business basics words worth final

7/31/2019 Business Basics Words Worth Final

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Business Basics:

A practical guide for

small business owners


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Contents

2 Starting a business

Are you an entrepreneur? Starting your own business vs buying an

existing one Taking the franchising route What structure suits your

business best? Legal requirements Setting up your infrastructure

Using savings and investments to reach your business goals Insurance protect yourself and your business

20 Creating a business plan

What a business plan is (and is not) Key components of a successful

business plan

25 Basics of finance

How much is enough to start with? Financing options Managingyour cash flow

34 Basics of banking

Why business banking? Understanding banking services How to

conduct your business bank account Simplify your business banking

43 BBBEE basics

What BBBEE is all about How BBBEE can benefit small businesses

Who is exempt EMEs and QSEs

47 Need-to-know info

Where to go for more information


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Are you an entrepreneur?

any people dream, at some point or another in their careers, of starting their own

usiness. However, wanting to be your own boss is not enough to ensure your success:

around 80% of all new small businesses fail within the first five years. Before setting

p shop, you need to think carefully about whether you have the right temperament,

eadership skills, support system and dedication to be an entrepreneur.

Evaluate your strengths and weaknesses by honestly answering the following questions:

Are you a self-starter? You need to be able to develop and drive projects, manage

your time and follow through on details.

Are you willing to work long hours? When you own a business you are committed to it

4 hours a day, seven days a week particularly during the first few years.

Are you good at ma ng dec s ons? As a sole owner you will have to make decisions

quickly, under pressure and on your own.

Do you plan well? Research indicates that many business failures could have been

avoided through better planning. Good organisation of financials, inventory, schedules

and production is the oil that keeps any business engine running smoothly.

Do you have the strength to stay motivated? Running a business can wear you down,

especially when all the responsibility is on your shoulders. It takes strong motivation and

assion to survive a slump in business, or periods of burnout.

Are you w ll ng to nvest? True entrepreneurs put their money where their mouths

are. This might mean using personal savings or property.

Have you cons dered t e poss le mpact on your am ly? Starting a business can be

ard on family life. The demands of a spouse who is not fully supportive of the venture

ay be hard to balance with the demands of your new business. There might also be

inancial difficulties until the business becomes profitable, which could necessitate

owering your standard of living.

Do you ave a networ o r ends or assoc ates w o could prov de outs de

inancing? Insufficient capital is a key cause of small business failure. If you are not

able to obtain enough funds from a bank, you may need to rely on funds from friends

and family. Most start-up businesses are funded this way.

How well do you get along with different people? Business owners need to developworking relationships with a variety of people, including customers, vendors, staff,

ankers and professionals like lawyers, accountants or consultants.

Starting a business


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Can you deal with a demanding client, an unreliable supplier or a cranky employee

in the best interests of your business?

If you can answer YES to most of the above, then you may have the potential to join the

anks of successful small business owners. If you cant, you need to reconsider whetherstarting a small business is the path you should follow.

Starting your own businessvs buying an existing one

A good idea is not necessarily a feasible and viable business opportunity. In order for it

to become one, it must create and/or add value for the customer in other words, fill a

gap in the market and be profitable.

Starting a business is neither quick nor easy, but if you pay careful attention to detail,

ollow a well thought-out plan and ask for advice as often as you can, it can be a very

exciting journey. Use the handy checklist on page 5 to make sure you have all the bases

covered.

Remember, though, that starting from scratch is not the only avenue open to someonewho wants to be a business owner. Buying an existing business is also an option. The

trick is not to take anything for granted the more you know about the business you


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ave in mind, the easier it is to make good decisions.

