The year 2011 is nearly done!

For some, it has been a very good year; for others – well, I’m sure they hope it won’t be repeated!

2012 has been forecast by many to be a very significant year, internationally, from a business point of view.  Some years back, I read a prophetic view by Robert Kiyosaki – the author of the Rich Dad, Poor Dad books – that 2012 would bring a worldwide, major financial collapse.  There have been a number of other such prophecies subsequently, basically confirming this view – most of which have been based on the imminent ‘coming-of-age’ of the so-called ‘baby boomers’ – the generation of post-second-world-war people who are now reaching retirement age, and who will be wanting their money!

When one reads of the growing problems faced by the European community, and not least, the spiralling debt problems in the USA, then it seems like 2012 could well be very challenging indeed.

Here in South Africa we have our own issues – not least of which is probably the highest official unemployment rate in the developing world – and something which I don’t believe is going to get better.  Certainly not as long as our labour laws, and the combative stance of the trade union movement (and the foolish posturing of certain political figures), continues to alienate both local and international investors.  Business confidence has been declining for some time now.

However, before you all start passing the revolver around, it’s not all doom and gloom.  Business is really what we make of it – it’s all about people; our needs, our dreams, our relationships.  South Africans have always been innovative and great at adapting to circumstances.  I do believe that next year we’re going to have to be ‘on our toes’, if we’re going to stay ahead. And, perhaps in the few weeks ahead – the time when traditionally we take a well-earned break from all our hard work – we can give thought to some of the things we can do to be at the cutting edge of our respective industries?

It would be a good time to review what’s happened, what’s missing, and what’s next! And then start writing down some plans of action for early in the year.

I would like to take this opportunity to thank my team for all they’ve accomplished this year – there would simply be no business if it wasn’t for them.  Then, on behalf of the team, I would like to thank all our clients and suppliers for their continued support.  It’s not just about what we are able do for each other – it’s also about what we have learned to mean to each other!

I trust that each and every one of you will have a blessed and peaceful holiday season – a time with family; a time to rest and a time to reflect – and I look forward to continuing in 2012, to make it the best year yet!

Some years ago, there was a huge rush to create Section 51 PAIA Manuals in order to comply with the deadline laid down by government.

We, at FINSERV, acting on behalf of clients, spent huge amounts of time assisting clients with this, only to have the whole process “moth-balled” by a moratorium.  It would seem that this has raised its head again, and this time, won’t go away.

The South African Human Rights Commission has a specific mandate in terms of the Promotion of Access to Information Act 2 of 2000 (PAIA), to monitor compliance with the legislation, report compliance levels to National Parliament, and to enhance implementation of the Act within both the Public and Private sector.

It has seen very poor levels of compliance despite the inception of this legislation more than a decade ago, when the Minister declared a moratorium exempting small business from complying with Section 51 of this Act.

This moratorium is set to expire on 31 December 2011.

What this means is that ALL businesses/organisations – for profit or not-for-profit – will now be required to have these manuals.

This section carries a mandatory compliance obligation for the Private Sector.  Regulations permit the imposition of a fine or a sentence of imprisonment for wilful or grossly negligent non-compliance with the obligations of this section.

The PAIA is also a component of a framework advocated by the Companies Act, the King reports, etc. vital to securing good corporate governance.   The purpose of this legislation is to promote a culture of transparency, accountability and good governance both in the private and public sectors.

In terms of Section 51 of the PAIA, the head of a private body must:

1. compile a section 51 manual which is a roadmap of the company
2. submit the manual to the South African Human Rights Commission once, electronically and in hard copy format
3. effect material changes when these occur and resubmit to the SAHRC
4. Submit manuals to SAHRC head office.
5. make the manual available as prescribed by the Act at the company offices and on their website;
6. must  annex a request form to the manual and  also make request forms available on the website and at the company premises’ access points;

There are penalties for non compliance, even though the Commission has not imposed fines for non compliance to date.  It does, however, reserve the right to do so.

