Managing your startup capital

Becoming an entrepreneur is not as easy as waking up with an idea and having money thrown at you to turn it into a reality. Most successful entrepreneurs share the same sentiments – it takes many rejections and disappointments, and plenty of restarts. There are two things this article will explore; how to get startup capital, and how to manage it.

1. How to get the startup capital

Your drive to become an entrepreneur should not be derived from wanting to have exactly what another entrepreneur has achieved. By virtue of your business idea being different, an opportunity to succeed already exists. Think carefully and seriously about your creative ideas to assess which ones present the most viable options. When you know what will work, approach investors.

Investors are willing to consider investing startup capital to get your idea into the already competitive market and growing your customer base as quickly as possible. They want to see that their investment is going into the practical ways of making things happen.

2. How to manage it

Now that the capital for your business is available to you, your return on your idea’s marketing budget should now be approximated. Think realistically when it comes to overheads, advertising and personnel as these areas should not be where all your capital goes. The two important things that ensure that you appear more credible are the idea development and the launch thereof.

  • Ensure that you are able to track your expenditure so that your capital does not collapse.
  • Let your startup capital be for business purposes and don’t let personal problems dip into it
  • Learn to use a cloud accounting system to avoid possible accounting errors, and to balance your books

This article is a general information sheet and should not be used or relied on as legal or other 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)

Innovation: How to manage it

Managing innovation? Why put a damper on creativity? No, that is not the idea. The purpose of managing innovation is to organise all the free-flowing ideas in order to avoid chaos and to actually put all the great ideas into action.

 

Here are the steps to how you can manage innovation:

 

  1. Envision

 

To envision an idea is a critical step in the innovation management process. The envisioning process should put the plan in place to reach the innovation goals. Words alone are not enough. Leaders of innovative companies need to emphasise that innovation is a strategic imperative and they need to back up their words with their actions.

 

  1. Engage

 

The next step, to engage, is where ideas are generated. In this process, companies engage employees, customers and partners to capture and share new ideas. To formalise the engagement process transforms it from an unfocused and ineffective “suggestion box” to a proactive and productive approach that efficiently produces targeted innovations.

 

  1. Evolve

 

With this step, companies evolve ideas to increase their quality and value. Early feedback will allow ideas to be improved upon and problems to be raised so they can be solved or prevented. Give people a platform to exchange information, add comments and refine ideas, and remember, in order to get the most out of ideas, they need to mature. Developing these ideas in a virtual team setting provides the medium to bring group knowledge together and share it with subject matter experts, communities of interest and others by discussing, commenting and contributing to concepts.

 

  1. Evaluate

 

Companies must identify the ideas that they believe will succeed. A lot of companies are overwhelmed by too many ideas. They want to use the “wisdom of the crowd” to provide some direction on where to focus. The goal is to take potentially thousands of ideas and turn them into a more reasonable number that you can evaluate. Companies can identify the best ideas by tracking which ideas are getting the most attention, views and comments. They can also provide mechanisms for the community to rate the ideas, from a simple “like” to providing specific feedback or validation on details like technical feasibility.

 

  1. Execute

 

The best idea in the world will have no value unless it can be transformed into a reality. The execution process takes the input from the previous processes to execute an official project which will further build on the idea. Companies should have a repeatable project management method and should plan projects based on the deliverables to be completed. One of the clearest challenges that companies face in the execution phase is simply getting projects delivered on time and on budget while maintaining quality.

 

In conclusion, successful innovations are the result of carefully examining the target market and the available technology to meet customer needs. Essentially, innovation management means to be innovative in order to come up with solutions, before competitors have realised there is a problem.

 

This article is a general information sheet and should not be used or relied on as legal or other 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)

Application for reduced assessments

Where taxpayers are aggrieved by assessments issued by the South African Revenue Service (SARS), the Tax Administration Act[1] makes provision for a dispute resolution process, whereby a taxpayer can request reasons for an assessment, object to an assessment, and if necessary, further appeal procedures are available. Dispute resolution is process-orientated, and strict rules prescribe the form, dates and general procedures applicable to both taxpayers and SARS. Given the involved process, dispute resolution is often costly, with professional assistance being required to ensure compliance with the system. When there are obvious mistakes in an assessment (as opposed to matters of substance or interpretation), going through a dispute resolution process can be a frustrating process for taxpayers, since amounts assessed should never have arisen in the first place. 

