Companies: “XBRL” is Coming Soon. What is it and Are You Affected?

1_h86WRANB5oBVvy5INRKi0gThe Companies and Intellectual Property Commission (CIPC) will from 1 July 2018 require that all Annual Financial Statements (AFS) submitted to the CIPC be in eXtensible Business Reporting Language (XBRL) format.

What is XBRL and what are its benefits? 

It is a global standard for digital reporting. It uses a tagging software system whereby data can be used across many platforms without needing to recapture it.

This means it saves time, is more accurate and can be used as an analytic tool. For example, CIPC will be able to meaningfully compare AFS from different organisations which will be of value to users such as investors.

In addition, XBRL quickly identifies submission problems (making them quick to correct) and is extremely cost effective.

It is widely used overseas – for example, people submit their income tax returns in the UK using XBRL.

Who has to submit annual financials to CIPC?

Basically, any entity which is required by the Companies Act to have their AFS audited. These include:

  • Public companies and State Owned Enterprises such as Eskom,
  • Companies holding fiduciary assets of R5 million or more (estate agents’ trust accounts for example),
  • Non–profit companies carrying out activities which are in the public interest, such as a wetlands reserve,
  • Non-profit companies created by the State,
  • Companies whose public interest score is 350 or more,
  • Any company whose public interest score is at least 100 and compiles its AFS in-house,

If you fall into one of these categories speak to your accountant who will guide you through the process of creating your AFS in XBRL. Remember the implementation date is 1 July this year.

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)

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The European Union has Implemented GDPR – It May Affect You

GDPR-Lock-on-Map-of-EuropeThe EU’s General Data Protection Regulation (GDPR) became enforceable on the 25th of May. It is regarded as the world’s most comprehensive legislation protecting private data.

GDPR may be applicable to South Africans if your business provides goods or services in the EU, and in certain other circumstances. Speak to your accountant if in doubt – there are hefty penalties for non-compliance.

POPI

As you know, South Africa’s own privacy law POPI (the Protection of Personal Information Act) is expected to commence any day now, and that’s when the one year grace period clock will start ticking.

Judging by the extensive media coverage given to GDPR last week, POPI will have a substantial impact in South Africa. Although the one year grace period will give you a year before enforcement kicks in, if you haven’t already started getting ready for POPI, speak to your accountant about it and watch this space – we’ll compile a checklist on how POPI will affect you once POPI commences.

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)

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Risk Management for Your SME

business-challenge-jenga-e1527019929632“All courses of action are risky, so prudence is not in avoiding danger (it’s impossible), but in calculating risk and acting decisively” (Niccolo Machiavelli)

We are all aware that business, as with life, is full of risks and things go wrong from time to time.

Some of us shy away from planning for these risks, put off by complex methodologies such as the Risk Matrix, and say “this is not for me”.

But it can be quite simple

Why not just write down what can go wrong – you can do it alone or with your team. As you are experienced in business, you have plenty of knowledge of the hazards out there.

Once you have a list, then ask yourself, what is the likelihood of the event happening? If it is very low and the outcome of the event occurring will have a small effect on your business, move on to the next risk.

Some risks will have a substantial impact on your business and it may be difficult to come up with a strategy to counter this risk. Speak to experts in the field, then approach the risk from different angles until a solution appears.

Eventually, you will have a series of strategies that could save your business one day. Most of the risks and the solutions you identify will be things you will probably have already thought through. But there will always be one or two you haven’t thought of and that is the power and benefit of this exercise.

It’s not negative thinking  

For those who don’t like to dwell on what they call the negative, this exercise is actually a positive experience. Assessing what can go wrong and having a strategy to counter the risk will allow you to have the comfort of knowing you will be ready to react to adverse events when they occur.

Also, confronting your fears is never easy but by considering all possible angles and finding a solution you are in fact overcoming these fears. As they say, don’t meet your fears head on but tilt at them until you feel comfortable.

The unpredictable is happening more and more – who would have predicted Donald Trump becoming President? So engage in lateral thinking when you do this process.

You also need to factor in how other people will react – very few economists, for example, factored in the complete panic that set in during the 2008 financial meltdown. Thus, many had the strategy of selling down their holdings should financial cracks begin to appear, but in the avalanche of sell orders, they couldn’t offload their holdings and took substantial losses.

Just remember that all high-risk-takers survive because they consider all the risks and make plans to counter them.

