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Don’t Be Tempted To Cancel Your Insurance Cover

These may still be difficult economic times, but with criminals targeting smaller businesses, cancelling your insurance policy may not be the wisest move – especially when there are ways to reduce your premiums.

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With armed robberies rising 41% last year and the country still struggling to emerge from the recession, many business owners are faced with the dilemma of cutting costs on the one hand,while continuing to insure their business against crime on the other. Doing away with insurance is not such a good idea, especially when 70% of all armed robberies target small businesses, according to the police.

Business Against Crime and the police are piloting two interventions – one in Tembisa, the other in central Johannesburg. They are quizzing business owners about how they handle their cash and what security they have in place, the idea being to provide these businesses with security tips. But it’s not enough to rely solely on their help.

A study by small business research company SBP, released in July last year, found that half of all South African business owners surveyed don’t have insurance to cover a burglary or robbery.At the same time, stats provided by Indwe Risk Services reveal that the number of clients hit by armed robberies increased by nearly 100% from 2007 to 2008.

Identify Risks

However, in recent months most of Indwe Risk Services’ clients have chosen to cut cover for things like cash, laptops and business interruption, according to the firm. But the advice from Indwe Risk Service’s Peter Olyott is that before you decide to cut your premiums, ask yourself which risk if it ever were to occur, could close your business down or ruin you financially.

Olyott advises business owners to insure against loss or damage to their own vehicles, theft of their assets and loss of money. He also recommends looking at practical ways of reducing insurance spend by reviewing the insured values on equipment, stock and vehicles.

Shop around

Another way to cut costs is to shop around. Opting to go with a direct insurer is also an option, especially as they claim to offer more affordable cover. Traditional insurance firms,however, often argue that direct insurance companies offer boxed products which don’t cater to a business’s specific needs.

But Ernst Gouws, CE of Outsurance, says that direct insurers are more modern in their approach and so provide more flexible offerings than traditional brokerages. In his view it’s also not good enough to simply ask your broker to shop around for you, because broker commissions make up 15% of your premium.

Gouws says one way of cutting the cost of your premiums is to consider which risks you are willing to take. His suggestion is to take out insurance on items such as your company vehicles and trucks, as well as items like laptops, tools and equipment that are most likely to be stolen in the event of a robbery or burglary. He recommends lower premiums and a high excess on office contents or non-moveable fixtures.

“This way you self-insure these goods against the unlikely event of them being stolen, but you still have proper insurance for worst-case scenarios such as your whole office or factory burning down”.

Jon Jon Smit, sales director for CIB Insurance, recommends some simple steps to reducing your premiums. These include ensuring your fire-fighting equipment is serviced, making sure your housekeeping is neat and tidy, taking the necessary security precautions like having two people present at opening and closing times, doing regular stock takes to ensure stock levels are accurate and switching off high-voltage electronic equipment after hours to avoid electrical fires.

Stephen Timm is a freelance writer at Entrepreneur Magazine.

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Silver Linings For Smaller Businesses In Budget 2018

As expected, the Finance Minister and Treasury have proposed some tough measures to address South Africa’s tax collection shortfall, growing budget deficit, and new spending priorities in the 2018 Budget Speech. Sage software can ensure your business remains compliant through these upcoming changes.

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Higher VAT, fuel levies and import duties on luxury goods will crimp consumer spending, which could be bad news for SMEs, but we are pleased that the Finance Minister has raised his GDP growth projections and proposed interventions to help grow South African SMEs.

Government is taking steps to restore fiscal credibility, rein in spending, and hold off another credit ratings downgrade, such as:

Growth, reviewed competition policy and improved market access

The hopes and concerns of entrepreneurs and SMEs were extensively covered, including how low market access and high barriers to entry are constraining the growth of the country’s SMEs.

Related: Argon And Sage Pair Up For A Powerful Partnership

While government will take action against anti-competitive behaviour that harms these businesses, big businesses should also play a constructive role in nurturing the growth of SMEs through mentoring and partnership.

An increase in SME funding

The Departments of Small Businesses and Science & Technology and the National Treasury developing a R2,1 billion fund to benefit SMEs during the early start-up phase is good news, but it’s important that the funding is spent efficiently and productively.

We’d like to hear more details about how government will choose to allocate this money.

A shift in public procurement participation

Government using public procurement to support Black Economic Empowerment, industrialisation and development of SMEs see its billions of rand in procurement spend used to empower SME owners — we look forward to more details about how government will increase participation of small and micro businesses in procurement opportunities.

It’s also critical that government follows through on its promise to pay small businesses within 30 days of invoicing. Cash flow is a major challenge for small businesses and few of them can afford to wait three to six months for payment on a big project.

The rise in the VAT rate

The VAT hike will take some money out of people’s pockets, but will probably have less impact on business confidence than higher corporate taxes, and less impact on consumer spending than further personal tax increases.

SMEs will need to ensure their systems are ready to cater for the new VAT rate, but this should not be too much of a challenge for those with automated accounting systems. By international standards, VAT in South Africa is still relatively low — we can just hope that this increase is not followed by another in the next year or two. n

Managing the VAT Transition

The VAT Act stipulates that the time of supply will be either when an invoice is issued or when payment is received — whichever happens first. For example, if you invoice for a sale on 31 March but are only paid on 30 April, the VAT rate of 14% will apply. If you receive payment on or after 1 April but have not yet invoiced for the sale, then VAT should be charged at 15%.