Fortunately, the Act makes provision (in section 93), for SARS to make reduced assessments if SARS is satisfied that “there is a readily apparent undisputed error in the assessment” by SARS or the taxpayer in a return. SARS may make such reduced assessments even though no objection has been lodged, or no appeal has been noted. There are however some difficulties in applying section 93, both practically and in substance.

 

On a practical level, neither the Act nor any dispute resolution rules make provision for the process to be followed in terms of section 93. In a recent tax court decision,[2] the judge concluded the following regarding the process:

 

However, the basis on which a taxpayer can have a matter considered under s 93(1)(d) is clearly not by way of objection to, or appeal against, an assessment. A separate procedure is available for these. Neither does it envisage a formal application. It seems to me that it is simply by way of a request.

 

The request procedure, unfortunately, leaves the taxpayer out in the cold, since it is doubtful that an outcome to the request would have been obtained within 30 business days after an assessment was issued – the period within which an objection was required to be lodged. An application in terms of section 93 will not suspend the period during which an objection is required to be lodged – should the request ultimately be denied; the taxpayer has severely damaged his chances on success if objection is the next recourse, since the objection may potentially be submitted late.

 

Equally challenging, is that there is no clear indication or definition for what would amount to a “readily apparent undisputed error”. What may be very apparent to the taxpayer, may not be interpreted as such by SARS. Arguably, a “readily apparent undisputed error” would be something along the lines of incorrect tax rates applied, or incorrect penalty percentages applied – requiring minimal (if any) interpretation of tax provisions.

 

Although providing an avenue for the reduced assessments for taxpayers, a request in terms of section 93 should be managed very cautiously, as it may be necessary to run a parallel objection process to ensure that taxpayers are not jeopardised in the other remedies available to them, in the event of an unsuccessful request.

 

[1] No 28 of 2011 (“the Act”).

[2] Rampersadh and Another v Commissioner for the South African Revenue Service and Others (5493/2017) [2018] ZAKZPHC 36 (27 August 2018).

 

This article is a general information sheet and should not be used or relied on as legal or other 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)

Korporatiewe beheer – Finansiële jaareinde

Die finansiële jaar van ’n maatskappy staan bekend as die rekenkundige periode. Ingevolge artikel 27 van die Maatskappywet No. 71 van 2008 (“die Wet”), het elke maatskappy wat geregistreer is ingevolge die Wet ’n finansiële jaareinde. Hierdie datum word vervat op die Kennisgewing van Inkorporasie-dokument van ’n betrokke maatskappy.

 

Die eerste finansiële jaareinde van ’n maatskappy begin op die datum waarop die maatskappy geregistreer is. Hierdie laasgenoemde datum verskyn op die registrasie dokumentasie van die maatskappy. Die finansiële jaareinde van die maatskappy sal dan eindig op die datum soos wat dit verskyn op die Kennisgewing van Inkorporasie-dokument van die maatskappy.

 

Die opeenvolgende finansiële jaar van ’n maatskappy begin op die datum direk na die voorafgaande finansiële jaar geëindig het, en sal dan weer eindig op die datum soos vervat in die Kennisgewing van inkorporasie-dokument van die maatskappy, behalwe as die maatskappy se finansiële jaareinde verander word deur ’n besluit van die direksie gedurende die betrokke finansiële jaar.

 

Die direksie van ’n maatskappy mag die finansiële jaar van ’n maatskappy enige tyd wysig deur ’n aansoek van wysiging in te dien by die Companies and Intellectual Property Commission (“CIPC”) deur die indiening van ’n CoR 25-vorm wat geteken is deur een van die direkteure van die maatskappy asook ’n ondersteunde resolusie wat geteken is deur al die direkteure van die betrokke maatskappy.

 

Die vereistes vir die wysiging van ’n finansiële jaareinde soos uiteengesit is in die Wet is as volg:

 

  1. ’n finansiële jaareinde mag slegs een keer in ’n betrokke finansiële jaar gewysig word;
  2. die nuut-verkose finansiële jaareinde moet ’n datum wees wat later is as die datum waarop die wysiging ingedien word by die CIPC; en
  3. die nuwe finansiële jaareinde mag nie daartoe aanleiding gee dat die nuwe finansiële jaar langer as 15 maande sal wees ná die voorafgaande finansiële jaar geëindig het nie.