When you consider buying an existing business, keep these guidelines in mind:

n Be wary a us ness ro er s andl ng t e transact on on your e al . A broker

represents the seller, not the buyer, and might not have your best interests at heart.

n Focus your search. Determine what criteria are important to you and review what is

available. Even if a business is not officially for sale, the owner might be willing to

sell at a good price.

n Rev ew all t e gures. The seller might lie, but the sales records wont.

n Create an n ormat on c ec l st or t e seller. It should cover every aspect of the

business, from suppliers and customers to employees and the competition.

n Set up a purchase agreement. his should protect you from future decline in

business, bad inventory, faulty equipment and other liabilities.

n H re t e r g t pro ess onals, e, a lawyer and accountant. A lot of money can be

saved purely from the choices you make at this stage.

n Negot ate. Make an offer you can safely afford.

As mentioned earlier, one can never have too much information when evaluating a

usiness thats for sale. Be sure to ask these questions before signing a purchase

agreement:

n Why is the seller selling?

n Can the current owner provide an income statement for the last two years that will

allow for a meaningful financial analysis?

n What is the businesss track record?

n Who are the key customers and how will transfer of ownership affect them?

n Who are the key suppliers? What are the terms and conditions of trade?

n Is there a valuation list of assets?

n What are the total accounts receivable and how recoverable are these?

n What agreements are in place regarding premises and asset leases?

n Are there any tax disputes that may impact on future payments?

n Is there any pending litigation against the business?

n Does the business provide any guarantees or warranties on its goods and are these

reflected on the balance sheet?

n Which employees are key to the future viability of the business?

n What is the businesss cash flow cycle?

Advantages of buying an existing business

n You save the time, money and energy that is normally needed to start a business

from scratch.

n A successful existing business may have a better chance of maintaining its success

and is therefore less risky than a new venture.

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Prepare a business plan. Make sure

it includes your marketing strategy

and pricing structures, and allows

sufficient cash flow provision for

the first 12 months.

Decide on the legal structure of

the business, eg, close corporation,

private company or partnership.

Select a name for the business and

apply for registration.

If working from home, contact the

local municipality regarding by-laws

that may affect the business.

If not working from home, findappropriate premises. Determine

all alterations and signage

requirements.

Discuss your plans with your

business banker and obtain advice

on the different financing options.

Open a business bank account and

make sure you understand how the

related bank fees will be charged.

Apply for and obtain written

confirmation of a business loan or

overdraft facilities.

Apply for the licences, certificates

and permits you will need to trade

legally.

Register with the South African

Revenue Service (SARS) and obtain

a VAT registration certificate.

Review all your responsibilities as

an employer, eg, regarding the

Unemployment Insurance Fund and

Compensation for Occupational

Injuries and Diseases, to ensurelegal compliance.

Take out appropriate insurance

cover.

Establish terms and conditions of

employment; recruit and train staff.

Order business stationery andpromotional materials.

Make the necessary arrangements

for credit sales and be sure to

understand the legal requirements

relating to finance charges.

Consider joining the local Chamber

of Commerce or other organisations

that can help you get established.

Appoint an attorney and

accountant or bookkeeper and

agree on service levels and fees.

Locate key suppliers, confirm their

prices and terms and conditions.

Establish minimum inventory and

distribution requirements.

New business start-up checklist

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n Experienced and reliable employees are usually part of the deal.

n Supplier relationships exist.

n Inventory balances are known.

n Equipment is installed and production capacity is known.

Disadvantages of buying an existing business

n You can be deceived by the owner into buying an unprofitable business.

n The business may have a poor reputation or image that could prove difficult to

change.n Some existing employees might not be suitable for the job. There may also be a

history of internal politics and conflict, which may continue despite a change in

ownership.

n Inventory, facilities and equipment may be obsolete, damaged or old.

n The business may be overpriced.

Visit Standard Banks Business Banking website for a step-by-step guide on how to

assess an existing business and how to calculate a realistic price when buying one

[www.standardbank.co.za Business Starting a business Buying a business].

Taking the franchising route

Franchising is a way of doing business based on a proven business format. Money

is paid, usually on an upfront and ongoing basis, allowing for the use of intellectual

roperty and for the continuous provision of support and training.

