2018 Budget Speech

Entrepreneurs, we get it, you’re busy, so here’s the 2018 Budget Speech in a nutshell

 

The Finance Minister’s speech included the following:

• The budget deficit is projected to decrease from 4.3% in 2017/18 to 3.5% in 2020/21
• It is expected that gross debt will rise to 56.0% of GDP in 2020/21
• This year’s proposed tax measures will raise an additional R36 billion in 2018/19

What will you be paying more for?
• VAT is for the first time in our democratic history being increased: from 14% to 15%, effective 1 April 2018
• To promote eco-friendly choices, the plastic bag levy, car emissions tax and the levy on incandescent light bulbs will be increased
• Sugary beverages will now be taxed under a new health promotion levy from 1 April 2018
• The fuel levy has been increased by 52 cents/litre
• Alcohol and tobacco excise duties will be increased between 6-10%
• Estates worth more than R30 million will now be taxed at 25%
• Any donation in excess of R30 million in a tax year will be taxed at 25%

How will Government be providing financial support?
• Social development spend has been increased the most, by 9.2% over the MTEF
• Social grants will see R528.4 billion being spent over the MTEF
• The child support grant will increase from the baseline of R380 to R400 on 1 April and then to R410 on 1 October 2018
• The old age, disability and care dependency grants increase to R1 690 on 1 April and to R1 700 on 1 October 2018
• Higher education and training is receiving R324 billion in total over the MTEF
• Basic education, including infrastructure, learner and teacher support receives R792 billion
• For various purposes, including helping with the challenges of the drought, a provisional budget of R6 billion has been set aside. This includes short term disaster relief grants to the value of R473 million in 2018/19
• The HIV/AIDS and TB conditional grant receives R66.4 billion over the MTEF
• Subsidised public housing receives R123.3 billion over the MTEF

Raising Funds! – Who pays out the Fastest?

Unless you’re one of the fortunate few entrepreneurs who started saving very young or were born into a healthy trust fund, sooner or later you’re going to need to raise funds to begin a business or to cash flow yourself out of a tight spot.

In this Blog we’ll look at some of the more common types of funding available to entrepreneurs and what the estimated pay out timelines look like?

The types of funds listed below are the more common ones generally available to entrepreneurs:

• Own Funds – This is what funders call “skin in the game”. You backing your own venture, often says a lot about the faith you have in its potential. These funds are immediately available, but limited to what you can scrape from your bond or credit card.

 

• Friends/Fools/ Family – This is generally the easiest and quickest form of funding to raise. The repayment periods are the most generous and interest is generally waivered. The downside however is it’s often limited to small sums of cash.

 

• Invoice/Debtor Factoring – Cash Flow is generally the biggest issue facing SME’s, fortunately there are companies around that will advance you money on the strength of your debtor’s book and then only expect payment when these debtors settle their invoice. The set-up process is simple and funds are generally available within 48 hours.

 

• Bank Overdraft – If your business account is in good standing with your bank getting approval for an overdraft should be a pretty painless exercise. The good news is it’s often available within 48 hours, the down side is it’s often limited to a percentage of the funds that pass through your business account.

 

• Bank Loan – Strangely enough, after own or family/ friend’s funds, approaching banks is often the next stop for most entrepreneurs. Accessing these funds generally takes a lot longer to approve as there are several criteria that banks would like you to meet. The old adage of “prove you don’t need our money, before we lend to you” still seems to apply!

 

• Governments Grants – Luckily there are several grant schemes available, the negatives are that the application process is often lengthy and generally requires that you contribute some form of funds in order to access the grant.

 

• Angel Funds – Still in it’s infancy in South Africa, but if you’re pitching the right product, you may get lucky! Timelines to funding vary and access is often by invitation only.

 

• Venture Capital – Although a well-known form of funding, you definitely need a winning product/concept before they will part with their time and money. If selected though, we warned the process is not a quick one as they will want to satisfy themselves that they have planned for every negative eventuality.