Have a look also at these excellent TED Talks videos “Three Simple, Fun and Effective Tools to Help Manage Risk | Will Gadd | TEDxYYC” and “Risk Management: Chris Davenport at TEDxMileHigh”.

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)

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When Do We Stop Working for SARS This Year?

398-20160429-043750-4118-021016_common_tax_m.max-784x410It has become a global phenomenon measuring Tax Freedom Day, the day up to which you work to pay your taxes – only after Tax Freedom Day do you start working for yourself. In 2018 it takes us South Africans 133 days or 39% of our working time to pay our taxes.

Generally, the trend has been rising – when the measurement began in 1994, it took 101 days to pay our tax. We have gone up by more than one month since then, which is quite a disturbing trend. This is set to continue as Government will take a few years to get its fiscal house in order.

However, when we benchmark South Africa against other countries, we are not doing too badly. As reflected in the table below, we are placed 11th out of 29 countries.

logista_June

Source: the above table is adapted from Wikipedia.

By the time you read this article, you will have paid your tax and for the rest of the year the money you earn is all yours!

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)

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Lessons for Your Business: How Does the World’s Most Successful Company Keep Growing?

fullfillment-by-amazonAmazon is now regarded as the best company in the world – its market capitalisation is approaching R800 billion and its founder Jeff Bezos is the world’s richest man.

Year after year in customer satisfaction surveys Amazon invariably comes out on top. Jeff Bezos recently shared Amazon’s secrets in his annual letter to shareholders.

The key to this success is that high standards are now part of the culture of Amazon. How was this achieved?


The key principles

  • Standards are teachable

High standards are not part of our DNA but anybody willing to learn can absorb the requirements of high standards. This is refreshing in an era where many organisations are recruiting only well qualified people.

Once the ethos of high standards is taught and accepted it becomes infectious and spreads to the whole team and the organisation. Conversely, the opposite is true that low standards are also infectious.

  • Standards need to be high across all disciplines

Your business will not be successful unless all disciplines achieve high standards. If, for example, you have great marketing and production capabilities but poor distribution and sales staff the business will struggle to be competitive.

Bezos says all people have blind spots and cannot set high standards in all areas. But if you build up a strong management team which covers all spheres of the business, you will achieve best practice methodologies across the company.

  • Be realistic

Communicate to your staff that attaining world class standards involves hard work. It is not going to be easy but if there is a culture of team members striving to achieve these standards, then it will filter down to all employees.

  • Skills and teamwork

No individual has all the skills required to complete all functions in their team activities. But working in teams most often means that one team member will have a unique, necessary skill needed by the team. In other words, having a pool of skills in a team increases the overall skill levels of the team.

  • Work in narratives

Most surprising is that Amazon doesn’t work in PowerPoint presentations but in six page memos. At the beginning of each meeting one team will present a six page memo. The meeting will spend half an hour reading and discussing the memo.

This has many benefits – the team writing the memo spends time getting their thoughts and ideas into a well-constructed narrative format. As Bezos writes, you cannot lay down procedures on how to write a good memo but everyone recognises a good memo when they see it.

The power of this is that everyone in the team discusses and understands these memos. In turn it is well communicated to the organisation and thus builds up Amazon’s high standards.

Not everyone can write a high quality memo, but there is always someone in the team who can and if each team member contributes to it, then the team as a unit will have the skills to write a high quality memo.

Bezos says we need to accept that a high quality memo usually cannot be written in a couple of weeks – Amazon’s best memos are often written and rewritten over a few months until they achieve the high standard and clarity required. This needs to be communicated to the organisation, otherwise teams will quit if they can’t write a good memo in a week or two. As Bezos writes above, be realistic.

  • High Standards equate to a successful business

Once you have achieved this across the organisation, your business will have world class products/services, people and processes. In a world of fast moving consumer expectations and rapid change, building a strong organisation with high standards is critical to staying competitive.

You also find that high calibre people are drawn to companies like Amazon. This reinforces the success of the company and enables it to keep pulling away from the competition. We live in a dynamic world so we need to keep growing our knowledge and skills.

Some of us may not like the idea of using memos to build standards but good leadership, fostering a culture of learning (standards are learnt), quality in all aspects of the business and encouraging teamwork will put your business on the path of success.

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)

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Practical Tips on Cash Flow

cash-flow-1473836262“Never take your eyes off cash flow because it’s the life-blood of business” (Richard Branson)

The Companies Act is underpinned by the assumption of liquidity and solvency – directors and owners are mandated to ensure the business can meet all its short term obligations.

