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)

5 COMMON SMALL BUSINESS MONEY MISTAKES

B2Of all the roles a small business owner takes on, often the most challenging is managing the business’s finances. You can improve your chances for success – and your profitability — by being aware of and steering clear of these common small business money mistakes.

  1. Insufficient Cash

Insufficient cash is one of the leading causes of business failure. Startups often overestimate how quickly they’ll start making money, and underestimate all the expenses they’ll incur. But startups aren’t the only businesses prone to failure due to insufficient cash. Once you have a steady flow of business you can run into cash problems in a couple of ways. One is a failure to realize the difference between cash flow and sales. You can have plenty of sales on record, but unless you get paid in advance for those sales, you’ll have expenses to pay before you collect from your customers.

  1. Waiting Too Long to Seek Credit

The worst time to look for a business loan or line of credit is when you most need it. If your business is paying its bills late and is on the brink of failing, finding funding will be difficult or impossible. The time to seek funding is when your business looks solid enough to convince a lender you will be able to repay what you borrow.

  1. Mixing Business and Personal Funds

Whether you are starting a new business, or you’re running an established business, mixing personal and business funds is a recipe for disaster. Assuming you are the sole owner and you buy business supplies with your personal credit card or use a business check to pay for a personal purchase, you’re going to have difficulty keeping track of how much money the business is actually making or losing throughout the year.

If there are times when you have to use personal funds for your business – or vice versa – the correct way to handle the situation is to make a formal transaction and document it. If you have business partners, get them to sign off on the transaction, too.

  1. Not Staying on Top of Record keeping

As a business owner, your focus is usually on winning business and making sure the customers get it in a timely fashion. Along the way there are so many things to do that it’s easy to let recordkeeping fall by the wayside. Receipts for inventory or other purchases get shoved in a folder, envelope, drawer, or the proverbial shoebox, until such time as you “get around” to recording them. Invoices for items you’ve purchased on credit maybe wind up in your inbox – with dozens of other pieces of paper.

Records for business travel may wind up on the back of a receipt or napkin, or stuck in a note on your smart phone. Receipts from people who still pay you wind up in the same folder or drawer, and credit card payments show up in your bank account based on the credit card used to make the purchase, with no convenient way of matching any one day’s credit card receipts to specific purchases made.

  1. Under Pricing

Determining the right price to charge for products or services is seldom an easy decision. Charge too much, and you could lose sales to a competitor. Charge too little, and you won’t make much profit – or worse, you’ll lose money.

Small businesses – particularly those just starting out – often charge too little. Sometimes they rationalise that the low price is a way of “getting their foot in the door.” Sometimes the price is low because a new business owner isn’t taking into account the cost of his or her own labour, or hasn’t accurately determined all of the costs that have to be considered in setting prices. If you’re just starting out, remember to account for all your costs in figuring out what to charge, and check to see what competitors are charging for what you sell.

References:

  • Attard, Janet. “5 Common Small Business Money Mistakes”. Business Know-How. N.p., 2017. 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)

KEEP YOUR BUSINESS GROWING

B4Having a successful business means ensuring that it continues to grow. Without growth, your business will eventually run dry and stagnant. But with the added responsibility of maintaining your business and keeping things running smoothly, it can be difficult to know where to look for business growth.

  1. Look for cost savings

This point is especially true when your business is trying to survive a struggling economy. Making cost saving choices can become more or less difficult depending on how you manage your incomings and outgoings.

Try find cost savings wherever you can. What subscriptions are you still paying for that you no longer need? Which supplier relationships need to be terminated? Are you spending too much on stationery? Aim to eliminate all unnecessary costs, even if they’re small.

  1. Automate everything

When you waste time, you waste money. When it comes to things like report preparation, data entry, and accounts payable and receivable, it’s worth investigating your automation options. Things like pursuing invoices can now be done with a click of a button and a few strokes of the keyboard. What’s more, they can be handled safely, legally, and efficiently.

Once you’ve automated portions of your business, you can focus exclusively on growing the business rather than just maintaining it. This is critical, because growing a business takes extreme dedication and commitment.

  1. Target other markets

If your current market is serving you well, then ask yourself if there are others. Sometime, those other markets are what make money. If your consumer market ranges from young professionals to young families, think about where these people spend most of their time. Could you introduce your business to schools, restaurants or community events? You could also offer discounts to special-interest clubs or donate part of your profits to schools and associations.

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)

GROWING YOUR BUSINESS AND ADAPTING TO CHANGE

B3Growing a business takes several important characteristics that require a dedicated leader driving it at the helm. These characteristics include vision, change and people. An effective leader will also engage others in the business to embrace and adapt to change as growth continues.