So, there you have it, as you can see there are several forms of funding entrepreneurs can access regardless of the stage their business is at. The trick though is to have all your information ready at a moment’s notice, because so often it is the entrepreneurs lack of preparation that stymies 90% of funding applications regardless of the source.

At Phezulu VBO we do more than just assist clients with raising funding, we are your “one stop SME shop”, assisting with everything from Accounting, Business Management, BEE, Consulting, Company Registration to Payroll and Mentoring.

For more information, please visit our website or give us a call on 010 003 8558

The New Year and your Business – What you need to know!

So, the holidays are over – you’re a little heavier, your wallet is a lot lighter. You’re eager to open your business doors and start the year but after last year, you’re a little sceptical about how 2017 might turn out!

Well, the first thing you need to know is:  Worrying will not solve any of your problems!!

If you’d like 2017 to be a kicker of a year then we suggest you concentrate on the following over the next few days:

Cash Flow – At this time of year cash flow is probably the biggest concern of all small businesses. Make a list of your debtors and what they owe and begin calling them – not emailing – but calling them. Let them know you’re counting on their payment to keep providing the great services / products they’ve become accustomed to.

2016 Hangover – No we don’t mean an alcohol hangover, but rather a hangover of incomplete work from 2016! It has the same effect of leaving you uninspired for what lies ahead, so just knuckle down and get it out the way so 2017 can live up to your expectations.

Sales Channel / Deal Flow – The year has barely begun and you’re already worrying where the next sale / deal will come from. That’s a good sign, but you’d be a little less concerned if you had prepared for this at the end of last year. All is not lost though, you still have enough time to rescue the situation.

We always suggest contacting all the clients you’ve done work for over the past year (including prospects, who you quoted but never heard from again) and let them know you are around and ready to amaze them again this year.

This should be a good starting point but listening to your clients’ needs when chatting to them will keep the work coming throughout the rest of the year.

Administration – Or Red Tape as we like to call it! J  Use the next few quieter days, to get on top of your administration. Make a list of expiry / due dates for items like BEE & Tax Clearance certificates, CIPC Annual returns, etc. and put them in your calendar with reminders so you have enough time to action them.

Mentor – Find a mentor who can guide you and hold you to account when you miss targets. Have your accountant help you prepare a budget and management accounts for the coming year and then discuss these with your mentor.

That’s it, follow these 5 essential steps over the next few weeks and your 2017 will definitely get off to a flying start!

At Phezulu VBO we do more than just assist clients with planning for New Year’s, we are your “one stop SME shop”, assisting with everything from Accounting, Business Management, BEE, Consulting, Company Registration to Payroll and Mentoring.

For more information, please visit our website or give us a call on 010 003 8558

Your Business – Can it survive an Economic meltdown?

At some point in your business life cycle you’re going to experience a cash flow crisis, it might be in the start-up phase because you’ve underestimated how much time it would take to generate sufficient sales, it might be several years later when economic forces cause many of your clients to close shop or downscale to cheaper (not better) providers.

Whatever the reason, you’re going to have to take some drastic steps to ensure the survival of your business!

So! What steps can be taken to give your business the best shot at survival?

The first and most important thing is to realise that this is a serious situation! Action is required immediately! Don’t sit around and hope things might get better!

The quickest thing you can do is cut costs, but don’t be rash, go to market and get quotes for all the expenses you’re currently incurring – traditional landlines can be replaced by VOIP, insurance can be reduced, offices can be scaled down, etc. – and then make a sensible choice.

If you have staff and you need to reduce their numbers, you can’t just fire them, contact an HR consultant or the Department of Labour to assist. Following the correct procedures, while laborious will save you money.

While you’re waiting for quotes to reduce your expenses, begin contacting all the clients you’ve ever quoted or done business with in the past two years and reconnect. Find out why they’re no longer doing business with you or why they didn’t accept your quote. Their feedback will accomplish two things – (1) You may receive orders and (2) you’ll have a better indication why your target market is not buying from you!

This information is crucial as it will form the basis of your turnaround plan!

