Matsobanemetja Business Consulting Pty Ltd

BUSINESS OWNER BANK STATEMENT REVIEW

Dear Business Owners

The end of the year gives us an opportunity to do some introspection.

If you have not been doing things the right way, as far as record keeping is concerned – please aim to do things differently in the new year. Your business depends on it.

I just thought while we are a bit settled, may I please ask you to perform this little exercise.

✍️ Pull out your November business bank statement with the transactions dated 01 November to 30 November 2022.

✍️ Start by recording all the monies received as a results of sales – categorize them as ‘Sales’ or ‘Income’

✍️ Then record the monies that went out of the bank account as a results of business operations. Purchases of raw materials, Payments of operational expenses such as wages and salaries, paying electricity, rent, telephone and internet, etc.

✍️ Total sum both the Income and the expenses, respectively.

✍️ Are there any other expenses that were catered for but had nothing to do with the business? Record them separately and the total sum in the end.

✍️ With your calculator enter the Sales / Income figure and less (minus) the costs of raw materials and expenses. And see how much you are left with.
For e.g. Sales = R10 000,00 – R6 000.00 (which is the total of both the raw materials and operational expenses) thus your total answer is R4 000.00

This means your profit for the month was R4 000,00

You may ask, what do we do with the personal expenses that were covered by the business?

The answer is Pay back the money to the business account. It was not supposed to be used in that way in the first place. Failure to pay back will result in writing off as a wasteful expenditure. You can just imagine the negative image this will create 🥺

Hence you might not see the business profit.

The objective of this exercise is the following:
✅ To indicate to you the importance of record keeping
✅ The importance of separating personal funds from business or rather the importantance of earning a salary from the business
✅ Check if you are running a profitable business
✅ Learning to budget and certain decisions you can draw by just looking at your figures. For e.g. you might realise how much you can save by bulk buying.
✅ You may also be able to check if your pricing for the products or services are correct.
✅ Controlling your expenses
✅ Having monthly sales targets

**there are many other decisions that can be drawn by just looking at your business figures and overall business performance.

Make sense? Try this exercise with only your one month bank statement and see if it will not assist

This is how things need to be done on a monthly basis!

Y2023 we are talking growth in our businesses. Manifest it 🤑 We are fetching the Bag 💰 for real!

http://www.matsobanemetja.co.za

Compiled by Ms. Dikeledi Seoloane – Accountant, Tax Practitioner, Owner at Matsobanemetja Business Consulting – The Accounting Firm | matsobanemetja_bc

BUILD AND GROW YOUR BUSINESS BY UNDERSTANDING TAXABLE DEDUCTIONS

There is a famous quote that says – a non financial person when a transaction happens they only recognise one entry. As an accountant that works with various small to medium businesses i tend to agree. Doing so with no judgement of course 😉

Though the most recognised entry is that of an Income, it is also not useful to ignore the expenses we incur during our operations. Because such has an effect on our businesses – positive or negative.

Being equally in control of our expenses helps us to not burn the business funds due to unexpected expenses that could have been managed or avoided. Track your expenses and review them as often as possible. It is advisable that it is done on a monthly basis to avoid being exposed to a loss or shrinkage only at the financial year end of the business. It might be too late to rectify.

In as much as you may rely on your bookkeeper or accountant please make it to a point that you receive frequent communication from them. Their job is to assist you with providing clarity via the numbers that will communicate clearly the position and the performance of your business.

Learn and be able to read at least the 2 parts of the Financial statements. The Income Statement and the Balance Sheet. It is extremely important that you are able to analyse them as they carry valuable business information. Whether your business is a promising success, stagnant or non-profitable.

Do not overlook the business deductions in your business. Though they have a limit as regulated by the receiver of revenue it is also important that you note them as they play a huge role in reducing your tax liability. Deductions such as: Gifts to clients, Software, Insurance premiums, Training and Development, bad debt written off, etc. All these are required one way or the other for scaling our businesses thus it will be dangerous not to recognise them in our recordings.

The blog is compiled by an accountant who runs a fast growing accounting firm. She would like to also remind the readers or business owners that though accountants are not magicians that can grow your business overnight, if you have a look at the information they put together – it might be helpful for you in running a successful business!