The best way to achieve this is via cash flow.

As cash flow is fundamental to any business, this should be managed by senior management.

The starting point

Sit with your accountant and work out the monthly inflows and outflows from your bank statements. Put them into a spreadsheet and then review this frequently (weekly is desirable) until the cash flows start to get accurate. More importantly you begin to understand the patterns of your company’s cash flows.

Drill down

The most significant aspects of cash flow are:

  • Sales. Can I reduce discounts/rebates without losing sales? Is it possible to sell different products to customers? How do I grow my customer base?
  • Ultimately, no business will flourish without growing sales. Also key to sales is managing debtors:
    • How much contact do you have with customers? Getting to know them will reduce the chance of slow payment.
    • How quickly do you respond to customer queries? Are credit notes issued promptly?
  • Stock. Do you have a good forecasting system to balance not losing sales with minimising stock holding? Is slow moving stock quickly identified?
  • Creditors. Do you maximise the possibilities with creditors, for example are all possibilities in terms of early settlement discounts taken advantage of?
  • VAT. VAT should be included in your sales figures as well as your purchases, and your VAT return payments factored into your cash flow.
  • Work out your free cash flow. This is the excess cash you generate after liabilities have been met. This is crucial to your business as it means you can finance new assets or pay more dividends. Essentially it gives you flexibility and more freedom to grow and run your business.

When you review your business after each month end, build in cash flow to the review. Many businesses now have free cash flow as a key performance indicator.

Cash flow is critical to any business – give it the attention it deserves.  It will also give you a good understanding of how the business is performing.

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)

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Here’s what You Should Know About “YES” (our Youth Employment Service) and the Opportunity for SMEs

Empower+Youth+TodayOne of the most intractable problems facing South Africa is high unemployment, particularly (and this is a global problem) among the youth. Initiatives to deal with the issue have failed and our unemployment has risen from 21% in 2008 to over 27% at present. Clearly this is not sustainable.

Recently government, business and labour announced the YES (Youth Employment Service) program to tackle youth unemployment. YES will, over the next three years, provide one million young people with a one year’s internship in a business.

The YES initiative recognises that Small and Medium-sized Enterprises (SMEs) are a fundamental driver of employment and seeks their involvement. SMEs should look to get involved as the program is already funded and apart from helping to overcome unemployment, SMEs can reap benefits for their own businesses.

The rationale for YES

Most young people do not get a Matric pass and find it extremely hard to find a job. They thus cannot get the experience and skills to become an effective part of the community. In addition, most of the unemployed youth live in townships which are a substantial distance from businesses.

Currently youth unemployment stands at over 50%. 

How YES works

The program has a three-pronged approach:

  1. In the next three years over 100 companies will sign contracts with 1 million interns. The program will be for at least 1 year and interns will:
    • Gain work experience
    • Be given practical business training courses (training modules have been developed and will be given to interns)
    • Acquire the necessary skills to ensure they will be able to perform in business
    • A database of all the CVs of interns will be set up which will be available to companies seeking to employ staff.
  2. Business hubs will be set up in the townships where training and mentorships will take place. Satellite facilities of SARS, CIPC and B-BBEE accreditators will be available at these hubs. In addition, there will be internet provided along with facilities, including 3D printers, for light manufacturing.

A database will be built up linking township SMEs to the large corporates which will give priority to trading with these small businesses.

  1. It is unlikely that the 100 larger companies will be able to take on 1 million interns and they will sponsor those who they are unable to accommodate for internships with Black-owned SMEs in townships. This will build up business and employment in these areas.

This is particularly an opportunity for businesses who want to tap into the “Black” market. Why not set up a Black-owned SME in a township and train interns in your products/services and in your business? The interns get knowledge and experience and you can offer employment to the stronger candidates in your business whilst helping other candidates become marketable to other businesses. 

Incentives for business to get involved

The interns will earn R3,500 per month. Employers can get this refunded via the Employment Tax Incentive (ETI) which is paid by reducing your monthly PAYE.

There is also the potential to move either one or two places up in your B-BBEE score. A discussion paper is out for comment on amending B-BBEE legislation, the main proposals being –

  • In essence companies are set targets as to how many interns they should train and if they exceed their target and offer employment to a percentage of candidates, they move up one position in their scorecard. Companies doubling the number of their target interns and employing double their required quota will move up two positions in their scorecard.
  • In addition, companies can claim 50% of their YES skills spend in the Skills Development category.