The advantage for the franchisor (the person who grants the right to someone else

to trade under his/her brand or name) is that the outlets are run by owners who are

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driven by the success of their business. The advantage for the franchisee (the owner

who runs the business) is that it is based on a tried and tested business concept.

When you consider buying a franchise, take time to do the following:

n Find out what franchises are available.

n Assess opportunities carefully talk to other franchisees.

n Investigate the financial prospects for the business.

n Ask your bank if it will consider a loan for your choice of franchise.

n Research the customers and competitors in your area.

n Draw up a business plan.

Do not take up the first franchise opportunity that presents itself without investigating

alternatives. More importantly, do not allow yourself to be hurried into making adecision.

Also remember to do your homework properly: just because a business works

elsewhere, doesnt mean it will work in your area as well. Dont pay a non-refundable

deposit for the franchise or sign anything without legal advice.

Refer to Standard Banks Business Banking website www.standardbank.co.za for more

information regarding the rights and obligations of franchisees.

Advantages

n Predictability you have access to a proven blueprint and coordinated systems

and procedures to start the business.

n Support the franchisor assists with all aspects of starting the business, such

as staff selection and training. Once established, you continue to receive

operational support from the franchisors field staff.

n

One voice the franchisor takes care of advertising and promotions on yourbehalf.

n Buying power you benefit from lower prices due to the franchisors bulk

buying capability.

n Financing the franchisors backing makes it easier to obtain financing.

Disadvantages

n Rigid operating procedures can restrict your creativity and freedom.

n Set-up costs can be higher than for a similar business operating independently.

n You have to rely on the franchisor for major business decisions, which couldaffect your future earnings.

n A deterioration in the groups reputation will also affect your business.

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Franchising pros and cons


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What structure suits your business best?

There are several ways to structure the legal ownership of your business, depending on

the nature of the business, the number of people involved, management capabilities,

ersonal risk and your future plans. Each type of business entity has different legal and

tax consequences, which may influence your choice.

A business that is altogether separate and distinct from its members is a legal entity. Its

existence is independent from the continued existence of its members and it can have

ights and obligations apart from those of its members. Such businesses are usually

eferred to as juristic persons to distinguish them from human beings or naturalersons.

A business set up as a legal entity has:

n Legal capacity and is competent to have rights and duties.

n Capacity to act and is competent to contract.

n Capacity to litigate, which means it can appear in court as party to a legal action. In

this case, the businesss assets are at risk, not the personal assets of the owners.

The owners are therefore protected.

Sole propr etors p: This is a business owned and operated by one person, under his orer own name or a trade name. This format is best suited to a business that is not fixed

asset-driven (ie, is service-based) and in which the owner is the sole employee. Income

accrues directly to the owner and is included in his or her income tax return. There are

o complicated statutory returns other than meeting basic legal and tax requirements.

The disadvantage of a sole proprietorship is that the business is not a separate legal

entity, so the owner is liable for, and can be sued for, the businesss debts. If the owner

dies, the business ceases to exist. Conversely, if the business fails, the owner could lose

everything.

Partnership: A partnership exists between a minimum of two and a maximum of 20

eople who together carry on a trade, business or profession. It is based on the same

rinciples as a sole proprietorship, which means the partnership is not a separate legal

entity or a taxpayer in its own right. Each partner is taxed on their share of the profits

and is jointly liable for the debts or obligations of the business.

A partnership requires a contract to formalise each persons contribution to the

usiness, their responsibilities, profit share, means of resolving disputes, disability/death

insurance, and what procedure will be followed if the partnership changes or is dissolved.

Close corporation: A close corporation (CC) is a simplified business entity specifically

designed for small enterprises it is easier and cheaper to register and run than a


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company. A CC can have between one and ten members, each of whom owns an

agreed percentage of the business and who is liable for managing it properly. The CC is

considered to be a separate legal entity, which can sue or be sued. The CC registers as a

taxpayer in its own right; it must have an accounting officer but is not required to have

audited financial statements. This structure is ideal for a business that purchases stock

on credit.

