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NEWSLETTER Nommer van Number 1 of 2004 A truly effective business plan One thing stands out in conversations with business advisors, consultants and their successful clients: Careful business planning is now needed more than ever. Successful people are intentional about their actions and only do things on purpose. Activity alone is not enough – value is only achieved by deliberate action. A well thought-out business plan can ensure that your actions are intentional and focused on clear aims. Therefore, the extent that you plan your own success can dramatically increase your chance to realise that success. In order to be truly effective, a business plan must do much more than simply describe you, your business and the future of your business. There are several steps you can take in creating your plan to ensure that it maximises your chances for success: 1. Make sure you've captured your vision. Your 5. Involve your peers, employees and vision for your business is the basis of your consultants. Great businesses have never been business plan. It will guide all the decisions you created by only one individual. Putting your make about the business, where you want to take it business plan in writing and having it reviewed by and how you want to get there. other people who understand your industry can uncover blind spots that can be easily addressed. 2. Think of your business systematically. What Encourage them to tear it apart and identify aspects systems and processes have you implemented to not making sense. You're not vying for ensure that every client has the same high-quality compliments, but to effect changes in logic or to experience, whether you are present or not? Great find ways in which you can serve clients more value is created in the business when you can effectively in order for the firm and your clients to be delegate responsibility to your employees to deliver more successful. this outstanding experience. Keep it short and simple. For example, "I'll limit the number of 6. Stay the course. Greater opportunities will products I produce, rather than trying to be all present themselves as you reach towards the next things to all people." level of success. Don't be tempted to constantly change your plan. If something doesn't fit your plan, 3. Fine-tune your marketing plan. Consider the discard it. Be consistent and specific. Be strategic, demographics of your target market, how to market not tactical. By staying on track, working the plan to prospects, how to monitor prospects and how to and fine-tuning according to the new feedback the find out why key prospects buy. market provides, you will be well on your way to fulfill your dreams. 4. Maintain flexibility. Recognise that there is not one right way to do business. What works today is unlikely to work tomorrow with the same results. Success requires constant innovation and finding a better way. Controlling computers in business: Backup systems Computers and systems have become part of the daily lives of all organisations. W here many of the benefits were previously only enjoyed from significant investment by large organisations, even the smallest of business now have access to these benefits. These benefits are however accompanied by certain risks. During the following five months, we will provide a series of articles aimed at assisting you to use, manage and control your computer system properly. The existence of suitable backup procedures is one Loss of goodwill (customers, supplier, banks, of the most fundamental controls that all businesses, regardless of their size or the extent of staff); and their computer use, must implement. As we often find examples of inadequate procedures in this area, the first article in the series will address Closure of business due to lost backup, archive and restore issues. production/sales/goodwill. Situations where files are lost can normally be You will need to make a number of choices when easily resolved by reverting to backup copies of the designing a proper backup procedure, particularly: lost files. Situations where a computer crashes or is stolen will require a disaster recovery plan. One of the basic requirements of any recovery plan is Frequency of backup (daily, every two days, however the availability of adequate backups. If weekly, etc.) computer files have not been backed up, those files could be lost forever. Depending on the data lost, a business could suffer a number of serious Method of backup (should the process run consequences, potentially even the failure of the manually or automatically, should all data be business itself. backed up or only changed and new data, The types of costs that could be incurred in the etc.) event of a disaster where backups were not available include: Backup media used (diskettes, DVD, CD, Labour time to recreate programs or data; disk arrays, tapes, etc.) As with any business decision, the development of Orders lost while data is being recovered; a backup procedure should be accompanied by a thorough cost-benefit analysis. When you make the Industrial action if payroll cannot be decision to buy, upgrade or outsource a computer system, you should include the costs of the backup completed; process in your calculations. A wide variety of backup procedures are in use throughout the Lost production due to lack of systems or business world. Defining a procedure for your business should involve the identification and data; consideration of the costs and benefits of the different options available to you. Despite the costs Penalty charges from customers, suppliers or involved, there is very rarely a situation where a decision not to introduce a suitable backup banks due to inability to process information; procedure, is justifiable. Very few computer users (businesses or individuals) can claim they have never lost data they would rather not have lost. The payment of bonuses Many organisations have adopted a practice of paying bonuses, often around year-end. There is however still significant uncertainty about the legal situation as far as the payment of bonuses is concerned. This situation is not alleviated by the fact that Labour Law is silent on the question of bonuses, therefore leaving the decision about the payment or non-payment of bonuses and the related negotiations with employees entirely up to the employer. It is imperative to scrutinise the contract of It is extremely necessary that employees be employment in this case. If the contract indicates informed at least six months in advance that the that an employee will receive a 13th cheque, for 13th cheque will not be paid that year. Some example, the employer is obligated to pay the employers could argue that they don't know six amount. The employee is therefore entitled to such months in advance that they will be unable to pay a payment if it is stated in the contract of the bonus, but surely by mid-year they should have employment. If the contract does not stipulate some idea of what the profits will be like at the end anything in this regard, an employer who presently of the year. does not pay bonuses of any sort and prefers to continue in that manner, can do so, without fear of To suddenly advise employees as late as November being accused of unfair labour practice. or early December that no bonuses will be paid that year could result in a charge of unfair labour The exact legal situation will depend on the type of practice with respect to the provision of benefits, bonus. The following main categories of bonus lodged at the CCMA. payments can be distinguished: The employer must bear in mind that many employees include the amount of the bonus in their The 13th cheque or “Christmas Bonus” normal