The manual must, amongst others, contain the following information:

1. details of the company’s postal, email and street address, fax and phone numbers of the company;
2. the description of available records generated by the company, stating those which are automatically available and those that are only available on request;
3. outline the request procedure in terms of PAIA;
4. state who the head of the company is (CEO is usually the  Information Officer in terms of PAIA);
5. stipulate the fees applicable, as legislated by the Act, which are payable by  requesters of information;
6. remedies available to requesters, if their request for information has been refused;
7. Details facilitating any request for access to a record etc.

The Human Rights Commission is mandated to provide training and support to all sectors of society, and so can be contacted for assistance.

We encourage all our clients, in the interests of compliance and good governance, to ensure that these manuals are done in the manner prescribed.

If you would like assistance with this, please would you contact Louise Madgwick at Finserv at 033-3552550 or email her at louise@finserv.co,.za.  It is not expensive. The cost for producing this manual for our clients will be R200 plus VAT, and will include the production of a hard copy manual.

If you’ve been in business for a while, you will (hopefully), from time to time, have sat back and thought about your business; about what you make or sell and how you do it; about your customers and how to grow that base; about how best to utilise your employee skills.  Some of you may even have gone to the extent of having a formal strategy session once a year – perhaps facilitated by an independent consultant.  They’re always helpful.

In most cases, however, annual strategy sessions don’t amount to much. (Other than a time to get your people together for a bit of team building.)  With the best intentions, and unless they’re well-managed, they can turn into an opportunity for the detractors and whiners in your organisation to air their views on why your business doesn’t work! (And have a go at you at the same time!)  It can also end up as a foundation for issuing new top-down instructions on how to do business the boss’s way!

Tony Manning, a local strategist and management consultant says this:

“Ask people what they understand about strategy.  Here are some common answers:

• ‘It’s a plan for taking your company into the future.”
• ‘Vision, mission, values, and action plans.’
• ‘A long-term view of where we’re headed.’
• ‘A SWOT analysis.” (An exercise that forms part of just about every planning workshop and fills lots of flipchart pages, yet seldom leads to radical thinking.  More often, the same issues get recycled year after year and never go away.)
• ‘The analysis you do to make sure you hit the numbers.’

“Management tools such as this can come and go with mostly disappointing results……

I’ve attended and facilitated more than my fair share of these sessions, and I have to agree with him.  They do stimulate quite a lot of thinking, and some of it can turn out to be very good, but – and this is a big but, unless we can turn that good thinking into solid action, it’s just more words on the wind.

I’ve just moved from a fairly large city to a small rural town.  It’s not retirement – just relocation.  Work goes on – but it now has to go on very differently; and this requires a different strategy.  And let me tell you, this is not so easy!  When you’ve been doing something a certain way for a long time, it’s quite difficult to get your head around the fact that you have to change your methods to get the same (or better) results.   Just living in a new house has its challenges.  Crockery and cutlery doesn’t spring quite so easily to hand; it takes a little extra thought to remember where the socks and the groceries are now kept, and if you’re like me without a landline, faxing a document means scanning and using the internet.  I’ve had to change my daily routines to fit in with the (much) slower pace here in Montagu – like I’ve been told by this wine/brandy community – the best things in life take time!

I’ve had to innovate.

The big mistake we make about change is that we think we can package it, and then dish it out to everyone in our organisations as standard operating procedures.  Now, I’m not knocking the need for SOP’s – order is good, but not to the extent that everyone is strait-jacketed into systems and policies that strangle the life out of any form of innovation that may exist.

In our modern fast-paced economy, we cannot afford any strait-jacketing – either of ourselves or our employees.  In fact, we need to be encouraging innovation, innovation, innovation!  There’s always a better way to do something, and dare I say it, even if that better way is not to do it anymore, at all!