Company: company is also created as a separate legal entity, which has to register as

a taxpayer in its own right. The owners of a company, who are protected from individual

iability, are called directors and shareholders. A company can make shares available to

staff as a private company (Pty) or to the public as a limited company (Ltd), and these

are easily transferred from one owner to another. Registered companies are required to

ave an accounting officer and to produce audited financial statements.

This is the best legal structure for people who ultimately want to sell their business to a

arge competitor, or list on the stock exchange.Trading trust: A trading trust is created by a deed, under which property is held and

anaged for the benefit and profit of the beneficiaries named in the deed. It is not a

separate legal entity from its trustees, but is regarded as such for tax and transfer duty

urposes. Trustees must be authorised by the Master of the High Court.

Trading trusts are appropriate for businesses such as property development enterprises.

Cooperat ve: This is a separate legal entity that provides limited liability and conducts

usiness for the benefit of its members. Its members are also, to a large extent, its

customers. For example, cooperative societies or companies are used extensively in

agriculture for the supply and distribution of farming supplies and products within

arming communities.


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Legal requirements

The easiest and, unfortunately, most expensive way to register your business is to

se an expert, such as an auditor or a company specialising in registration services.

You can complete the registration yourself at a fraction of the cost, but you may be

overwhelmed by the paperwork.

When registering your business, follow these steps:n Choose a type of business entity: For example, a CC or (Pty) Ltd.

n Reserve a name: Before you can register your business, you will need to apply to

the Companies and Intellectual Property Registration Office (CIPRO) to reserve a

company name (using form CK7 for a CC and form CM5 for a company). You must

submit three alternatives to the Registrar, in case your preferred name is already

taken or is too similar to another business already in practice. Once your application

has been approved, the name will be reserved for you for two months.

n Reg ster your us ness: A CC registration can only be processed once the

suggested name is approved and reserved. For a CC, you must complete and submit

a Close Corporation Founding Statement (a CK1 form). It takes between three and

four weeks to register a CC but the processing time varies depending on the backlog


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at the Registrars office. Registering a (Pty) Ltd is more complex and you should

use an attorney to assist you. After successfully reserving a name, you will need to

complete several forms, including a power of attorney document, permitting yourattorney to act on your behalf.

To speed up the registration process, it is possible to purchase a pre-existing CC or

company that is dormant, known as a shelf company, from a business registration

service provider. You simply have to apply to change the name of the entity and get

yourself appointed as the member or director. This usually costs only slightly more than

egistering a brand new company, and can save weeks of admin time. In fact, you could

e ready to do business within 30 minutes of purchasing a shelf company.

The process of amending the members takes up to six weeks to complete, but does notrevent you from trading in the meantime. Depending on whether you use an agent or

deal directly with CIPRO, the costs range from a few hundred Rand to a few thousand.

ote: Copies of all the relevant forms can be purchased at stationery stores, or

ownloaded from the CIPRO website www.cipro.co.za

Apart from establishing your companys legal status, you also have to register for a few

other things:

1. Tax (prov s onal, PAYE, VAT): Individuals operating as sole traders, partners in apartnership, members of a CC and directors of a company, need to register with the

South African Revenue Service (SARS) as soon as they register their business. PAYE

(Pay As You Earn) is tax deducted from employees salaries. All employees must

register with SARS.

If your business turnover is more than R300 000 per year, you will also need to

register as a VAT vendor. Electronic filing (eFiling) is a channel between SARS and

the taxpayer through which tax forms and payments can be submitted online.

You can access eFiling through Standard Banks Business Banking website. For thebest tax advice, simply log on to www.sars.co.za or talk to a qualified tax consultant.

. Skills Development Levies: Business entities with an annual payroll of less

than R500 000 are exempt from paying Skills Development Levies (SDL). SDL

registration is done at the same time as PAYE.