Happy trading 🤍

Compiled by Ms. Dikeledi Seoloane on behalf of the accounting firm – Matsobanemetja Business Consulting (Pty) Ltd

Dikeledi is a registered business accountant and qualified tax practitioner.

http://www.matsobanemetja.co.za

BUSINESS PRACTICES

I was invited for an interview by YOU FM and therefore decided to create a blog out of the questions that were asked.

1. What are the basic business practices?
1)a. Making profit – you must never compromise on this important business principle. For anything that will comprise the business from making profit, it is not good for the business.
1)b. Customer service – do realise that no business runs successfully without customers. Pay attention to them, treat them well and serve them to the best of your ability. Once a customer decide to buy from you, make it your job to retain them. That’s mainly how your business will grow.
1)c. Treat your employees well – Your employees play a very important and big role in your business. They are the most stakeholders in your organisation. Your employees are the one in close contact with your customers everyday. To receive customer satisfaction, make sure that you as an employer you create a very safe space and great work environment.

2. When starting off a business a very small one, is there a necessity to open a bank account or is there a particular amount of money I need to be making to open a business account?
– Yes. A business bank account must be opened immediately after you have received the company registration documents from CIPC. It is important that you transact every business activity from the right type of bank account. Business account assist in building a financial profile / portfolio for the business. It also assists us to account.

3. In order to register a business is there a need to have a business plan?
– Entrepreneurs and SMMEs need to move away from the popular notion that a business plan is only required for funding applications. It is an incorrect one. You need a business plan to measure your performance and progress. It serves as a roadmap for your business. You need to set goals for your business. Goals such as, what do you want your business to achieve in a certain period? Where do you see your business in x years time? Thus a business plan comes very handy to such.

4. What are the most common source documents important for every business owner?
4)a. Invoices – we need to comply with all the business requirements. Make sure we invoice our customers. Invoices: i) Getting paid on time. In this day and age we need to make sure that we make things easy for us to enable us to run our businesses smoothly. An Invoice with the important details such as the payment terms, full banking account details and amount payable make it easy for you. ii) Invoices assist for audit purposes. If SARS initiates an audit of your business you need to ensure that whatever paperwork they will require, you have. Failure to produce any paperwork is a failure to dispute any of their demands. iii) Invoices are also important for legal purposes. Imagine there are customers that do not want to pay for your Invoices. You require assistance from collection agencies or attorneys to recover the funds on your behalf. The starting point is that you produce all the source documents so they can assist you with the case.
4)b. Employment contract – employees need to know what is expected of them in the business. Important terms should be stipulated in the contract. This is same as committing work with our business associates. Contracts teaches individuals to act in a specific manner. Thus they act as the guidelines.

6. What are the most basic compliance principles that businesses should know and practice?
– Keeping the business active by making sure that the CIPC annual returns are filed every anniversary of the business.
– SARS returns must be submitted every financial year of the business. Whether operating or not. You need to declare the status of the business. Compliance is essential for every organisation, it creates growth as the business will always be ready for any open opportunities.

Happy trading!

Compiled by Ms. Dikeledi Seoloane on behalf of the accounting firm – Matsobanemetja Business Consulting (Pty) Ltd

Dikeledi is a registered business accountant and qualified tax practitioner.

http://www.matsobanemetja.co.za

Business Practices for Business Owners and Entrepreneurs

RANDOM BUSINESS ADVISES YOU DID NOT ASK FOR

Today I decided not to write a blog based on a specific topic however some useful pointers you may find useful in your business.

1. How much do I pay my first employee?
This question have re-surfaced many times during consultations with entrepreneurs. There is no straight answer to this. My usual response is that, as a small business owner you need to first know that you have limited resources to be able to pay what is called “market pay”. This mean you will also have a limitation in hiring people with vast experience in the industry. This right here requires you to decide with a very sober mind. Because a salary also affect the business cash flow. If you believe in skill transfer, I suggest that you hire individuals at a junior level with hope of giving them an extensive training on the job. Salaries are continuous expenses thus to uphold the integrity of your business please make sure that you pay employees what is due to them and pay them on time.