household budget during the holiday season, and that they depend on the bonus to pay The performance bonus for an annual holiday, Christmas presents, etc. To unexpectedly and at the last minute inform employees, that no bonusses will be paid that year The production bonus is unfair, and should be avoided. The 13th cheque or Christmas bonus Employers should examine and if necessary, revise their policy about the payment of the 13th cheque This bonus is normally classed as a gratuity - in in order for this type of bonus to be only paid to other words, a payment of gratitude by the those employees who genuinely performs well and employer to the employee in recognition of a job go the extra mile. The performance bonusA well done, or if you like, going the extra mile. performance bonus is normally paid for good performance, and should be calculated as a However, over the years most employees have percentage of the employee’s salary or wages. A come to expect the payment of the 13th Cheque as performance bonus can also be paid as a lump a right or entitlement, or as a condition of sum to a department and divided in equal amounts employment. This is evidenced by the fact that among the employees in the department. most applicants will ask "do you pay a 13th Cheque?" at job application interviews. This would apply to a situation where all employees in a particular department are collectively In other words, they expect to be paid a 13th responsible for above-average performance. The cheque irrespective of whether the job is well done performance would be measured against pre- or whether they have travelled the extra mile. They determined company standards. The bonus would want the payment of a 13th cheque to be included not only be paid for work that on occasion exceeds as a condition of employment. company standards, but for work consistently exceeding company standards. It is therefore the responsibility of the employer to get things back onto a proper footing. Nowadays This means that line management, the shop many employers have discarded the practice to pay foremen and even supervisors have to become a 13th cheque and have incorporated the amount more closely involved with the monitoring of into the employee’s basic salary. performance on the shop floor and keeping comprehensive records. There may however come a time, when after a bad trading year,, despite having paid consistently for In a situation where the results achieved by a the last ten years, an employer is unable to pay a department depend entirely on the collective effort 13th cheque. of all employees in the department, the amount of the bonus could be calculated on the basis of a percentage of profits achieved over and above what and reduced rejection rate generating additional was budgeted for, or as a percentage of the total profits for the shareholders can only be the result of profits generated by the department and so on. good management of a department, and a genuine interest of the employees in the job. Whatever the case, the method of calculation must be fair and equitable. Changing the bonus policy The production bonus In the case of the employer who at present does not pay any bonuses, it is entirely up to the employer to The production bonus is based, not on performance decide whether he wishes to do so or not. measured against company standards, but rather on production measured against targets. However the situation is slightly different in the case Measurement is also based on quality of of the employer who at present pays bonuses. production. Employees have become accustomed to expecting the payment of the bonus as a right or entitlement. In other words if the company has set a target for Therefore, those employers who wish to change the one particular employee or, for that matter, for a status quo with regard to the payment of bonuses, particular department to produce 100 widgets per either by paying less, or by paying at a different hour, and the employee or department consistently time of the year than previously, or by dividing an produce 130 widgets per hour, then a production annual bonus into two separate payments, will have bonus would be justified. to consult employees, explain the problems, and try to convince them to accept the new system. Similarly, if the company rule is that a rejection rate of 5 percent is acceptable, but the department Employers must remember that such changes do consistently achieves a rejection rate of only 1%, constitute a change to the employees terms and then a production bonus would be in order. conditions of employment, and as this cannot be done unilaterally – changes should be negotiated It must be acknowledged that additional production with the employees. The bottom line is that if employees refuse to Deduction of Professional accept the change and even if all employees do not Subscriptions agree to it, the employer can proceed and effect the change after negotiations if s/he has good, sound Employees could previously deduct a range of and reasonable commercial rationale for making the deductions such as entertainment and certain other change. expenses in their personal tax returns. The Minister of Finance announced in the 2002 Budget that the This however does not mean that a few disgruntled deductions available to employees would be employees will not proceed with a claim of unfair dramatically curtailed with effect from 1 March 2002. labour practice, but such a problem will not be insurmountable. Previously, members of a professional body such as the South African Institute of Chartered Accountants, In summary, be fair and be equitable. Advise your where their employer did not reimburse the cost of employees in advance if there will be a problem with membership, would claim the cost as a deduction. the payment of bonuses or if there will be a change This will no longer be possible in accordance with the from the established payment procedures. provisions introduced by way of section 23(m) of the Income Tax Act. Said section prohibits as a deduction, any amounts incurred by a person receiving a salary other than contributions to a pension or retirement annuity fund, any wear and tear relating to assets used by a person in his/her employment, legal fees incurred in recovering income, or deductions available for bad or doubtful debts where his/her employer goes insolvent and s/he is unable to recover his/her salary. The section also allows amounts of premiums paid which covers the person against the loss of income as a result of illness, injury, disability or unemployment and in respect of which amounts payable under the policy will constitute income, as a deduction. It is therefore advisable for professional persons in employment to ensure that their employer is contractually obliged to pay for their subscriptions to the professional body to which they belong. Failure to do so would mean that either the employee will not be entitled to claim the deduction or in the event that the employer merely reimburses the amount without being contractually obliged, a fringe benefit fully liable to income tax will Interest on late payment of tax Following the decrease in the Reserve Bank repo rate in October 2003, the Minister of Finance approved that the PFMA rate be reduced from 13% to 11,5% with effect from 1 December 2003. The new rates will therefore be applied from 1 December 2003 are as follows: Interest charged by SARS on outstanding taxes, duties and levies is equal to 11,5%; Interest on refunds of any overpayment of provisional tax is equal to 7,5%; and Interest on refunds in respect of certain successful tax appeals as well as certain delayed VAT refunds, is equal to 11,5%.
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