Marcus Buckingham, in his new book “Stand Out” says this:

Every organization is on a near-constant search for “best practice.” They convene conferences of top performers, pick their brains for the precious few actions, and then capture what they hear in online “knowledge centres,” in videos, or in the course books of their corporate university. Though it is not always stated explicitly, the vision driving all of this activity is that innovation can be harvested and that, once harvested, it can be deployed at scale. Find a few key innovations, so the thinking goes, and we’ll spread them to the many.   It is very rare to discover a best practice that is transferable person to person at such scale, with no lessening of its effectiveness.

True innovation has to be seen to be almost unique – no two people will do things exactly the same way.  This means that we have to encourage our employees to think out-of-the-box.  Some of the questions they need to start asking are: “Is there a better way to do this task?” “Should we be doing this at all?” This can be risky because we don’t necessarily want a free-for-all, but we do want them to be excited about what they do, and energized to come up with new innovative ways of doing things.  But, just because one person comes up with a great idea, doesn’t mean that everyone will necessarily take to it, or do it the same way.

Business right now is tougher than it has been for some time.  Margins are down, competition, and business risk, is increasing.  Businesses everywhere, and in every industry are looking for ‘an edge’ – some little thing which will allow their product or service to come out on top – and as a result, innovation has become the all-consuming goal.  Buckingham goes on with:

We all revere innovation. It is the mystical driver of progress, the secret sauce, the touchstone we reach for whenever our backs are against the wall. Our managers, our leaders, even our president cajole us to outthink, outsmart, “out-innovate” the competition. In these accelerated times, only innovation will keep us relevant, only innovation will allow us to keep thriving, only innovation can get us ahead and keep us there.

And when we say this, what do we mean by innovation? Usually we mean invention and we point back to that Golden Age of invention, the Apollo years, when anything was possible, when failure was not an option, when necessity created Teflon and freeze-dried food, the Stairmaster and digital photography, the technology inside every kidney-dialysis machine and the materials for your running shoes, solar panels and better golf balls, and, of course, ARPANet, the forerunner to the Internet.

Heady times.   No wonder our leaders hark back to them. For most of us, though, innovation is a little less dramatic. We aren’t looking to invent the Internet. We just want a better technique, a better way of doing things. We are tantalized by the notion that someone in our field has devised a method or figured out a shortcut, the “control-C” or “control-P,” of our job, something that if we could just find and replicate, we would be able to take a giant leap forward in our performance and in our career.

Instead of waiting for someone else to come up with these magical, mystical solutions, how about starting some thinking of your own?  Break it down into the things you do every day.  Do you need to do them all?  Every day? Can you do them better and simpler?  And don’t be too proud to ask your employees for their ideas – you will be pleasantly surprised.

Innovation has really just four components:

• Anticipation. Being alert to change.
• Insight. Seeing opportunities to offer something different and new.
• Imagination. Dreaming up new ways of doing it.
• Execution.  Doing it consistently and to the highest standards

Here’s an example:

You’re a small contractor.  Your revenue is project-related.  Each job has to be separately priced and evaluated.  You do all this estimating at night because your day is too full of other things.  Because of your experience, you are able to estimate the materials and labour required to do the job fairly easily – based on the way that it’s always been done before.  But who says it has to be done that way?  When last did you go out and physically do the job yourself – bearing all those innovation components in mind?  Who knows but that you could discover a novel way to get the job done, with less material, minimal labour, and have a very satisfied customer at the same time? And with the right technology and software, you could easily come up with a price for each new job at the touch of a button – and not at night either!

I’ve recently had occasion to answer these questions for clients, though for very different reasons.

In the first instance, the client’s business is in serious distress.   It’s a vicious circle – on the one hand, turnover has declined, but on the other hand, there are no funds to fund materials and labour for turnover if it was to suddenly turn around! The business is insolvent and I’ve had to advise the client to make the hard decision to close the doors. It’s a difficult decision to make, because no one likes to admit that they may have failed. However, it’s better to make this kind of decision early and then have time (and credibility) to start again, than delay what is the inevitable. It will only get, and be worse, if he waits!