Okay, so now you have a good idea of why you’re not making money and what expenses you’re able to cut! If you’re lucky, your expenses will be less than your income and you can then begin rebuilding your business. If you’re still in a position that your new reduced expenses are still more than your income and you’re unable to reduce them any further, what now?

The choices are, shut your business or if you’re very confident that you can trade yourself out of this rough patch then contact your suppliers and let them know that you’re going through a rough patch and will make reduced payments for the foreseeable future. Just never make promises you can’t keep, base your payment plan on actual numbers then focus all your efforts on driving sales as this is the only thing (coupled with customer service) that will save your business.

At Phezulu VBO we do more than just assist clients with turning their businesses around, we are your “one stop SME shop”, assisting with everything from Accounting, Business Management, BEE, Consulting, Company Registration to Payroll and Mentoring.

For more information, please visit our website or give us a call on 010 003 8558

Monthly Budgeting and Cashflow

Becoming successful in your small business, not busy!

How do I exchange my busy worklife for a successful one?

At Phezulu Business Management we know the success vs busy debate has been haunting entrepreneurs for longer than we have recorded information on the subject. Why is it such a big deal? If you’re successful, aren’t you busy?

While we know the measure of success is both a subjective as well as an emotive issue, therefore for the purposes of this blog we are going to look at “success” and “busy” in the very narrow sense where success equals more money and busy equals how much time am I spending in achieving this goal.

Many a poor spouse, family member or friend has often heard the lament “I work 10 to 14 hours a day and am so busy, yet at the end of the month I have very litte to show for it financially”

So, how is it possible that one can be so “busy” and yet not achieve your goal of earning more money?

Busy, according to the dictionary is defined as “full of activity”, but it doesn’t define what this activity is or should be, as a result we group all activities under “busy” and this is the beginning of our downfall. What we very quickly need to do is separate our “busyness” into “productive” and “non productive” activities and then focus more of our time on the activities in the productive column.

Now this sounds easy enough, however if it was this easy, why is it still such an issue in our daily lives? The truth is, this is a real problem because the majority of people are too “busy” to prepare a list of their monthly activities, therefore below is a simple step by step guide to get you going:

1. Prepare a list of all the outstanding activities that need your attention.

2. Sort these activities into productive and non productive activities. If you are unsure how to deceide ask yourself this simple question “Is this activity going to earn me money (productive), or distract me from earning money (non productive)?”

3. Prepare a daily activity list with allocated time slots. The bulk of your day must be taken up by productive activities, with one or two of the more pressing non productive activities.

4. Delegate as many activities as possible to members of your staff, then train them on steps 1 to 3 above.

5. Repeat daily as new activities are identified ☺

The above process will keep you focused on the important tasks of earning money while identifying those activities that can either be delegated or put on the back burner to be attended to at a later date, thereby freeing up more of your time to enjoy running your business.

At Phezulu we do more than just mentor clients in time management, we are in fact your one stop SME shop, assisting with everything from Accounting, Business Management, BEE, Consulting, Company Registration, Payroll and Mentoring.

For more information please visit our website http://www.phezulu.net or give me a call 087 945 0449

Tyronne Nel

How to choose your business entity as an entrepreneur

Phezulu is passionate about assisting small and medium businesses, therefore the articles we produce for this blog series are based on the business life cycle of a typical entrepreneur. Entrepreneurs come in all different shapes and sizes but the one thing we do all have in common is the legislative hurdles that we need to clear to legally remain in business. We have purposely used the word “legally” here because it is possible to be in business illegally, and by this I don’t mean you’re in the business of criminal activity, you may just be conducting a legal business but going about it in the incorrect manner.