 

As die finansiële jaar van ’n maatskappy eindig op ’n Saterdag of ’n Sondag van ’n betrokke jaar, dan sal daar geag word dat die finansiële jaar eindig op die volgende amptelike besigheidsdag.

 

Hierdie artikel is ʼn algemene inligtingsblad en moet nie as professionele advies beskou word nie. Geen verantwoordelikheid word aanvaar vir enige foute, verlies of skade wat ondervind word as gevolg  van die gebruik van enige inligting vervat in hierdie artikel nie. Kontak altyd ʼn finansiële raadgewer vir spesifieke en gedetailleerde advies. (E&OE)

The labour cop out on jobs

By Jerry Schuitema.

 

There are a number of follies in the intensified hype around job creation. One that came from the recent job summit is setting some target, albeit vague, of creating some 275 000 000 jobs a year. We should have learned by now that there are many forces outside of measures we can take ourselves that can turn the employment environment on its head.

 

Another is an attempt to create some form of tangible cohesion between representatives of groups that are so widely fragmented themselves. There can be no greater forces for cohesion in a group than having a common purpose and accepting a common fate, and the extent to which these can be forged in efforts such as the job summit will ultimately determine its success.

 

The only counter we can create against outside forces is a flexible economic construct that can absorb the bad times and exploit the good times to the fullest. In a business sense this can only be built on the principles of having a common purpose and sharing a common fate; a subject I have dealt with in depth in the revised version of my last book Common Purpose; Common Fate (a free pre-publication PDF copy of which can be downloaded here).

 

One can only find a common purpose by being outward looking; by making a contribution to the outside world — specifically customers or the needs and wants of others. Customers create jobs – not capital, labour or even government. By its very nature, jobs (and profits and taxes) are an outflow of that. So the concepts of job retention or job creation are inward looking and mostly end up in a toxic trade-off.

 

Unemployment is the outcome of losing jobs faster than we can create new jobs. Fix the problems causing job losses and job creation will take care of itself. We cannot do so by simply making some “sacrifices” by corporate capital in where it invests, who it buys from and occasionally waiving a dividend; or by labour being “less militant” in fighting retrenchments. The latter is something of an inconsistent trade-off for not insisting on a retrenchment moratorium.

 

The cohesion we seek at national level can only be effectively created at an individual company level – the wealth creating cells of our economy. Jobs are created and or sustained by an ability to create wealth, not simply redistributing wealth creation itself. It’s much easier to create cohesion around wealth creation because all can subscribe to the company’s common purpose of serving customers; irrespective of individual motives such as making a profit or receiving a wage. The latter are entirely dependent on the former, and the more these motives can be aligned to the former, the greater its flexibility and strength.

 

The single biggest drawback that continues to bedevil all efforts at creating flexibility and economic strength, is the cop-out by organised labour. It consistently behaves as a beneficiary or recipient rather than a contributor. Yet, as shown statistically by a national Contribution Account© of average company wealth creation and distribution, they are by far the biggest group beneficiaries in wealth distribution. But, because value added itself represents both contribution and reward, it can be argued that that share represents contribution as well; meaning that they are the biggest contributors to wealth creation. Unfortunately, that part is the most rigid and inflexible in its individual units of the wage itself. When wealth creation is lower, other interests, particularly capital, scramble to protect earnings and when unit costs are inflexible you simply have to reduce the number of units.

 

As long as wealth creation itself is under pressure, job losses will be the illogical outcome. I say illogical because faced with a socio economic crisis of nearly 4 out of ten employable people being out of work, it should make sense for labour to be more militant against retrenchments, and less militant if not more accommodating on wages. At the very least, it should not stand in the way of those enterprises who have such a solid relationship between all of its stakeholders that some sense of common fate, tangibly expressed in fortune sharing, is endorsed by labour itself. But it could even go much further and commit to protecting customer interests at all times and doing nothing that will harm customers, who are the real job creators for business.

 

Companies themselves can go a long way in creating labour flexibility: by encouraging an understanding of the value-creating (rather than profit) paradigm of business, and being consistently transparent about the performance of the company in an accounting expression that makes sense to all. The two pillars of optimum wealth distribution are to meet the legitimate expectations of all of the stakeholders and to encourage continued contribution.

 

These are far more manageable than one may think. All one has to do is change the lens through which one see business: from an institutional and money view; to a people and relationship view. That’s all. Do that and see what happens.

 

 

This article is a general information sheet and should not be used or relied on as legal or other 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)

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