Remember these are draft proposals and the final legislation could be tweaked.

There will be annual fees (R20,000 for SMEs) for companies who wish to register and participate in the YES program.

Overall, there are plenty of incentives for businesses who wish to participate in the YES program. With most of the large companies putting their support behind this initiative, it will probably be successful and contribute to solving one of the country’s most pressing problems.

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)

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A Tank of Petrol – Where Does Your Money Go?

image_content_8886634_20170929101219Are you aware that less than 40% of the petrol price is made up of actual petrol cost? Most of it goes to pay tax (Fuel Levy), the Road Accident Fund and the various players in storing, wholesaling and retailing petrol.

As of April the makeup of the cost of petrol (as reported by the Automobile Association) is as shown in the table below.

Notes to the table:

  1. The difference between the two sets of prices is the cost of transport (34 cents per litre) to get fuel from the coast to inland.
  2. The Fuel Levy is a general tax and is part of Government taxes. It will contribute R77.5 billion to taxes in 2018/2019.
  3. The RAF is to compensate those injured in road accidents. RAF will raise R41.2 billion in 2018/2019.
  4. Storage, margin and distribution is mainly the fee paid to wholesalers and service stations.

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)

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How Big is Your Carbon Footprint and How Can You Reduce It?

GettyImages-485873480-1024x726“We’re running the most dangerous experiment in history right now, which is to see how much carbon dioxide the atmosphere… can handle before there is an environmental catastrophe” (Elon Musk)

Climate change is now a part of our life. It is worth getting to know how big our carbon footprint is and how we can reduce it. Of course businesses will also need to start thinking about the new carbon tax planned for 1 January 2019.

Defining “carbon footprint”

It’s the amount of Greenhouse Gases (GHGs) emitted – the main culprits are carbon dioxide, methane, nitrous oxide and fluorinated gases.

The most common ways we emit Greenhouse Gases is by transport, the food we eat, the energy we consume and our shopping spend. If you want to measure your GHGs have a look at The Nature Conservancy’s Carbon Footprint Calculator here.

What should you do to reduce your footprint?

Transportation is now the biggest emitter of GHGs, so it’s a good place to start.

An overseas flight puts 2.6 tons of GHGs into the atmosphere. Do you really need to make that overseas trip when a lot of business can be done on electronic media?

Motor cars come next – if the average person did not use their car for a year it would also save 2.6 tons of GHGs. Consider the following:

  • When buying a car consider buying an electric or hybrid vehicle. Generally, the less emissions, the lower your operating costs.
  • Minimise the use of your car – use carpools, share a taxi or Uber, or where possible ride a bicycle or walk.
  • Service your car regularly and check tyre pressure often.
  • To optimise your fuel usage, drive more efficiently by braking less and reducing the amount of air-conditioning you use.

In terms of your home, look at going off grid and converting to renewable energy. If this is too expensive you can:

  • Regulate the hours your geyser operates,
  • Reduce your meat and dairy consumption,
  • Buy a laptop as they use 80% less power than desktops,
  • Recycle bottles, packaging etc.

There are many ways to save here, so look at your home and circumstances and analyse how you can cut GHGs.

We have already touched on shopping but reducing what you buy to cut down on waste is a good start. Look at the type of packaging on your purchases – is there wastage by the supplier and how environmentally friendly is it? If we do this correctly we can:

  • Save money
  • Lead a healthier lifestyle, and
  • Reduce CHGs.

Climate change is with us, so let’s approach it in a realistic and responsible way. Let’s also measure how we contribute to CHGs and how we can try to reduce our impact on the environment.

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)

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Bitcoin is Taxable!

gold and silver bitcoin lies on a white calculatorSARS has released a media statement on Bitcoin in which it states that people dealing in Bitcoins or other cryptocurrencies are subject to normal Income Tax law in terms of gross income, tax deductions or Capital Gains Tax. SARS are treating Bitcoin not as a currency but as an intangible asset.

If you are in doubt about your circumstances speak with your accountant, and in need you can get a ruling from SARS.

Taxpayers who fail to declare dealings in cryptocurrencies will be subject to interest and penalties.

Currently, you are not required to register for VAT if you are a vendor in Bitcoin (or any other internet currency).

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)

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