3. UIF: All businesses need to register for the Unemployment Insurance Fund (UIF)

with the Department of Labour (form UF8).

. COIDA: All businesses must register with the Compensation Commission at theDepartment of Labour in terms of the Compensation for Occupational Injuries and

Diseases Act (COIDA).


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Specific types of businesses require specific licences, over and above the generic

egistration requirements. For example, if you are planning to open, or currently run, an

accommodation establishment, restaurant, coffee shop, pub, tavern or shebeen whereood is served, you must have a valid business or trade licence. Trading without a valid

icence is a punishable offence.

Without a liquor licence you cannot legally sell or even give away liquor at a restaurant

or guesthouse. By the same token, liquor distributors may not supply liquor to any

trader who cannot produce a valid liquor licence.

If you are in the transport business, the necessary licences are essential both in terms

of vehicle and driver requirements. Anyone who transports passengers for reward must

ave a Road Transportation Permit (also known as a Public Operating License) as well asa Public Driving Permit (PDP).

Protecting intellectual property

Intellectual property (IP) is a vital, but often neglected, legal issue for every business

owner. IP can be defined as patents, trademarks, service marks, design rights,

copyright, know-how, trade or business names, ideas, concepts and other similar rights,

whether it is possible to register these or not. Any person with an innovative idea is in

ossession of a piece of IP, and is protected against unlawful copying.

For example, an invention is protected by a atent which gives the owner the right to

revent others from copying it without the owners permission. The owner is given the

atent right for 20 years.

The Designs Act allows a person to register des gns and prevent others from copying

them. Depending on how the design is classed, registration remains in force for ten or

15 years, provided the owner pays the annual renewal fees.

Trademarks are the words or marks that distinguish the goods or services of the owner

rom the goods or services of other suppliers or manufacturers. Trademarks may be

egistered and are renewed every ten years.

Copyright is the material expression of an idea. The law of copyright protects literary,

usical and artistic works, computer programs, broadcasts, sound recordings and

cinematograph films.

Owners of IP can give others the rights to use it by licensing it to them. A licence is

sually in the form of an agreement, in terms of which the owner allows the other

erson to use the right in return for remuneration.

If IP plays a large role in your business, it is essential to consult attorneys who specialise

in this field to ensure that your rights are properly protected.


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Setting up your infrastructure

A home-based office or workspace is one of the easiest ways for a new or small

usiness to reduce operating costs. But, as with everything else, there are advantages

and disadvantages to consider.

se these three questions to help you make the right decision on whether to rent

office space or work from home:

1. Will customers need to come to your workspace? If the answer is yes, you

need to consider whether your home is conveniently situated, what kind of

impression the environment will make on a new customer, and whether other

residents in your home, such as small children, will have an impact. Also consider

factors such as access to parking, a possible space restriction if the business

expands, and authorisation from your local municipality to operate a business from

home.

. W ll you e a le to ocus on your wor ? Working from home may seem like the

perfect solution, especially for mothers, but there are pitfalls. You might find that

you become lonely, or that your work is too frequently interrupted by domestic

chores or distractions. Working from home may also mean that your workday never

ends, as you dont formally leave the office to go home.

3. W at nd o wor w ll you e do ng? If your business is mostly desk-based or if

you are involved in a home industry such as baking or catering, it is relatively easy

to accommodate your workspace within your home. If, however, you are selling

building supplies or running a fleet of trucks, your neighbours might complain aboutthe noise or the use of space.

