Connect with us

Entrepreneur Today

Buyer Beware When Dealing with the Far East

Get the Best Deal when Importing Manufacturing Machinery from the Far East.

Entrepreneur

Published

on

China-Flag

Imagine spending hundreds of thousands of US dollars to import rollforming machinery from the Far East, only to discover upon its arrival, that the machine does not work and cannot be fixed.

Many businesses, daunted by the high cost of metalforming equipment, decide to buy from the Far East. Their reasons are twofold: prices are often far lower than their American or European counterparts, and local engineers often do not have the experience for advanced machines such as high speed lines with in-line punching configurations.

Once burnt, twice shy

Greg Fuchsloch, CEO of Metalforming Technologies South Africa, has been in the metalforming industry for 18 years and has seen local entrepreneurs forced to shut their doors after buying insufficient machinery from the Far East.

“One client only realised after the machinery was installed that it couldn’t run the material he had bought at a value of R2 million,” says Fuchsloch. “The only way to rectify the problem was to either buy a new machine or buy new material.  It simply would not rollform the material that the client intended profiling.”

According to Fuchsloch, if the price seems too good to be true, there is something to be concerned about.

So, is it possible to procure good quality equipment from the Far East? Fuchsloch believes it is. “It’s possible to find well-made machinery at lower prices, but you need to know exactly what you are looking for and where to go. Take the time to do plenty of research and visit each machine builder personally, even if it means visiting upward of forty manufacturers.”

Choosing the right equipment

Fuchsloch shares five tips on what to watch out for when sourcing a good deal on imported equipment:

1) Can replacement parts be found in South Africa?

Before purchasing any machinery, look carefully at each component and ensure replacement parts can be sourced locally. Some parts and components in the machines are critical in their design, and it is not worth taking a chance with cheaper, poorly designed alternatives. Look specifically at PLCs, electric switches, electric motors, drives and hydraulic components. Ensure the product list is detailed and steer towards brand name components. They may cost a little more initially, but the machines will stay in good working order for longer.

“While you’re at it, double check that all of the components used are authentic,” says Fuchsloch. “In many cases, known brand components are not supported in theFar East.”

2) Get a service agreement and warranties

Take special care when looking at the service agreement. Some manufacturers offer a one year warranty on paper but will refuse to replace the part when it breaks, suggesting the component broke through operator error. The supplier must agree to fly out a technician within a few days and at their own expense, or work with an approved local company who is able to service or repair the equipment.

“A local company recently bought four machines at a very cheap price from the Far East,” says Fuchsloch. “Three roofing panel machines and an insulated panel machine, none of which were in working order when they arrived.

“The client thought it was a small problem and brought in an engineering company to look at the machine. They were unable to fix it and so turned to me to see if I could help. After looking at the machines I determined that they were so poorly designed that the components could not even be used separately.

“The only option was to dump the machines and start over. The client wasn’t happy with my findings and showed me the door. Unfortunately his business didn’t survive this very expensive lesson.”  Be sure to inspect the machines in theFar Eastbefore shipment.

3) What is the delivery date, and what are the repercussions for late delivery?

Have precautions in place for possible problems such as late delivery. Ensure that the company you are dealing with is proficient in English and able to communicate your requirements and any possible future problems you may experience.

“Alternatively use a local company who deals in machinery, who knows the lay of the land and has done this many times before,” says Fuchsloch. “You might pay a little more up front, but it will save you a ton of heartache, lost production time and money in the end if you buy from a reputable company.”

4) Is the supplier also the manufacturer? 

Not all Far East manufacturers have an export licence and so they use a local middle man to manufacture the machinery. It’s hard to tell which one you’re working with, especially when the massive factory floor is filled with many machines you assume are made on the premises or at least by the same company. The agent often doesn’t have the technical expertise to answer your questions or adequately understand your requirements.

Visit the factory yourself; there is no way around it. Make sure you see the factory and not just the showroom, warehouse or someone else’s factory. And take a translator with you  some bigger companies have staff who can speak English, but most of the technical staff cannot.

5) Get a technical manual in English 

Finally, Fuchsloch recommends getting a technical manual written in English. “It often happens that I get a frantic call from buyers who can’t use their machines because they haven’t been supplied with a manual and can’t figure out how to get it working,” he concludes.

Good deals are out there

Despite the obvious obstacles, Fuchsloch does believe that it is possible to find a good deal if you’re prepared to put in extra time and money to research what you are getting, or work with an established and approved company with years of experience.

Metalforming Technologies SA has offices both in South Africa and in China. For more information please visit http://www.metalformingtechsa.com/

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.

Advertisement
Click to comment

You must be logged in to post a comment Login

Leave a Reply

Entrepreneur Today

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

Entrepreneur

Published

on

tax-increase

“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.

Continue Reading

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.

Entrepreneur

Published

on

tax

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.”

Continue Reading

Entrepreneur Today

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.

Entrepreneur

Published

on

business-insurance

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.

Continue Reading
Advertisement

SPOTLIGHT

Advertisement

Recent Posts

Follow Us

Entrepreneur-Newsletters
*
We respect your privacy. 
* indicates required.
Advertisement

Trending