In the second instance, the client is not insolvent at all, but very illiquid, – and simply because he has been unable to recover certain significant debts due to him, on time. As a result, one of his suppliers – who hasn’t been paid as a result – has been going around telling everyone the client is going out of business, and that he is going to ‘liquidate’ him. (in the business sense, hopefully!). In this instance, the supplier is being very naughty (slander actually) and just making things unnecessarily difficult in an already difficult situation. Business people need to work together and not against each other, as doing business is tough enough these days.

Business owners really do need to know what these terms mean, and what the implications are for them, so I thought it would be helpful to provide some short explanations.

A solvent business is one in which the value of its assets exceeds its liabilities. Even simpler – what one owns, amounts to a greater value than what one owes.

A liquid business is one which is able to pay its debts in the ordinary course of business and continue to do so within the next year.

A business that has liquidity problems is not necessarily insolvent. In fact, such a business could be significantly solvent – its asset value significantly exceeds its liabilities. Liquidity is all about cash, and how it’s managed.

The Companies Act in South Africa is particularly tough on directors that don’t take due care with the solvency of their businesses. I suspect that the courts will be just as tough on members of close coprporations and sole proprietors, if they trade recklessly. (in insolvent circumstances).  In managing this important aspect, liquidity has to be taken into account.

When deciding on liquidity, directors should at least consider the following:
• Is the company making its sales targets; have contracts been cancelled etc?
• Is the company able to collect its receivables timeously?
• Is it running into difficulty paying salaries and its commitments to SARS for tax and VAT?
• Are payments to critical suppliers being deferred?
• Are the company’s working capital facilities adequate, or are they already ‘maxed out’?
• Are there any impending legislative or industry changes which could seriously impact on company performance in the short term?
• Can the company continue to service its long term commitments?
• Are there any other cash resources available at short notice?

Directors/members/sole proprietors should be able to answer “yes” to these questions before further committing their businesses financially.
And if they can’t answer “yes” to at least a majority of those questions, they too may have to make the hard decisions!

Well, it’s been some time since my last update – it’s clear that I’ve forgotten what it takes to build a house and move from one town to another. (And that I’m 28 years older than when I last did it!). We’re both exhausted – physically and emotionally – and I think the worst is yet to come!
It seems that we may have our first night in the new home tonight – a full month later than we hoped. Inclement weather has been the main culprit for the delay, and even yesterday we were lashed by rain in a place where I’m told the average annual rainfall is only 150mm! The upside, I guess, is that we’ll get to see the Karoo in all its glory soon, when the flowers really break out. (And it’s already started!).

From a business point of view, it’s been a very interesting time.

As many of you know, Finserv is continuing with its base in Pietermaritzburg, and all our accounting and income tax services are very well supported by staff up there. In addition, the business coaching and management service is also ably provided by our Business Buddies team of Stuart Holliday, Anley John and Mark Allen – also in Pietermaritzburg. I’m hoping to expand our operation down here in the Cape, while maintaining relationship with my many clients – some of whom I’ve worked with for over 10 years – via our modern-day communications network: the Internet (mainly) and cell phones. It’s this latter change which has proven to be the most interesting!

Firstly, I’ve discovered that you no longer need Telkom to do business in South Africa. And just as well! I contacted them at the beginning of May to advise them of my move, and that I needed a transfer of service from Hilton to Montagu. (The service included a broadband internet service and a landline). They told me that I had applied too early, but that they would process the application, saying that I would only hear from them nearer the time. At the end of May I called again – and remember, you have to physically go to their Telkom Direct offices since they don’t advertise a landline number on the their web site! I was told that my application was being processed. At the end of June – two days before I moved town – and now fairly concerned since I needed this connect-ability once I got here to Montagu – I was once again told that the status of application was – and wait for it: – “solving”. However, I was told that they would phone me (on my cell phone) and let me know what was happening.