Cloud-based, automated accounting solutions, like Sage One, were VAT-ready on 1 April.

Businesses using these solutions don’t have to worry about staying on top of the different VAT rates because the system will automatically generate the correct VAT invoice, quote and debit or credit note.

The VAT Act states that displayed pricing and adverts must include VAT (unless the product is zero-rated). You have until 31 May to complete this work. Until then, you can display a notice at the till point, stating that prices do not include VAT at the new rate and will be adjusted at the tills. But why delay and risk confusing your customers?

Related: Sage Reports On How Payroll Compliance Is To Come Under Scrutiny

The next VAT201 return you submit to SARS will be more complicated because you will need to calculate input and output tax at different rates, not to mention the apportionment rate that will need to be calculated for contracts and services taking place before and after 1 April. If you’re using manual processes, you might need to consult an accountant to make sure you’re not over or under reporting VAT on your reconciliations.

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Reimagine The Use Of Technology

The phenomenon of ‘big data’ is rapidly catching up with the world of tax.

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As tax professionals we live in a new reality, fueled by the blinding pace of change. The digital revolution is here. Reimagine the future of the tax function through the lens of analytics.

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Get Your Small Business VAT-Ready Without The Headache

On 1 April 2018, Value-Added Tax (VAT) will increase for the first time in 25 years, from 14% to 15%. Viresh Harduth, Vice President: New Customer Acquisition (Start up and Small Business) at Sage Africa & Middle East, guides this transition.

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If you’re a small business owner, it’s likely that you’ve never had to deal with a change in the VAT rate before and don’t know where to start to get your systems and processes VAT-ready, without impacting your cash flow and operations.

Here are a few tips to get your small business VAT-ready, come 1 April:

Test your operation

If you are a small business that still uses manual processes like spreadsheets to calculate and record VAT, consider creating dummy sheets and invoices to ensure you are processing the additional VAT correctly and that you can process transactions at 14% on 31 March and 15% on 1 April.

Related: Sage Reports On How Payroll Compliance Is To Come Under Scrutiny

Also consider that, if a customer returns a product on 1 April that they bought on 31 March, it will need to be refunded at the old VAT rate.

NOTE: From 1 April, all receipts, invoices, quotes, adverts, credit and debit notes must reflect the new rate, so test your systems beforehand to make sure there aren’t any errors.

Understand time of supply

The transaction date, or time of supply, is probably the biggest consideration for businesses when applying VAT to sales. The VAT Act stipulates that the time of supply will be either when an invoice is issued or when payment is received – whichever happens first.

For example, if you invoice for a sale on 31 March but are only paid on 2 April, the VAT rate of 14% will apply. If you receive payment on 1 April but have not yet invoiced for the sale, then VAT should be charged at 15%.

NOTE: Consult the VAT Act for rate-specific rules applicable to contracts and supplies starting before and ending on or after 1 April.

Automate where possible

Cloud-based, automated accounting solutions, like Sage One, will be VAT ready, come 1 April. Businesses using these solutions don’t have to worry about staying on top of the different VAT rates because the system will automatically generate the correct VAT invoice, quote and debit or credit note.

NOTE: All transactions are stored and readily accessible in the cloud, from anywhere, ensuring businesses are compliant with SARS and VAT laws.

Educate your colleagues

It’s crucial that your team members know how to raise invoices and credit notes that are processed before and after 1 April, and how to process refunds for sales that occurred before this date, as these will attract different VAT rates.

Adjust your pricing

The VAT Act states that displayed pricing and adverts must include VAT (unless the product is zero-rated). Some small businesses might want to close shop for the day to adjust their shelf and online pricing to reflect the new rate in time for the new business week on Monday.

Related: How To Get The Most From Your Payroll Solution With The Sage Academy

However, those that are unable to do this can display a notice at the till point, stating that prices do not include VAT at the new rate and will be adjusted at the tills.

NOTE: This grace period is only in place until 31 May, after which all pricing must include the new rate.

Check your own quotes and invoices

Any quote or invoice you receive for stock purchased after 1 April should reflect the new VAT rate. You’ll need to submit this documentation when claiming input tax. If your supplier does not calculate VAT correctly, you will be liable for the shortfall, which could impact your cash flow.

NOTE: You will also incur penalties if you under- or over-declare VAT on your VAT201 return – another reason why automating the accounting process is a good idea.

Get reporting ready

The next VAT201 return you submit to SARS will be more complicated because you will need to calculate input and output tax at different rates, not to mention the apportionment rate that will need to be calculated for contracts and services taking place before and after 1 April.

Related: President Of Sage International Ivan Epstein Shares His Valuable Lessons

NOTE: Again, automated solutions can take care of this for you but, if you’re using manual processes, you might need to consult an accountant to make sure you’re not over or under reporting VAT on your reconciliations.

Complying with the new VAT rate is a massive administrative task for businesses of all sizes – and they don’t have much time to prepare. To find out how Sage can help your business with compliance, click here.

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