2. Register employees for statutory employee benefits
As a build up to the previous point, upholding the business integrity also includes registering employees for the basic statutory employee benefits such as UIF, PAYE (if employees are above the required threshold), COIDA, etc. This is simply because it is the right thing to do. Employees also require some assurance that they are not working for a “fly by night” type of a company. They will also be proud to work for a professional company that complies with labour laws.

3. What do you need to grow your company?
I have been recently asked this question. What better way to give a response from my own experience! There is a cliche saying that it is often used in business “Work on your business not in your business”.
As the leader of your business, you are responsible for spotting problems and delegating solutions. You are responsible for setting goals and thinking about the future. The only person in your company who will be genuinely motivated to grow your company is you. Every minute that you spend working on tasks that can be delegated is a minute that you are not planning, strategizing and building the best business possible.
This is why it’s important to work on your business, not in your business. I refer to myself as the sales person in my business. My key role is to supervise, train staff and bring more clients to the business.

I hope the above helps. Happy trading!

Compiled by Ms. Dikeledi Seoloane. Dikeledi is a registered accountant and tax practitioner. Founder and MD of an accounting firm Matsobanemetja Business Consulting (Pty) Ltd

How do you know that the company afford to obtain more credit facility?

Taking on a debt if you have a reasonable need, a sound financial track record, a firm financial history, and stable business, most banks, finance institutions, investors, etc will be willing to lend you the money.

Funds are required for different reasons. It could be the need of cash itself, or the need for the financing to purchase machinery or more equipments, even better acquiring big assets such as a property.

It is always better for the lender to make their own analysis so they can be able to calculate the risk of borrowing out their funds. Lenders may finds it encouraging to lend money to businesses that have activities. When people see activity, it generates excitement and excitement generates greater giving and participation in your request.

Briefly, what we are encouraging is that at least create an active profile that will best motivate your potential funder to assist with the funds.

One more important factor that is always overlooked is the proper structuring of the finances. As a director of the company, though you have a direct access to the business funds that does not mean you can spend as and when you wish. More so for your personal use. You ought to earn a salary from the business, which will qualify you to cater your personal needs.

Investors take seriously your relationship with the business funds. They are more likely to scrutinize the cash flow statement more than any other part of your financial report.

Some funding requests or credit applications are declined not because they think the business is not profitable but because of the lack of financial discipline.
Learn to implement order in your business. Keep a budget and stick to it. Set a sales target and fight to achieve it. A growing business is encouraging and a motivation.

Trade with direction. Happy trading!

Compiled by Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting (Pty) Ltd
A registered Accountant and Tax Practitioner.

http://www.matsobanemetja.co.za

How do you know that the company afford to obtain more credit facility?

Data Capturing,Transactional Allocations and Reporting

Data capturing is important in every business, not for future use only but for the end results.
We need to make sure that we understand how each transaction affect our books, as that will have an effect on our reporting.

1. Capital – at no point should money put into the business by the owner be counted as an income. The incorrect allocation of these funds will raise the tax liability, as the taxable income will include the revenue /sales amount. As much as Capital has an effect on our cash flow it should never be allocated under our income account. Capital affect the business balance sheet instead.

2. Loan (received) – same as capital, monies received as a results of borrowing should not be counted as an income. Especially Loans received from the bank. We need to bear in mind that a loan from financial institutions have an interests bearing. A loan is received in an exchange of assets such as cash, vehicle, property, etc. Thus the repayment of the loan must also not be allocated as an expense. Only the interests paid will go into our expense account.

3. Cash withdrawals – Though withdrawal of cash have a negative impact on our bank account, they also need to be reconciled according to their use. For example, if the owner withdraws cash paying for a small job done by a casual worker. The money paid needs to be allocated under the correct account. In this case ‘repairs and maintenance’. This will help us know the accurate value of maintenance done for a certain period.

4. Petty Cash – This is a small amount of cash that we keep in our premises for our small unexpected expenses. Petty cash also need to be reconciled according to the use of cash. To conclude accurate reports, our data entries need to be on par.

5. Purchases and Payments – we do not have such accounts in accounting. We need to investigate what exactly was the purchases for. For example, if it was for office supplies or consumables thus the transactions should be allocated as such. Payments as well – what was the nature of the payment? Query with the relevant person /department so we can allocate accordingly.