Well, to cut a long story short – it’s now a month later. I haven’t heard from anyone. I’ve been in to their Telkom Direct office in Worcester who also promised to call me and let me know what has happening (because it seems their computer can’t really tell them what the problem is!) – and needless to say, I’ve heard nothing. Wonderful being a monopoly isn’t it?
Anyway – I’ve managed to get a great internet connection through a local service provider (wireless and fast), and got to know my cell phone a lot better. I’ve experimented with Skype Video and GoToMeeting, by having a few ‘conference’ calls with clients, and found they work quite well. I’m hoping to have direct access to my Pietermaritzburg server soon, and will then be able to work on line almost as effectively as the staff in the main office. The wonders of modern technology!

Talking about modern technology – it’s not always that great!

One thing I really hate is the automatic answering services, both on the phone and the internet. Whenever you phone a certain firm, you get asked by a ‘canned’ voice to press a certain number for a certain service. Once you’ve gone through this, you get to speak to a person, who has written greeting and good-bye message to read out while you wait (patiently, hopefully). If you are unable to get your query/problem sorted out, you may have to go through the whole process again, only to find that you never get to speak to the same person twice. This means that you have to go through the whole rigmarole all over again. Now, let’s remember that this ‘service’ has been designed to save time and take the load off switchboard operators. But what about clients time that gets wasted?
My biggest issue at present is with Cell C. (and if you google “cellC complaints” you’ll see I’m not the only one). I took out a 3G contract with them over six months ago. It was on one of their ‘special’ deals advertised at R149 per month. I went in to their shop in the Liberty Midlands mall in Pietermaritzburg (where the service is appalling and the staff anything but friendly), and after filling in the necessary forms was told that they didn’t have ‘stock’ of this special! Which meant that I had to go back there a few days later. All was fine until the first month’s billing, when I discovered that I was being charged a full R100 a month more than advertised. I have phoned them; I have contacted their customer services email address – and guess what? I get this idiotic automatic answering service. I have now been asked to send them a copy of my 3G contract on three occasions (it seems they don’t keep copies), obviously to three different people in customer services. When nothing happens, I contact them again, only to be asked for the same information. Well, I haven’t been able to follow up recently because of my move, but I will be putting a stop payment on my debit order shortly, and hopefully they will sue me. Perhaps Carte Blanche would like to do an expose of this appalling service provider?

In spite of this – I’ve been encouraged by the attitude of business people down here, even though it’s a lot more laid back than in Pietermaritzburg or Durban. Nothing has been too much trouble. The quality of workmanship has been great and so has the attitude of the general workers. I’m looking forward to working with local business quite soon. And – my Afrikaans is improving by the day (it really got rusty in Pietermaritzburg)!

Here in South Africa, and even around the world, we’ve just had a number of public holidays in April. Employees, seeing the benefits, decided to take leave in between the various public holidays, effectively giving them two weeks holiday, and effectively reducing the number of productive working days for many businesses to not much more than two weeks as well. I know of a few businesses who decided to ‘close shop’ during this period.

I’m building a house down in Montagu, at the gateway to the little Karoo, and intending to move down there at the end of June. So I decided to drive down for the two week period and check on development. It was the first time I’d seen the house, so I was a little anxious at what I would find.

Fortunately, I have a builder who takes a pride in what he does, and who is highly regarded as a man of integrity in the area. I don’t think its unkind to say that the building industry has more than its fair share of dodgy characters, but in many ways, I was so pleased to see that quality work and good service is still highly valued down in the Breede River valley.

The building material suppliers, AH Marais & Seun, have been an inspiration. Their employees have been very helpful, going out of their way to assist, even when we couldn’t make up our minds about colour and quantity etc., and their prices – while not the cheapest around – were no rip-off either. I would easily recommend them. No wonder the family business has been around for such a long time.

When I consider too, that the only communication I had with the builder – up until I saw him – was by email and phone; the work done was almost all done to specification. There’s quite a bit to do still, but I have no doubt it will be completed on time and within budget. Well done Roy and Bonnieview Builders!

