds used to finance a new venture
Shareholder
An individual/entity who owns shares in a
company
Shareholders’ agreement
An
agreement/contract within a
structure
amongst
the
corporate
shareholders.
It
encompasses the following aspects:
-
Scope of the business
-
Administrative aspects
-
Job
descriptions
and
performance
measurements
-
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Intellectual property
122
Skills Development Levy (SDL)
Exit mechanisms
Levy
pa yable
in
terms
of
the
Skills
Development Act, Act 9 of 1999, for the
purpose of funding education and training
Sole proprietorship
A business owned by one person
Standard income tax on
employees (SITE)
Employee’s tax payable on remuneration
below R60 000 per annum
Suretyship
A legal document guaranteeing payment by an
individual/entity for another’s debt in the event
of no payment. This can limited to a specific
amount or unlimited.
Sustainable competitive advantage
The aspect of your business that sets
you apart from your competitors; the reason
why customers will buy your product instead of
other products
SWOT analysis
Identifies the strengths and weaknesses within
your business
and the opportunities
and
threats that your business faces from outside.
T
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Term loan
A loan granted by a bank normally for a
duration of between 3 and 10 years with
security
Trademark
A trademark means words or a design unique
to the goods or services of a business that
distinguishes
it
from
other
suppliers
or
manufacturers. Trademarks can be registered
over these words or the design for 10 years.
Trust deed
A document containing the conditions of a trust
Turnover
Sales made during the year
U
Unemployment Insurance Fund
(UIF)
This fund provides benefits for unemployed
workers. Every employed person must be
registered with the fund and make monthly
contributions.
V
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Value-added tax (VAT)
An indirect tax charge on most transactions.
The current rate is 14%.
Values
Values represent what an organisation and its
people stand for.
Variable rate
An fluctuating interest rate
VAT exempt
Goods on which no tax is claimed or paid
VAT zero rated
Goods on which no VAT can be added but
VAT is claimable on the expenses of
Production
Vision statement
The
vision statement of an
organisation
provides the overall direction in which the
organisation is heading; it keeps all parties in
the organisation focused on their defined goals.
W
Working capital
The short-term cash resources required by a
business, primarily for cash, debtors, work in
progress and inventory
Workmen’s compensation
An insurance for employers against accidents
or illness that could result in death or disability
for employees while working for the business
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X
Y
Z
SECTION F USEFUL WEBSITE ADDRESSES
4.1
www.sars.gov.za
- South African Revenue Services
4.2
www.dti.gov.za
4.3
www.reservebank.co.za
4.4
www.treasury.gov.za
- National Treasury
4.5
www.statssa.gov.za
- Statistics South Africa
4.6
www.cipro.go.za
- The Department of Trade and Industry
- South African Reserve Bank
- Companies and Intellectual Property
Registration Office
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