If you decide to rent office space, use these guidelines to inform your decision:


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n The location should be convenient for your customers and for you dont rent

premises that are an hour or more away from where you live.

n Make a checklist of what you want before you look for premises, including thenumber of workstations, parking and access for disabled persons.

n Obtain a full breakdown of what the monthly costs will be, including extras like

parking and water and electricity.

n Before signing a lease agreement, study it carefully. It might be a good idea to

consult a lawyer to make sure you fully understand what you are signing and what

your rights are.

n If you need to make substantial alterations or renovations to the premises, make

sure these are permitted by the landlord, or you could lose your deposit. Many

landlords actually give new tenants an allowance to do the necessary conversions.n Make sure you understand the implications of your lease and notice periods. If you

sign a two-year agreement and after six months discover that you cant afford it, you

are still obliged to pay the landlord for the full term.

Connect to the world

A desk, chair, filing cabinet and computer are not enough to connect your business to

the world of trade and industry. You will also need:

1. A telep one num er. You dont need a landline number to do business, but

a company that operates with only a cell phone number may appear to lack

permanence. Landline-to-landline calls are also significantly cheaper than cell-to-

landline calls.

At present, Telkom is South Africas only landline service provider. Neotel has been

granted a licence to provide these services and aims to start doing so commercially

in early 2008.

Cell phone services are provided by Vodacom, MTN, Cell C and Virgin Mobile.

. An ema l account. Email enables business to be conducted quickly, efficiently andconveniently over vast distances. No business today can afford not to have email

access. Either get an email account as part of an Internet subscription or create a

free email account at websites like Yahoo, Hotmail and Gmail.

3. A fax-to-email number. Once you have an email account, you can apply for a fax-

to-email number. This allows faxes to be sent directly to your computer, via email.

The number is free; the sender pays a charge when making the fax call (but because

the fax is transmitted digitally, call time is often much shorter than sending to a

standard fax number). Internet Service Providers (ISPs) typically provide free fax-to-email services to their subscribers. You can also sign up with any number of service

providers available on the Internet.


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. Internet connectivity. There are a few options in terms of Internet connectivity,

each appropriate for specific needs and circumstances.

n Analogue dial-up operates through an ordinary telephone line and is often used byhome users. It is one of the cheapest methods of access, but it also quite slow.

n An ISDN line is a digital dial-up connection, which is faster than analogue. As with

analogue, you pay for the time you are connected.

n ASDL is a separate digital line, which means you are permanently connected to

the Internet and email. It offers stable, secure, dramatically faster Internet access

speeds at a fixed monthly cost, regardless of how much or how little you use it.

n A leased line is a dedicated, permanent connection that offers real-time email and

Internet access for a fixed monthly cost. Numerous people can use it simultaneously,

and it is ideal for business users who spend eight hours or more a day on the Internet.n Wireless connections allow you to connect to the Internet through cell phone

networks, which means that you have access to email and the Internet wherever

there is cell phone reception. This option is not as fast as ASDL or leased lines, but is

ideal for the business owner who is not office-bound.

Internet connectivity has to be sourced from an ISP. Visit the website of the Internet

Service Providers Association for a list of ISPs to choose from: ww.ispa.co.za. They

all offer different packages and prices, hence you need to do your homework before

signing up. In order for your chosen ISP to connect you the Internet, you need theasic infrastructure, such as a landline or digital line, or a wireless modem or 3G card

(typically provided by your cell phone supplier).

5. A website. Creating and maintaining a website is one of the easiest and most cost-

effective ways to market your products and services to a global audience. Most ISPs

offer website design and hosting services specifically for small businesses, for a minimal

once-off fee and a fixed monthly cost. Your ISP should also be able to give you detailed

statistics to show how many people have accessed your site on a daily, weekly and

onthly basis.

Establishing a website requires a few tasks to be done:

Design These days most graphic design companies offer a website design service.

ISPs also offer basic design services, and numerous websites will guide you through the

rocess if you want to go the DIY route.

Hosting Once the website is designed, it has to be hosted in order for it to find a

ome on the Internet. Once again, your ISP is a good place to start. Many website

development companies also offer hosting services. Different companies offer different

ackages and prices, so shop around.