Just before we called on the house, my wife and I decided to spend a few days in Hermanus. Just some ‘chilling’ time together!

While driving around one day I experienced something I never believed possible – my Subaru Forester started giving trouble! Five years old and never missed a beat and here she was, coughing and spluttering on me! I pulled over at the Stanford Garage, where a kind mechanic pulled and prodded for a while, before going off to phone the agents in Somerset West. As is usual with most modern cars, not just anyone can fix them without a computer, so this very helpful young man suggested I take a drive to Somerset West to get it sorted out. We managed to get there alright – it was just cutting out on me whenever I stopped, – so with some judicious use of the clutch and handbrake, we pulled into the agents premises. We were well taken care of while we waited, and then were handed back our trusty ‘steed’ with an ‘all-in-order’ slap on the fender!

Why this story? Well, the mechanic in Stanford wouldn’t hear of being paid for the time he spent under the bonnet of the car, or on the phone to the agents; and in their usual Subaru agent fashion, our car was repaired and a few days later, someone phoned to see if everything was going alright. I felt like I was dreaming and had gone back in time some 40 years, to the days when service and care really meant something.

Well done you guys! Sweating the small stuff like this is what reaps dividends later on. Small business is alive and well and flourishing down in the Cape.

There are couple of fairly significant developments taking place here in South Africa, which will affect business; and all of which seem to be happening within the next few months. 

The first and most important one is the advent of the new Companies Act, which, it appears, will finally happen next month. (though seeing is believing!).    The previous Act was written 38 years ago, so it was due for a re-write.   In previous posts on this subject, I’ve raised a few important aspects of this new Act which need to be reviewed.  Please would you consult your accountant if your business is a registered company, to ensure that any changes that may have to be made, are made.  If your business is a registered Close Corporation, consult your accountant as well, to establish what your options are/will be.

Tied in with this new Act are significant changes to the administration of it through CIPRO - the central registry for business.    A recent newsletter to members from the South African Institute of Chartered Accountants set this out as follows:

Please take note of the following changes which are to be implemented on 1 April 2011, and the consequences of these changes.

Effective date 1 April 2011
The DTI is determined to have the Commission and the Act in effect on 1 April 2011. However, the following still needs to happen before 1 April 2011 for the above to take effect:

• Companies Amendment Bill still to be completed
• Companies Amendment Bill to go through Parliament
• Companies Amendment Bill to be signed by President
• Companies Amendment Bill effective date to be gazetted
• Regulations and Forms to be completed and signed off
• The National Assembly has scheduled to meet on 1, 2 and 9 March 2011 to deliberate and formally consider the Bill

The Commission
On 25 March 2011 the new Commission will be launched, and will become active from 1 April 2011. The names of the appointed commissioner and deputy commissioner are expected to be made public at this launch.

All documentation, applications and lodgements received by Cipro up to and including 31 March 2011, will be processed in accordance with the current (‘old’) Companies Act, with submissions taking place on the current CM / CK forms. From 1 April all applications have to be submitted on the new forms and comply with the new Companies Act requirements.

A new website will be launched as of 1 April 2011, which must be used from then onwards. Cipro has developers working around the clock in order for this website to be ready for implementation on 1 April 2011.

Cipro is employing every effort to make the transition a smooth one; however they acknowledge that the timeline is extremely tight. They are using all resources available in an attempt to reduce the backlog, and to ensure that come 1 April 2011, they are ready to convert to the Commission.

Please bear these changes in mind if you are thinking about making any statutory changes to existing companies and close corporations – its not going to happen quickly!

Lastly, we are faced with the advent of the Consumer Protection Act – also on 1st April 2011.  This is fairly serious legislation, as once in effect, will make South African consumers the most protected in the world!  It aims to protect the poor and vulnerable by serving as a formal Bill of Rights of the consumer.  Without going into all the intimate details in this newsletter, suffice it to say that every busines which acts as a supplier of goods and/or services should take the time – and the money – to consult an attorney to ensure that their quoting/supplying policies, procedures and practices are reviewed.  You may need to change a lot of your existing documentation

This is the next in the series on some of the causes for business distress. This is one which many business owners never consider.