We encourage the owners to keep track of these transaction by noting them down as they occur. So much happens in a day, thus it is not going to be easy to remember transactions that happened 30+ days ago.

Let us operate with direction.

Compiled by Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting (Pty) Ltd
A registered Accountant and Tax Practitioner.

http://www.matsobanemetja.co.za

Data Capturing, Allocations and Reporting

5 Accounting Categories that every Business Owner must understand.

There are 5 categories that I always emphasise that every entrepreneur must know and be clear about, for them to understand their businesses better.

1. Assets
These are valuable items with a long lifespan. Assets are extremely important in any business as we use them over and over again to generate income. We have 2 types of assets: Current assets and Non-current assets. Current assets are those that can change their position at any time, examples are cash, inventory, etc.
Non-current assets are a long-term investments for which the full value will not be realized within the accounting year. Examples are : property, plant and machinery, etc.

2. Liabilities
These are are the external parties that the company owes money to. Examples such as creditors i.e your suppliers
You might have obtained stock in credit and agreed to pay over a certain period. They become your liability as you are obligated to pay as per the agreement. A loan is also a liability as you are obligated to pay it back, with interest even. Just like assets, there are two types of Liabilities. Non-current Liabilities e.g long term loans such as mortgage, deferred taxes, etc. Current liabilities e.g accounts payable, short term borrowings, etc. Those that can be paid within a year.

3. Income
The monies that come into a business as a results of exchange of goods or services rendered. They are often referred to as sales because of its transactional nature. It is important to understand that a loan, though it has a positive effect of the company bank account but cannot be classified as income. A business need to render a service or sell goods in order to gain an income,obviously depending on the nature of business.

4. Expenses
The cost of operations that a company incurs to generate revenue. Examples of operational expenses are telephone, electricity, wages and salary. We often say “You must loose money to money”. It is in this notion.

5. Owner’s Equity
It is defined as the amount of money invested by the owner in the business minus any money taken out by the owner of the business. I often say the business and the owner can co-exist. Meaning one can borrow from the other should the need arise. However a clear discipline should be withheld. Accurate records should be maintained.

Understanding the above-mentioned categories will make you understand your business even more in terms of its positioning and the performance. They are not limited to accounting professionals.

Compiled by Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting (Pty) Ltd
A registered Accountant and Tax Practitioner.

Getting out of Debt

Getting out of debt

I am sure this may be one of the difficult exercise you may need to embark on. But for a healthy environment is deemed necessary to happen to create a positive environment for yourself.

Let us first realise that the decision to cut off your debts does not only involves paying them off. It means changing your old ways of spending money.

I have few important pointers that will help you embark in this journey.

Create a practical budget
A budget teaches you how you must spend your money. Create it and follow through. The budget will help see if you have funds for certain things or not. Especially those that we can do without.

2. Get into the habit of buying things cash.
This will teach you to live within your means. Impulse buying almost disappear when you buy for everything in cash.

3. Prioritize paying off the debt with more interest rate
Make sure the decision to pay off your debts does not overwhelms you that you get the pressure wanting to pay for everything at once. Tip: Concentrate more on the debt that accumulate too much interest. Pay it off and move to the next.

4. Dedicate a certain percentage of your income to savings
As you create your budget, make sure you do not leave out at least 5% – 10% to your savings. This will help you with those unexpected expenses that you would not have budgeted for.

5. Generate more income
Cost of living is too high. To a point where even if you were to request for a raise you will still find yourself needing to stretch. Thus I say create multiple streams of income. This is necessary for everyone. It will help you a lot with cashflow.

6. Be patient
Acknowledge that it is not going to be easy to get yourself out of the trap. And unfortunately there is no easy way out.
Be careful of those programmes that promises to get you out quicker. Make sure you understand them before you sign up should you need their assistance.

Compiled by Ms. Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting (Pty) Ltd

SCALING YOUR BUSINESS

Many business owners are unaware that growth and scaling are not the same. Growth is defined as an increase in capacity, operations, and revenue, but this increase comes with a concurrent increase in costs for the company to earn more money.