Search engine optimisation (SEO) Internet search engines are the primary vehicles


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with which customers search for and find information. SEO is the process of designing,

structuring and maintaining your website in such a way that your site is as close to the

top of the results list as possible when someone does an Internet search for your kindof business. Make sure your website designer understands SEO.

Payment options for doing business online

These days, more and more people prefer to conduct transactions with debit or credit

cards instead of cash. In setting yourself up to start doing business, you should seriously

consider registering for merchant services, which would allow you to accept Maestro

and Electron debit cards, Mastercard and Visa cheque cards, as well as Mastercard,

American Express, Diners Club and Visa credit cards, not only for in-store transactions,

ut also for purchases over the Internet.

When your application for merchant services is approved, your bank will supply you with

the necessary infrastructure, such as merchant machines.

At Standard Bank you can apply for merchant services with the assistance of a business

anker at your local branch. Alternatively you can follow the instructions provided on

the Business Banking website www.standardbank.co.za

In order to accept online credit card payments, you will need to link your website to an

online payment systems such as MWEB Business Safeshop www.mwebbusiness.co.za,

PayGate www.paygate.co.za, Setcom ww.setcom.co.za or Virtual Card Services www.

virtualvendor.co.za

Debit card transactions are conducted via AutoPay. All AutoPay transactions are

authenticated, which means cardholders cannot dispute their transactions.

When you apply for Internet merchant services, you need to provide the bank with a

usiness plan that includes a description of your business and estimates of the volume

and value of the business you hope to achieve through card transactions.

Your website must also comply with the Electronic Commerce and Telecommunication(ECT) Act. Additionally, the website you use to conduct your business must display:

n Details of your business and contact information.

n Your terms and conditions.

n Full descriptions of the goods and services you offer.

n Your policy on returns and refunds.

n Details of the support you offer your customers.

n The transaction currency.

n Any export restrictions.

n Your delivery policy.n Details of the types of payment you accept.

n Your confidentiality and privacy policy.


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Using savings and investment depositaccounts to reach your business goals

If you have spare cash and want to invest it for a rainy day or to finance a future

usiness opportunity, talk to your bank about which savings and investment products

are available to help you achieve this.

A call deposit is an interest-earning investment deposit account that gives you the

option of withdrawing your money when you need it. This account helps you to manage

your monthly cash flow.

A MoneyMar et call account offers all the benefits of an ordinary call deposit in that

your funds are immediately available to you, but the entry-level, minimum balance and

inimum transaction requirements are significantly higher. The higher requirements,

owever, mean a much higher return.

A MarketLink account is a card-based money market deposit account that offers you

attractive interest rates along with basic transaction functionality through a variety of

Standard Bank self-service channels.

A ot ce depos t is an interest-earning deposit account where you are required to give

the bank at least 32 days notice before being allowed access to your funds. This helps

you to save by keeping your savings out of temptations way.

A ixed deposit s an interest-earning investment deposit account where a lump sum

of money is invested for a fixed period, at a fixed rate of interest. A fixed deposit


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offers you the benefit of knowing exactly what return you can expect to earn over the

investment period.

When considering a savings and investment deposit option, you have to consider these

actors:

n Access to your money is there a possibility that you might need to access your

funds at short notice, or can you afford to tie up your money for a longer period of

time? Generally, the longer that you are willing to invest for, the higher the return

that you are likely to earn.

n Do you want to add to your investment over time or do you want to make a once-off

investment?

n What is the minimum amount you have available to invest with immediate effect?

Different types of accounts will require different minimum deposits, ranging from as

little as R50 to as much as R250 000.

Remember, Standard Bank offers business customers access to consultants who can

rovide expert advice on financial planning and more complex investment solutions

such as unit trusts, online share trading and offshore investments. Your business banker

can introduce you to one of these consultants.

Small business owners often neglect to ensure that the wealth they create is secured.

Optimal succession and estate planning is a complicated legal matter, requiring the

advice of estate planning, legal and financial experts.

