Tax Relief For Small Businesses:

As you may be aware, in the 2013 budget speech, Minister Pravin Gordhan proposed that there would be further tax relief for small businesses, including an increase in the monetary tax thresholds applicable for small business corporations. There are specific criteria that apply for you to qualify as a small business, such as: all shareholders must be natural persons (individuals), and that the annual gross income must not exceed R20 million (up from R14 million). In addition, personal service providers are excluded and no more than 20% of gross income may come from investments or from rendering personal services. Shareholders are limited in respect of other business interests that they may hold.

If your annual turnover is R1million or less, the all-in-one “turnover tax” as a “micro enterprise” may be applicable to you.  This is a simplified turnover based tax system substituting income tax, CGT and in certain circumstances, VAT. This applies not only to companies, but also to sole proprietors, partnerships, close corporations, companies and co-operatives.  With effect from years of assessment commencing 1 March 2012, a micro business can voluntarily exit the turnover tax system at the end of any year of assessment. However, once out of the turnover tax system, the taxpayer will not be permitted to re-enter. Personal services rendered under employment like conditions and professional services are excluded.

Note that this is a summarised article and specific professional advice should be taken before making any decisions which may impact your business. Contact our offices for assistance.

2013 Employer Annual Reconciliation:

The 2013 Employer Annual Reconciliation period will run from 1 April to 31 May 2013. During this period all Employers are required to submit their Employer Reconciliation Declaration (EMP501) and Employee Tax Certificates [IRP5/IT3(a)s] for the transaction period 1 March 2012 to 28 February 2013, in respect of the Monthly Employer Declarations (EMP201) submitted, the payments made and the IRP5/IT3(a)s generated. Contact our offices for assistance with these submissions.

Alterable, Unalterable and Restrictive Provisions In Your New MOI:

The 30 April 2013 deadline is fast approaching in order to bring your shareholder agreements and your company’s Memorandum of Incorporation (MOI) into line with the new Companies Act.

There is a considerable degree of flexibility given to a company to draft an MOI in order to accommodate their specific requirements.

Basically the Act states that the MOI can be divided into three categories which require that the company is constituted in accordance with –

1. The unalterable provisions of the Act
2. The alterable provisions of the Act, subject to any negation, restriction, limitation, qualification, extension or other alteration that is contemplated in an ‘alterable’ provision, and has been noted in the company’s MOI
3. Any further provision in the company’s MOI

The Act expands on these provisions by providing that the company may also include any matter that the Act does not address, include any provision altering the effect of any alterable provision, as well as include any provision imposing on the company a higher standard, greater restriction, longer period of time, or similarly more onerous requirement than would otherwise apply to a company in terms of an unalterable provision of the Act. This is a very important provision as it allows the shareholders to effectively override or veto many of the wide powers given to directors by certain unalterable provisions in the Act, should the company wish to do so.

The MOI may also contain restrictive conditions applicable to the company and any specific requirement for the amendment of such a provision. It may also prohibit the amendment of any provision contained in it. For example, the capacity and powers of the company may be restricted (e.g. the company is created to perform a very specific function only). The general public must be alerted to this fact, and in such cases, the Act requires that the company’s name be immediately followed by the expression ’Ring-Fenced’ (‘RF’).

This is a short summary on the provisions that your MOI may contain. The topic is very complex. Contact our offices for professional advice on your MOI.

Change Management:

The business world is continually in the throes of major change. Developments in technology, information systems, legislation, business models and processes are ongoing. These changes seriously challenge organisations and individuals who experience higher stress levels, choosier customers, and increasing diversity in the business world.

As a manager or a company owner, managing change is a skill that does not always come naturally. It encompasses such a vast array of processes and skills, not least of all is the ability to have a sensitive understanding of the human reaction to change.

No one organisation will have exactly the same requirements as another, however there are a set of “guiding” principles that will assist with change management.

1. Begin with a systematic diagnosis of the current situation , in order to determine both the need and capability for change
2. Get the right people in place with the right emotional commitment, and mix of skills and levels
3. Communicate the rationale behind the change to all stakeholders and employees
4. Help employees to understand the necessity for change.  This will assist with motivating the organisation to follow the new direction
5. Conduct a diagnostic to ascertain the core values, beliefs, and perceptions of employees – all of which must be taken into account for successful change to occur
6. Get the team to establish a simple vision and strategy
7. Leadership needs to provide support, direction and example. Leaders should embrace the new processes first
8. Continually reassess the impact of the change on the organisation and make adjustments to maintain momentum and drive results
9. Speak to the individual – change is a very personal journey, be mindful of people’s strengths and weaknesses.

Invoicing Tips To Boost Your Cashflow:

Cash flow is the lifeblood of any small business. Timing is everything.

Here are some tips to speed up the process of invoicing and getting your client to pay up faster.

1. Invoice immediately on completion of the work.Don’t wait until the end of the month. Also make sure that your client is happy, and that you invoice them when they are on the “gratitude curve”, and are more likely to pay.
2. Email invoices to your clients. There are certain legal requirements that have to be met when you send electronic invoices. Some of these are that they have to be sent on an encrypted format (at least 128 bytes) over a secure line or contain an electronic signature, and the recipient must confirm in writing that he will accept electronic invoices for the purposes of claiming input VAT.
3. Include a detailed description of the work completed. This reduces the chance of your client disputing the invoice, and gives him an idea of exactly how much you did to complete the work.
4. Set your own payment terms. The convention is to require payment within 30 days after invoicing. You do not have to adhere to this convention, and can require payment on receipt of the invoice, or on any other terms that suite you. Set up your payment terms on your invoice document, on your engagement letter with your client, on your quotes and on your website. Ensure that your client is aware of these terms before you begin providing the service or product to him.  Encourage your clients to pay by EFT directly into your bank account.
5. Send regular monthly statements. It is amazing how often monthly statements do not go out to clients. Ensure that regular statements are sent, on email.
6. Use your Accounts receivable reports to:

• Filter a list your top 5 “bad payers”. Most accounting software packages these days have the facility to provide reports in the form of charts and graphs. Use these to target the bad payers as soon as possible – before you have to compete with their other creditors for payment.
• Gauge the health of your business – contact the clients who are “bad payers” – perhaps their lack of payment is as a result of them being unhappy with the service they have received?

*Reference to client in service industry also includes customer in retail or product delivery industry.

Sincerely,