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A Sucker For Entrepreneurs…

With just days to go before the winner of The Workspace/MiWay Business Insurance Entrepreneur Competition is announced, one of the judges, PHAKISO TSOTETSI has some ideas on the challenges faced by emerging entrepreneurs.

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As an established entrepreneur passing on the skills and lessons I’ve learnt on my journey I, too, have emerged from this process a wiser man.

With just days to go before the winner of The Workspace/MiWay Entrepreneur Competition is announced, I’ve reflected on the time spent conducting workshops and skills development programmes with firstly the top 10, and more recently, the top five entrepreneurs.

Their maturity and love for what they do is the something that was brought home to me constantly, and which reminded me as an entrepreneur of how much I love what I do.

Secondly their level of dedication into growing their businesses was evident through the effort of participating in this competition (which started in February, and culminates on 13 September). This was no cut ‘n’ paste process. It was rigorous, time-consuming and yes, tough. Their openness to learning to be criticised, to be vulnerable about their personal and business lives, to say ‘I want to grow, teach me’; this is something that I know is tough to do, but because of their hunger and determination, they took it all on board (and on the chin).

I’m a sucker for entrepreneurs because I know what it means and takes to be one. Some of these guys are first generation entrepreneurs in their families and most of their immediate families do not understand what it takes to run an enterprise so there are various pressures that these guys experience, let alone their businesses. So to see them still follow their dream with that understanding is inspiring.

Traits in common

That said, I believe entrepreneurs do have certain traits in common. They are confident about themselves and their business. They are eager to succeed.

They are able to overcome challenges and see the bigger picture, so they display self-determination, consistency and agility. In the case of our finalists, they have a deep sense of self and feel a responsibility to contribute to this country’s people and its economic growth.

Cloud based loyalty management platform and app for SMEs, Loyal 1; finance solution company, Matla Risk Management; events and catering business Sindi’s Best for All; mining tech integration partner, Dwyka Mining Services; and Minatlou Trading 251, supplier of general and women-specific protective personal equipment/clothing are the top 5 finalists.

Related: Watch List: 50 Black African Women Entrepreneurs To Watch

Very different businesses, with different challenges yet what struck me was that they really understood their businesses and knew how to sell it. What they really needed to take it further was a business development programme that would structure their business and harness the skills they already possessed.

And that’s where the important part of this competition really kicked in. We incorporated a series of workshops and skills development initiatives to help them reach the next level. [As an aside, an important part of this was learning to pitch their businesses properly. One has even told me how his pitch training helped him acquire new business as he was going through the competition!)

So how they absorbed and took on these lessons played an enormous role in whether they made it to the next level of the competition. Working closely with them through this process highlighted several issues.

The challenges

Firstly, I realised many entrepreneurs had difficulty in differentiating a partner from client simply because of how some of their businesses needed corporate financing to activate the market which they had access to. As a result it was difficult for some the entrepreneurs to clearly understand who their client and partner was. This meant most of them said their services wereB2B and B2C at the same time.

Secondly the entrepreneurs ran their businesses without proper financial strategies and planning. They had not set measurable targets for their businesses. Some operated hand to mouth due to the lack of structure, and weren’t able to take home a salary.

Lastly, the entrepreneurs needed to understand the key operations of their businesses and focus on ensuring that those aspects were kept going all the time. This spoke to developing systems and processes that when implemented, would allow them to remove themselves from the day to day operations and bring in key people to run those functions for them while they focus on bringing in business and the bigger picture.

This is of course a difficult thing to do for a lot of the entrepreneurs. One of the entrants ended up crying because she realised that she was the biggest obstacle in her growth. In one week she had turned down two deals due to her lack of capacity simply because she wanted to be the one to do everything and did not trust other people to deliver and uphold her brand’s standards.

Related: 10 SA Entrepreneurs Who Built Their Businesses From Nothing

Back to the top five finalists. What differentiated them from other competitors was their product knowledge, the potential for growth, their determination and enthusiasm, having good existing clients, that they were already generating some money, and that their needs met the prize offering (valued at over R500 000).

My advice to them – and to all the entrepreneurs out there who are helping us build an economically vibrant South Africa – continue being agile, especially in these challenging economic time. Don’t be afraid to try new things. And don’t forget to invest in yourself.

And my plea to government? Please cut the red tape. Please allow entrepreneurs to flourish. Please take the words of Jack Ma, founder of Alibaba, to heart. When he visited South Africa recently, he said, “The best way to create jobs is to encourage small business,” adding that he’d advised President Cyril Ramaphosa to give favourable tax rates to start ups as they needed it, rather than big businesses. He compared taxing small businesses to “taking the meat off mosquitoes’ legs”. Hear hear!

