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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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