The first thing most entrepreneurs do is formalise the structure under which they plan to conduct their business. There are several different types of business entities you can choose from when you wish to get started in business. We will focus our articles on the most common ones:

• Sole Proprietor – this is the simplest form of entity as you require no forms to set it up and you can begin any time you choose. A sole proprietorship, also known as a sole trader or simply a proprietorship, is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business. The owner receives all profits (subject to taxation specific to the business) and has unlimited responsibility for all losses and debts. The proprietor owns all the assests of the business as well as all debts. This means that the owner has no less liability than if they were acting as an individual instead of as a business
• Close Corporation – while it is no longer possible to register new corporations, any existing corporations are still legal and will operate as normal. A close corporation is generally a smaller corporation and is entitled to operate without the strict formalities normally required in the operation of standard corporations.
• Private Company – a company whose shares may not be offered to the public for sale and which operates under legal requirements less strict than those for a public company. This is a business structure for entrepreneurs to run their business with no limit on the number of directors. Under the new Companies Act, private companies have become the new standard for business- changes to the law have made their operation easier and cheaper. Registered private companies are granted Proprietary Limited or “(Pty) Ltd” status.
• Personal Liability Company – these are mostly used by professional partnerships, such as Doctors, Lawyers, Engineers and Accountants, as a minimum of one director is required. The Personal Liability Company and its directors, past and present, are jointly liable for any debts and liabilities incurred. Registered personal liability companies are granted Incorporated (Inc) status.

 

The different entities listed above each have their own peculiarities and risk profiles, the entity you choose however is entirely up to you and the amount of risk you wish to bear.

A word of caution! Should your business have more than one shareholder, we would recommend you talk to a professional to assist you with technical issues like your shareholders agreement, memorandum of incorporation and secretarial duties.

Registering any of the above entities, except the Sole Proprietor, will require you to interact with the Companies and Intellectual Property Commission (CIPC). They are the record keepers and like most official bodies, they tend to make life a little more difficult than it needs be. While the private individual is more than welcome to visit CIPC and process their own registration, our experience has shown that they prefer to make use of a third party to do this for them. Registration with CIPC can take anywhere between five and twenty one working days, so make sure you have made allowance for this in your planning.

For assistance in registering your business structure, shareholders agreements, memorandum of incorporation and secretarial duties contact PheZulu Business Management on info@phezulu.net

 

 

There are only three things that every entrepreneur ought to know

Essentially there are only three things that every entrepreneur ought to know:

Who owes me money?

To whom do I owe money?

How much money do I have in the bank?

So you’re thinking: “Wow that sounds really simple, what do I need to do in order to get to grips with those three things?” Well let’s run through the three statements as see what’s required?

Who owes me money?

During the course of each month you will be issuing your clients invoices for the products your business sells or the services your business renders. A simply calculation of the amounts invoiced against the amounts already received will let you know what is still outstanding.

In accounting terms these clients are referred to as Debtors

To whom do I owe money?

As above, besides the monthly rent and salary costs, etc., during the course of each month your business will be invoiced for the services and products it consumes. Again a simple calculation of the invoices received less those already paid will let you know what you still owe.

In accounting terms these suppliers are referred to as Creditors

How much money do I have in the bank?

Well this is the simplest of the lot – just log in to your account each day and check your daily balance.

Once you have your finger on the pulse of these three items, you have the ability to calculate your businesses cash flow requirements. Understanding your business cash flow requirements is the key to business survival. Once you understand your cash flow requirements you can then confidently claim to understand your business.

Cash flow – why do I need to understand it?

Over the course of a few months you will soon discover that not all your debtors are as honourable as you initially thought and very soon you might have several clients owing your business money. Keeping track of who owes you money and for how long it has been outstanding is very important. In accounting terms this is referred to as a debtor’s age analysis.

Now, your clients inability to settle their invoices (whether intentional or not), will soon put you in a position where you are unable to pay your creditors when their invoices become due. Keeping track of who you owe money to and for how long it has been outstanding is very important. In accounting terms this is referred to as a creditor’s age analysis.

So as you can see, knowing who owes you money (and when it’s due) allows you to pay who you owe money (when it’s due) from the money you have in the bank. This in a nutshell is the essence of cash flow.

Now you’re probably wondering how does knowing these three things allow me to put a system in place to manage all these registrations to keep my business compliant.

Well all you need to do from here is provide this information to your accountant every month and they will have all the information they need to ensure your business complies with all the necessary regulations.

Next month we will demystify your business Income Statement and Balance Sheet and NO!, you don’t need to be an accountant to understand it.

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