I think it would be fair to say that most owners of small businesses confuse the finances of their businesses with that of their own personal expenses. Many don’t draw a distinction between the two at all. This can have very serious consequences for your business – and for you – if you’re one of those people.

The effects of this are two-fold:

• It creates a false sense of security for the owner – he thinks he is earning a significant income because, subconsciously, he relates it to the cash inflows of the business – and,
• It creates a false sense of security about his business; – he thinks his business is doing well because he is living an above-average lifestyle.

One would think that a quick glance at the income statement will warn them that all is not well, but there are three main reasons why this doesn’t happen:

• The Income Statement is incomplete and hardly ever looked at anyway; and/or
• Personal expenses are written off to business expense accounts (which is illegal).
• The personal expenses of the owner may be allocated to a loan account, which ends up growing faster than the retained earnings of the business.

In order to cater for the increased demand on cash from within the business, creditors are usually compromised and agreed payment terms are extended – and most of the time it is not by agreement. If you are drawing R50,000 a month from your business that only generates a R30,000 per month pre-drawing profit, the surplus drawing can only come from one source – borrowings! If it continues unabated it will prove to be terminal.

It is vital that sufficient analysis is carried out – and this really doesn’t take long to do – to determine the following:

• Exactly how much profit (or loss) the business is actually making. (After excluding all those personal expenses which tend to creep into the monthly business cash flow!!!)
• Exactly how much you, as the owner of the business, need to live on.
• Whether the profit being generated is sufficient to meet those needs and still enable the business to grow organically.

It is my experience that this research is very rarely carried out.

The main motivating factor for managing their finances in this confused way seems to be the desire amongst many small business-owners to pay as little income tax as possible. This is sometimes so prevalent that I often find new business-owners trying to avoid tax when they haven’t even made a profit yet!

I am a firm believer in the right of each and every individual to order his/her finances in such a way as to pay as little tax as legally possible. There are still a number of ways of doing this without incurring the wrath of the Commissioner for Inland Revenue but it requires careful planning, discipline and the right financial structures in place.

If the business is financially well-managed, and all other things being equal, it will make a profit and grow. The income it generates for the business owner will also grow, in spite of the fact that income tax has to be paid. In fact, as a small-business owner, I would rather have a serious tax problem than a business in distress!
If the business is not financially well-managed, it will die – and no amount of tax evasion is going help.

My suggestion to small business owners then is this:

• Analyse your personal financial requirements in terms of your Obligations, Needs and Wants (ONW’s) – and prioritise them in that order.
• Measure those ONW’s against the income being generated by your business, after you have made adjustments for personal expenditure that has been included in your business’ records.
• If the profit being generated is insufficient to meet those ONW’s, make some changes to your personal demands – starting with the Wants!
• Allow sufficient profit to be retained in the business to cater for growth.
• Create a personal budget and open up a private bank account to monitor your personal expenses. Then draw a “salary” each month – and no more!
• Employ the services of a qualified tax practitioner to help you minimise your liability in this regard. The cost will be well worth it!
• After the profit has been made, and a reserve (war-chest) has been created, then you can begin to enjoy the fruits of your labours!

For many businesses in South Africa, its that time of year again – the financial year end. The reason for this is mainly because it’s also the end of the income tax year for individuals and many other tax-paying entities.

We have found that, and certainly for many small businesses, this time of the year tends to fly by with not much attention paid to it, until – and this is quite important, the accountants want all sorts of things done to enable them to carry out their duties efficiently and economically. In our own client base, and given that we now have to adhere to much stricter deadlines from the South African Revenue Services, it has become more and more difficult to meet these deadlines, for all our clients, all the time! The reason is quite simple: – this all-important financial year end stuff is generally left to the last minute and it results in huge bottlenecks in our planning.