Scaling entails gradually and steadily expanding a business to sustain its growth over time. Your company is scalable if it can handle increased customer demand without significantly increasing its expenses to meet that demand. With scaling, you sacrifice less to get the same results.

How do you scale your business?

1. Automate processes

If there is anything that the current pandemic has taught us as entrepreneurs is to learn how to be innovative. We were forced to leave our comfort zones. We had to convert some of our services or products sales to be obtained online. We learned to be more virtual. Some companies have also realised that they do not need staff full time at the office. Which became beneficial for both the employer and employees. Employers save in terms of office consumables, employees can now work flexible time and are able to spend more time with their families as they wouldn’t spend most of the time stuck in traffic traveling to and from work.

2. Offer skills and support programmes to your employees

In as much as customer retention is important to our businesses but the most important stakeholders in our organisations are our employees. Equip them with more tools and resources so that they can perform better. Keep them engaged and interested by facilitating with more skills and development to be effective at their jobs.

3. Have a plan to reach your target

When you have all your goals written down and plans on how to achieve them, you need to revisit them as often as possible so you can remain accountable. Scaling is an excellent time to be in check of your progress and reflect on the new direction your company is taking.

We need to speak about growth and scaling as soon as our businesses start operating. Often we glamorous being small business owners long enough. Let’s allow in opportunities to expand.

Happy trading!

Compiled by Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting. Dikeledi is a registered Business Accountant, Tax Practitioner and Business woman.

To book a consultation with her please email her personal assistant on PA@matsobanemetja.co.za

ADVISE TO A NEW AND EVERY SMALL BUSINESS OWNER

It is a new year and one of your new year resolutions may be to start a business. Whether as a side hustle or full-time it doesn’t matter, it is still a business. I have compiled the following few pointers to assist in building your entity

1. Register your business
Having your entity registered will sort of force you to have all the lagalities in place. Have the name, registration number so you will be able to open a separate bank account for your Business. It will also be easy for people to do business with you. Having your brand identity, Invoicing clients for easy payments, etc. This will encourage more people to work with you.

2. Save a certain percentage every month from your profits
The main principle of business is to make a profit. And that in turn helps us achieve the secondary principle which is growth. The same way that you used to have a savings account under your personal capacity, we can implement the same habit in our businesses. Having money saved will help your business with the cash flow. You do not need to wait for invoices to be paid to keep a float. Cash flow is the heartbeat of every business. Money saved can aslo assist with buying more assets for the business.

3. Track your Fuel and travelling expenses when using one vehicle for both business and personal
When you are starting in business you obviously do not have much of assets to use for business thus you end up using the one car you have for both business and personal. To help control these expenses so that your personal expenses do not overlap to the business, please make sure you keep track of your mileages and fuel use. This will help you stay in control. In true essence your personal traveling expenses should be covered by your salary. Thus, if it is not possible yet, you need to help yourself by creating proper systems in place so you can remain disciplined.

4. Develop a Bookkeeping system / routine
You do not have to purchase an accounting software for this to be possible. You can make use of an excel spreadsheet to record all your transactions. If you can, please hire a Bookkeeper or an accountant on a retainer basis. They will help in making sure that the transactions are categorized accordingly. Where you may record a loan as an income for e.g a professional will help correct the Misallocation so the data captured reflects the true performance and position of your business. If you cannot afford to pay the retainer on a monthly basis please check if they have any flexible payment methods to accommodate you.

5. Earn a salary from the business
It is not easy but it is important. Your salary will help to cover your personal expenses. You need to still contribute towards your retirement savings, life covers, medical aid, insurances, etc.

6. Hire an Accountant who understands small businesses
An experienced finance person will help reduce tax obligations by introducing ways to save your cash. In South Africa we have various legal ways we can take advantage of to save up on taxes. Big businesses are exploring them, Small businesses must follow suite. This technicalties do not only help us in monetary value but assist in gaining momentum and exposure. You will have to consult with me at a fee to learn more on this 

A lot goes into running a small business as you wear many hats as a start-up. Thus it is a lot easy to overlook this important factors and only realize when it is too late

Compiled by Ms. Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting. Dikeledi is a registered Business Accountant and Tax Practitioner.

To book a consultation with her please email her personal assistant on PA@matsobanemetja.co.za