  1. Vision: First, plot the course for where the business should go in the short-term, and the long-term. This includes knowing who your customers are and what they are likely to demand. Without a clear vision, you will be steering your business in a random direction, which could completely miss your customers.
  1. Change: When it comes to growing any business, change is essential. Those that do not change and adapt to new ways of doing things will fall behind. Understand what needs to be put in place to grow the business. You might need to source better business operating systems to streamline this growth, or change a few internal business processes, or rethink how you calculate your hourly rates.
  1. People:  People are essential for the growth of any business. But not just any people, you need the right team in order to move your business forward and reach the vision you have in mind. However, you should understand that you will need to guide and coach the staff into changing their mindset and adapting to these growth changes.

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 TIPS FOR A SUCCESSFUL BUSINESS

B4Running a business has many challenges, from building clientele to employee relations. However, one of the biggest challenges a business may face is keeping abreast of important accounting practices. This is vitally important because without the proper practices in place, your entire business may be placed in jeopardy.

  1. Keeping records

The most important thing regarding your financial records is keeping everything in one place so you don’t have to worry about meeting a request, and it is also to keep everything simple. To make matters easier, you can try using online banking.

With online banking, you can track simple debits and credits to your account. However, when it comes time to accurately state how things were spent or earned, separate bookkeeping records should be kept. Perhaps you should consider investing in an easy accounting software, which you can use to track money coming in and out daily.

  1. Invoicing

Invoices are more than just prompts for your clients to make payments. They’re records of the terms of a transaction, and because of this, it’s critical that you enter information that is accurate and complete. It’s also important to understand what the difference is between invoices and receipts.

Reworking or adding to an invoice, creating multiple versions, or cancelling an inaccurate invoice will only confuse the accounting process and make matters difficult. Furthermore, accurate invoicing ensures that if your clients ask any questions regarding a payment, you will be prepared with a record of previously-agreed-upon terms under which you and your clients operate.

  1.  Collecting taxes

Taxes need to be taken out at the time of sale or at the time payroll is generated. Just like with receipts, the longer you go between a transaction and proper accounting, the more room for error there is and the more risk you expose your business to.

You need to collect (or apply) taxes as soon as a sale is made or immediately upon payroll generation. That will ensure that you don’t incur penalties for delayed tax payments. This will also help your accountant keep as much profit as possible.

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)

THE IMPORTANCE OF HAVING A GOOD ACCOUNTING SYSTEM

B2If your business doesn’t have an effective accounting system in place, you run the risk of making serious errors in your finances. Furthermore, a good accounting system simply makes life easier and allows you to focus more on growing your business.

  • It helps you evaluate the performance of your business: A good accounting system gives you a thorough overview of the financial performance of your business. If you don’t have an accounting record, how will you know if your business is growing or shrinking? So, your account records help you know if your business is growing, stagnant or slowing down.
  • It helps you manage cash flow and meet deadlines: Cash flow management means knowing what you do with the cash that comes into the organisation. Your accounting system helps you know areas that need cash. For instance, cash may be needed to finance your debts, or make major renovations or order for new stocks, and it is your accounting system that will help you know this. In short, no business will growth further without a good cash management system. Also, your accounting books help you know when bills like your rent needs to be paid.
  • It’s needed for business goal setting: Your accounting system will help when setting new business goals for the week, month or year, as seeing the business performance for the last financial year will help you project and set goals for the New Year and plan ahead for the business.

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)

5 TIPS FOR MANAGING YOUR SMALL BUSINESS PAYROLL

B11. Know your big deadlines

Dealing with accounting deadlines and employee returns is much less stressful when you know what you need to action well in advance. Make sure you have a good system in place that alerts you to important dates and if you need to do anything. Working ahead gives you time to sort out any concerns or problems.

  1. Invest in a payroll software

Payroll systems such as Sage Instant Payroll or Sage One Payroll will automate the whole process for you, taking care of things like NI and tax calculations, generating payslips for employees, keeping up with legislation and providing information for end of year tax returns.

  1. Keep up with payroll legislation

Changes in regulation may affect how you need to run your payroll, so it pays to keep abreast of major new laws. Benefits and tax change frequently and while you don’t necessarily need to know all the details, it’s worth staying informed and getting advice when you’re not sure.

  1. Have a financial back-up plan

Keeping on top of payments is crucial in any growing business. Setting up a good credit control system, sending out invoices promptly and always chasing late payments firmly as soon as they become due will help avoid cash flow disruption.