I have no doubt that many other accounting and tax practitioners will agree with me on this. So, – to assist clients (and I would encourage you to pass this on to other business associates you know, for their benefit) please click on the following link, print off the notes (or copy and paste), and then hand it to your bookkeeper/accountant to take care of for you.

http://www.finserv.co.za/financial-business-coaching/business-development/year-end-accounting-verification-process

I would suggest they create a leverarch file, divided up in accordance with the headings on these notes, and which they can hand over to your accounting officer/tax practitioner as soon as possible after the year end. Apart from the fact that it will make your accountant’s life a lot easier, it will give you, the business owner, a much better insight into what has happened with your accounting records during the year.

Most important then – don’t forget to count stock; and make sure you’ve paid your second provisional income tax payment on time.

Looking forward to a great 2012 financial year…..

I’ve just received a blog from the TomorrowToday website entirtled “Fox or Hedgehog? How will you shape your future?”  In view of the fact that I’ve recently been moaning about the information overload, I found the article very helpful, and so I’m taking the liberty of printing it in its entirety, and then adding my own comments:

In 1953, well before the information revolution seized the planet, philosopher Isaiah Berlin divided thinkers into two basic categories: the fox and the hedgehog. The difference is that hedgehogs know ‘one big thing’ whilst foxes know ‘many things’. A hedgehog will focus on one overriding idea whilst the fox darts from one thing to another, gathering multiple ideas and finding inspiration from a variety of sources.

Today’s array of social and information technologies dictate that we act more like foxes than hedgehogs. We all increasingly – and to various degrees, browse and scavenge for information, news and connections, be that through smart-phones or any one of a number of devices available. All this is forcing a new way of thinking on the majority of people who live and function in the connected world. There will always be a need for the hedgehog but it is the fox that is increasingly dominating the territory and as such, hedgehogs should rightly fear the foxes. At a State or collective level, the activity and dexterity of the fox serves as a threat to the very ideology of hedgehog thinking, as seen in the recent events that have unfolded in Egypt and that have been played out in front of a live-global audience.

In this world that is continually morphing and changing before our very eyes, adaptive intelligence will be essential at both a personal and communal level. Allied to adaptive intelligence will be the need to think and behave like a fox. Translating that thinking mindset into engagement with the multiple technologies at our disposal is something that is natural for Gen X and Y but will require some work for those of an older vintage. For those battling with this transition in the face of what seems like overwhelming information overload it might help to take to heart what Clay Shirkley said, “It is not information overload – its filter failure”.

The need then is to develop good filters in order to maximize the available information and cultivate the practice of fox-thinking. This is will be one of the major leadership challenges going forward.

If you would like to find someone to blame for this information flood other than Bill Gates, you might consider Dr. Claude Shannon. Shannon was a mathematician and the pioneer of modern information theory, having been educated at the University of Michigan and MIT. In 1949, he and Dr. Warren Weaver co-wrote The Mathematical Theory of Communication, which many consider the cornerstone of modern in¬formation theory. Weaver wrote his portion with less mathematics and condensed Shannon’s formulae into three components:

1. Technical (“Did you hear me?”),

2. Semantic (“Did you understand me?”), and

3. Behavioral (“What will you do? “)

These three components can serve as helpful filters when it comes to accessing and using information. Certainly we cannot rely on the wisdom that has got us here to be the wisdom that gets us to where we need to be. Developing fox-like instincts will require work for the vast majority of those leading in the new world of work.

I like this idea of filter failure!  In many ways, I guess I’ve struggled with this.  Sometimes I almost feel like I’ve lost out growing up and I need to absorb as much of this information as possible, until I reach overload.  I wrote recently about “the one thing” referring to that classic movie ‘City Slickers’.  I suppose one could say that I was suggesting we all become hedgehogs, but that’s not the case.  Hedgehogs only KNOW one thing.  No, I’m suggesting that we become foxes, KNOWING MANY things, but through this process of filtering, become focussed on doing things right – one at a time, and then making sure that it’s the right thing!