Phakiso Tsotetsi is the co-founder of the Hookupdinner, one of the fastest growing entrepreneurial networking platforms in the Sub-Saharan Africa along with co founding The Peoples Fund, a crowd funding and asset financing company that is driven by the people and for the People. Tsotetsi is an entrepreneur at heart and is all about entrepreneurs.

Entrepreneur Magazine is South Africa's top read business publication with the highest readership per month according to AMPS. The title has won seven major publishing excellence awards since it's launch in 2006. Entrepreneur Magazine is the "how-to" handbook for growing companies. Find us on Google+ here.

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3 Stealthy Tax Hikes Payroll Managers And Employees Need To Take Note Of

By Rob Cooper, tax expert at Sage, and chairman of the Payroll Authors Group of South Africa

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“Dammed if you do and dammed if you don’t.” 

The adage summarises the difficult decisions government and the Finance Minister faced when balancing the country’s books, rescuing state-owned enterprises, and reviving the growth of our economy. Given the economic pressure that most taxpayers are facing, government ideally needed to achieve all of that without direct increases to personal income tax in the most recent Budget Speech.

Personal income tax has comprised at least a third of South Africa’s total tax revenue in recent tax years, despite growing unemployment. The 2019 Budget, presented in February, forecasts that personal income tax will account for nearly 39% of tax collected during the upcoming (2019/20) tax year. Given that we are in an election year and that the tax base is fragile, it’s not surprising that the Finance Minister and the National Treasury avoided direct increases to the statutory tax tables used to calculate PAYE for employees in the budget.

Nonetheless, government has made inflation work in its favour to impose some tax increases by stealth. Here are three ways government is raising more revenue without direct tax increases:

1. Bracket creep

The statutory tax tables used by payrolls and employers have not been changed for 2019/20, nor have the brackets been adjusted for inflation. This effectively amounts to an indirect tax increase that will yield a revenue saving of approximately R12.8 billion for government’s coffers.

It is not unusual for government to use ‘bracket creep’ to effectively raise more revenue. But unlike previous tax years, even low- and middle-income earners are not getting much relief. Rebates and the tax threshold are being increased by small amounts to allow some relief, but many people this year will feel the pain as inflationary salary increases push them into a higher tax bracket.

2. Medical aid credit not adjusted for inflation 

As proposed in the 2018 Budget, the Finance Minister did not apply an inflationary increase to the Medical Tax Credit, which allowed him to raise an extra R1 billion in revenue for the year. Surprisingly, these funds will be allocated to general tax revenue rather than ring-fenced for healthcare. In previous tax years, revenue generated from below-inflation increases on medical scheme credits was used to fund National Health Insurance (NHI) pilot projects.

There is still no clarity on how the NHI is going to be funded except for a general statement that the funding model is a problem for the National Treasury to solve, and that the principles of cross-subsidisation will apply. One wonders if any real progress will be made soon, given the fiscal constraints government faces.

3. Business travel deduction left untouched

The Budget leaves the per-kilometre cost rates used to determine tax deductions for business travel untouched. By not increasing travel rates to account for inflation, government effectively increases income tax collection at the cost of the taxpayer. This will be a blow for people who need to claim from their employers for business travel in their personal vehicles. This change has slipped through largely unnoticed and the budget does not provide numbers for the expected increase in tax revenue.

Closing words

Amid political turmoil and uncertainty, the Finance Minister presented a balanced budget for 2019/20 that offers hope for the future along with some tough love. With government taking steps to accelerate economic growth and improve revenue collection, we should hopefully see a steady improvement in government finances, which will translate into less pressure on the taxpayer in future years.

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Entrepreneur Today

SMEs: Staying On The Right Side Of The Taxman

Remaining SARS compliant can be a constant challenge for small- to medium-enterprises (SMEs), especially when they are trying to focus on growing their businesses and streamlining their operations.

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EasyBiz Managing Director, Gary Epstein, says submitting taxes can be a seamless process that does not have to take up more time than is necessary. “If business owners understand what is required of them and they put a few processes into place to deal with their tax submissions properly, their lives will be so much easier.”

What are the top three considerations for SMEs when submitting tax returns?

“Firstly,” says Epstein, “SARS returns must be accurate and submitted in terms of the relevant Act. Secondly, returns should be submitted and paid on time to avoid unnecessary penalties and interest, and thirdly, business owners must follow up on queries issued by SARS. “Do not ignore these queries, act on them as soon as possible”.

