THREE FINANCIAL TIPS FOR SMALL BUSINESS ENTREPRENEURS

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

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

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

  1. Create a loyalty program that encourages repeat customers 

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

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

  1. Have a lean start-up

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

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

 References:

  • Glassman, Barry. “The Best Financial Advice For Small Business Owners Now”. Forbes.com. N.p., 2014. Web. 29 June 2017.
  • Leinbach-Reyhle, Nicole. “3 Small Business Tips Uniquely Aimed At Entrepreneurs”. Forbes.com. N.p., 2016. Web. 29 June 2017.

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

ACCOUNTING BEST PRACTICES FOR SMALL BUSINESSES

B2When it comes to looking after the welfare of a business, accounting tops the list as being the most important. Without proper accounting, a business runs the risk of losing everything. The following are a few best practices that are essential for businesses to take note of.

  1. Check it off your list first

Proper accounting should be a priority from the start. Not only is keeping accurate books crucial to your company’s financial health and success, but it will only get more complicated down the road if you keep putting off until later.

  1. Focus your time and energy where it’s needed

Though there may be a period when you’re responsible for a wide variety of roles, take time to evaluate where your skills are most needed and best used. The chances are this isn’t the accounting department… identify what you need to do to make sure your time is spent effectively and efficiently.

  1. Get the right software

Without the right software, it will be difficult to keep track of what’s going on in your business. There are plenty of services out there to help you keep your finances, including payments, invoices, payroll and taxes, organised and in check. Identify which tools you need for your business activities and look into different options by taking into consideration your company size, growth rate and location.

  1. Never overspend

Just because a software package is the most sophisticated and expensive, doesn’t necessarily mean it’s the right software for your company as many small businesses won’t need enterprise-level services. Furthermore, more complicated software doesn’t do you any good if you don’t know how to fully utilise it.

  1. Hire a professional

If you are not familiar with accounting processes and are sure you don’t know what you’re doing, then it is the best option to hire a professional to get the job done for you. This is one area where you cannot afford to learn by trial and error.

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

COMPANY TAX IN SOUTH AFRICA

B3If you are self-employed or a business owner, you have to pay company tax in South Africa. How much business tax you pay and what deductions you can claim will depend on the size and type of your business.

What is company tax?

Company tax (also called, “corporate income tax”) is what keeps our economy functional. There exists different business categories, who all have to go through registration procedures and have to pay tax. Tax is a rather complicated matter, which is why a lot of people choose to rather pass it on to professional business accountants.

Who needs to pay company tax?

All registered businesses in South Africa have to pay company tax on their worldwide income to SARS. Companies based outside of South Africa, but operating in South Africa, must pay tax on income derived from within South Africa only. The type of companies that have to pay company tax in South Africa include:

  • listed and unlisted public companies
  • private companies
  • close corporations
  • co-operatives
  • collective investment schemes
  • small business corporations
  • share block companies
  • body corporates
  • public benefit companies
  • dormant companies

What steps must be taken?

  1. Register as a taxpayer. Every business liable to tax under the Income Tax Act, 1962, must register with SARS as a taxpayer. You can register once for all different tax types, using the client information system.
  2. Submit annual tax return. Every registered taxpayer must submit a return of income twelve months after the end of the financial year. Returns can be submitted electronically or manually via SARS.
  3. Submit provisional tax returns. Every company must submit provisional tax returns. Your first provisional tax return must be submitted six months from the start of the year, and the second at year-end, and must contain an estimate of the total taxable income earned or to be earned for that period. Payment of the tax must accompany the return. A third “top-up” payment may be made six months after year-end.

Resources

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

CLAIMING INPUT TAX FOR VAT PURPOSES ON IMMOVABLE PROPERTY

B4When a registered VAT vendor sells a property, that transaction is subject to VAT and not to transfer duty.[1] Where the purchaser of the property is itself a VAT vendor, input tax may be claimed against the acquisition price paid for the property, and which will in most instances effectively equate to the VAT charged by the seller-VAT vendor, therefore leaving the purchaser eventually in a VAT neutral position subsequently once the input tax is paid back to it.

Where the purchaser-vender however buys immovable property from a non-VAT registered seller, the transaction is not subject to VAT, but rather to transfer duty being levied on the purchaser and which transfer duty is payable over to SARS. The question which then often arises in practice is whether the purchaser-vendor is entitled to claim input tax on the acquisition of the property, and whether that input tax claim should be limited to the transfer duty charge levied against the purchaser-VAT vendor.

In terms of section 16(3) of the VAT Act,[2] VAT vendors are entitled to claim an amount of input tax against amounts incurred to acquire “second-hand goods” from non-VAT vendors. In the case of immovable property, this rule similarly applies, and immovable property too may amount to “second-hand goods”, it being defined as “… goods which were previously owned and used”.[3]

Paragraph (b) of the definition of “input tax” is the relevant provision governing the relevant VAT treatment. Assuming that a sale of immovable property entered into between a non-VAT vendor seller and a VAT vendor purchaser is undertaken at open market value, the “input tax” definition then determines that the input tax to be claimed by the VAT vendor on the acquisition would equate to an amount equal to the “tax fraction” (also a defined term, being 14 / 114) as applied to the price paid for the property. Assume for example that a property is purchased for R1.14m by a VAT vendor from a person not registered for VAT. Applying the transfer duty rates to this transaction, an amount of transfer duty of R7,200 would be payable by the purchaser to SARS. This notwithstanding though, the purchaser-vendor may also claim a deemed VAT input tax amount of R140,000 (being 14 / 114 x R1.14m) during that relevant VAT period.

This position was not always the case. Previously, in terms of a proviso to paragraph (b) of the definition of “input tax”, an input tax claim would have been limited to the amount of transfer duty payable by the VAT vendor when it acquired the property. This is however now no longer the case, and the applicable proviso has since been deleted.

[1] Section 8(15) of the Transfer Duty Act, 40 of 1949

[2] 89 of 1991

[3] See the definition of “second-hand goods” in section 1 of the VAT Act.

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