  1. If all else fails… outsource

If managing payroll yourself is proving a real headache, consider outsourcing to a payroll company. They’re experts at what they do, and can save you the hassle of managing everything yourself and staying on top of regulations and paperwork.

Reference:

  • “8 Tips For Managing Payroll | Small Business Advice | Sage Singapore”. Sage.com. N.p., 2017. 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)

WHEN IT COMES TO STRATEGY, THINK BIG

B2To create a strategic roadmap for your business you don’t need heaps of wonderful resources; you only need to give up your preconceived ideas about strategy. Sometimes the thing that holds a small business back the most is small thinking. If you believe that the size of your business is a disadvantage when it comes to strategic planning, simply because the big companies have all the financial resources and manpower to influence the market, then why start a business at all? Fortunately, money or size of personnel is not what counts when you create a strategic plan – common sense is.

Keep your enthusiasm in check

You don’t need to strategise constantly; rather make sure that you understand the market conditions and that you have attainable goals – don’t waste time on too much planning. You could also try using your company’s small size to out-manoeuvre larger, slower companies by addressing challenges and options and seizing opportunities over short but regular spaces of time.

Challenge assumptions

Believing in the status quo is not part of a successful entrepreneur’s strategy. The business climate is constantly changing with the help of the Internet, social media and other mobile devices. Many companies have landed on the business rubbish dump because they could not adapt to changing times. Question everything. Attempt playing devil’s advocate with your new ideas, then get your team together and devise plans to make the idea viable. Ignore preconceived notions about what can or cannot work – while some business principles are a given, very few business ideas are completely useless.

Avoid myopia

You can build a sales strategy based on the outcome you desire. Don’t miss out on good opportunities because you are too caught up in day-to-day activities to think outside the box and re-examine your progress. Change your perspective and get your team to think in more creative, profitable ways.

Jack (or Jane) be nimble, eager and bold

The market and the needs of customers keep changing, and it’s beyond your control. What you can control, however, is how you adjust to these changes and what new plans you create. Be bold in your new approach and keep an open mind as to the unconventional ways in which to grow.

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)

GOODS AND SERVICES ACQUIRED BY VAT VENDORS ON CREDIT

B2It is an established principle that registered VAT vendors may claim a deduction for input tax on goods or services acquired for use in the course of making taxable supplies as part of carrying on an enterprise.[1] For example, a VAT vendor purchases trading stock from another vendor for the purpose of sale to its clients subsequently. Once those goods are purchased by the VAT vendor, even if on credit, input tax may generally be claimed on the goods purchased.

Where the VAT vendor above buys the goods on credit, the input tax claimed may effectively be reversed if payment to the creditor is not forthcoming timeously. In terms of section 22(3) of the VAT Act, where the consideration for the purchase of goods have not been paid by the VAT vendor to its supplier within 12 months of it buying the goods, a portion of the input tax claimed must be effectively reversed and paid over to SARS as output VAT. In other words, where a VAT vendor has claimed input tax, but has not yet settled the amount due to the person providing it with those goods or services in respect of which the input tax is claimed, the input tax claim will be effectively cancelled.

Although it may appear to be a trivial matter to most, the question does become relevant where goods or services are supplied between related persons or entities, such as group companies for instance. When “payment” is made for purposes of the VAT Act has recently been considered in the case of XYZ Company (Pty) Ltd v CSARS.[2] In that case a VAT supply was made between a holding company and its subsidiary, with the amount owing subsequently being moved from the debtors’ book to the loan account which the subsidiary company had in place with the holding company. SARS contended that the purchase price remaining outstanding on loan account has not yet been paid by the subsidiary, and therefore the input tax claimed by the subsidiary had to be accounted for as output tax after 12 months of the supply taking place.

The Tax Court however differed and attributed a wide meaning to the word “paid”. It held that the action of transferring the debt due from the debtors’ book to the loan account of the parties amounted to the payment of the debt arising from the supply. The holding company acquired a new right with new terms, being those linked to the newly created loan account and which differed from the trade debt, even though the counter-party was unchanged. Payment, in a wide sense, is not limited to cash flow only, but also include an exchange and creation of new rights and obligations.

While the judgment deals specifically with the context of section 22(3), a consideration whether amounts have been “paid” or not are not limited to this provision only and the effect thereof may extend wider to other provisions of the VAT Act too, the provisions of section 16(3) – which deal with input tax claimed on second hand goods acquired – being a pertinent example.

References:

  • [1] Section 17(1) of the VAT Act, 89 of 1991
  • [2] Case No.: VAT 1247, 5 September 2016 (Cape Town)

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)