What are the major SARS submission deadlines for SMEs?

Epstein points out that small business owners need to adhere to various tax deadlines, each with their own particular dates for submission. “It is important that business owners diarise the dates (and set advance reminders for themselves) and/or enlist the services of an accountant or financial adviser to help them keep abreast of requirements.”

Value-added tax (VAT)

VAT payments need to be submitted in the VAT period allocated to the business, according to various categories and ending on the last day of a calendar month. This may mean making payments once a month, once every two months, once every six months or annually, depending on the category.

Provisional taxes

Provisional tax should be submitted at the end of August (first provisional) and at the end of February (second provisional) – for February year-end companies.

Employee taxes

In addition to submitting an annual reconciliation (EMP501) for the period 1 March to end of February for Pay-As-You-Earn (PAYE), Skills Development Levy (SDL) and Unemployment Insurance Fund (UIF), employee tax, in the form of an EMP201 return, needs to be submitted by the seventh of every month.

When can SMEs get extensions and is it worth it?

Epstein says SMEs can apply for various extensions, but these are subject to the Income Tax Act and Tax Administration Act.

“It is best for SMEs to consult their tax professionals to get advice regarding extensions for their businesses.”

What is SARS not flexible about?

SARS is not flexible when it comes to late returns and late payments.

“I cannot stress enough how important it is for SME owners to ensure their tax returns are submitted on time. In this way, they will avoid the inconvenience and expense of additional fines and interest,” notes Epstein.

What skills do SMEs need in their organisations to be able to submit to SARS efficiently?

Business owners often don’t have the time or expertise to deal with tax submissions throughout the year. If the business cannot afford to employ a full-time accountant or financial services expert, it would do well to outsource its tax requirements to a registered tax practitioner.

“I would recommend that even if they are not submitting the tax returns themselves, business owners should have a broad understanding of the tax regulations and what is expected of them. There is a lot of helpful information on the various Acts and tax requirements on SARS’ website,” says Epstein.

How does the right software help SMEs remain SARS compliant?

SME’s (and their accountants’) jobs can be made easier by using reliable accounting software to calculate accurate VAT reports. These reports are only as accurate as the data entered into them, which means care needs to be taken when inputting data into the accounting programme. Epstein says a good accounting software package must be reliable, easy to use and functional.

“SMEs need to check that the software has thorough reporting capabilities and can interface with other software solutions. Of course, it is also important to find out whether the software is locally supported by the vendor or not.”

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4 Dangers Of Business Under-insurance

A common short-term insurance peril that many SMEs face when submitting a claim following an insured event is the risk of being underinsured.

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Malesela Maupa, Head of Products and Insurer Relationships at FNB Insurance Brokers says, many small business owners mistakenly believe that by merely having a short-term insurance policy in place they are adequately protected against unforeseen events.

“This is technically correct provided that the business is covered for the full replacement value of the items insured. However, in circumstances where the sum insured does not cover the full replacement value or material loss of the item insured, the business is underinsured,” explains Maupa, as he unpacks the dangers of business underinsurance:

1. Financial loss

The most common risk is financial loss on the part of the business. If the business is underinsured or the indemnity period understated, the short-term insurance policy will only pay out the sum insured for the stated indemnity period as stated in the schedule, with the business owner having to provide for the shortfall. This often leads to cash flow challenges, impacting profit margins or rendering it difficult for the business to recover following the financial loss.

2. Reputational damage

Should an underinsured business not have sufficient funds to replace a key business activity or critical component following a loss, this may impact its ability to fulfil its contractual obligations, leading to a loss of business or market share, and irreparable reputational damage in the worst-case scenario.

3. Legal action

A small business also faces the risk of customers or clients taking legal action against it, should it fail to deliver on goods and services following a loss or be unable to honour its financial commitments that they committed to prior to the loss.

4. Survival of the business

A catastrophic event such as fire, which could result in the loss of stock or company equipment and documentation, could threaten the survival of a small business that is not yet fully established, if the business assets are not adequately insured.

Working with an experienced short-term insurance broker or insurer is essential when taking up short-term insurance to ensure that business contents are covered for their full replacement value.

Furthermore, depending on the nature of the business or item insured, the policy should be reviewed on a regular basis to avoid underinsurance as the value of items often change overtime due to fluctuations in economic activity. Where it’s necessary, evaluation certificates need to be kept up to date.

“Lastly, SMEs should ensure that the sum insured does not exceed the replacement value, which would lead to over insurance. Should a business submit a claim following a loss, the insurer would only pay out the replacement value, regardless of the higher sum insured,” concludes Maupa.

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