Standard Bank has a consulting unit of estate planning specialists who can help you, for

a once-off consultation fee, to assess your needs and draw up your will. The unit also

specialises in setting up secure trusts for your assets. You qualify for this service if you

ave gross assets of more than R250 000.

A related matter is insurance for your business a necessity that will provide you with

eace of mind. Your bank can offer a comprehensive range of insurance options and

you can tailor your policy to suit your business.

When planning your insurance policy, discuss the following types of insurance with your

roker:

n Public liability insurance: This will protect your business from financial loss as

Insurance protect yourselfand your business


21/5219

a result of an injury, death or property damage caused by business operations,

employees or products to a client or customer.

n Burglary or t e t: This protects against loss of key equipment or movable assets.n Vehicle and passenger liability cover: Not only must you insure your vehicle(s), but

if you intend to transport passengers, you should consider some form of insurance to

protect you and your business against potential claims due to accidents that result in

injury or death.

n Ot ers nclude: Bad debts, cash in transit, employee insurance, fire, glass, loss of

profits, natural disasters, etc.

Standard Bank offers various business insurance solutions. A business banker at your

ocal branch can introduce you to a financial consultant who can explain the following

options:

n Keyman nsurance: This covers key individuals in a company, enabling the business

to recover losses incurred if the employee dies or is disabled.

n Deferred compensation: This is a mutually arranged plan between employer and

employee, whereby the employer provides cash benefits, in addition to conventional

approved funds, in the form of a gratuity at retirement or disability, or to the

employees dependants on death.

n Cont ngent l a l ty plan: his is funded by a life policy which pays out on behalf of

the business in the event of premature death or permanent disability.n Staff incentive scheme: Also known as preferred compensation, this provides staff

who have special skills, training or experience, and who you wish to retain, with a

cash benefit before retirement.

n Restra nt o trade agreement: This is used to protect companies against executives

who want to leave their employer and set up a business in competition to them.

n Buy and sell agreement: This provides surviving co-owners of a company with funds

to purchase the interest or share of a deceased or disabled co-owner.

n Loan redempt on plan: This is a specially devised Standard Bank plan designed to

release loan accounts for the personal benefit of shareholders, without affecting thecapital needs of the business.

n Health insurance: This includes traditional medical aid schemes, new generation

healthcare products and top-up schemes that provide businesses with cost-effective

health insurance solutions.

A Standard Bank financial consultant can also help you to protect yourself and structure

your personal wealth, eg, through retirement annuities, life insurance, disability cover, a

ospital plan, medical aid and a will.

Without insurance you run enormous risks and it is highly unlikely that you would be

able to convince someone to invest in your venture. Therefore, it is a good idea to build

an insurance review into your annual business planning cycle.


22/5220

What a business plan is (and is not)

A business plan is a detailed overview of the current position of the business, where it

wants to go and how it will achieve its goals. It is a strategic blueprint of a businesss

ast, present and future.

A business plan is important because it forces you to think about what your business is

doing. It prompts you to figure out where you want your company to be in the future and

ow you intend to make this happen. Your plan acts as an outline that guides and steers

your business so that it can achieve all its objectives. This document will also be your

calling card when you want to raise finance or find new investors and business partners.

The importance of a comprehensive, well thought-out business plan cannot be

overemphasised. Apart from financing, much hinges on it: credit from suppliers,

operational and financial management and marketing. In short, achieving your goals

depends on the creation and execution of a sound business plan.

A business plan is:

n The blueprint of your business and an explanation of your complete strategy.

n A tangible representation to prospective stakeholders of who you are, what you are

and what you want to achieve.n The result of research, planning, thinking and seeking expert advice.

n A working document to be consulted frequently to keep you on track.

A business plan is not:

n Simply a means to raise finance.

n Something a consultant can draw up without your involvement.

n A thick file that gathers dust in the cupboard.

The benefits of a business plann It requires you to look carefully at your industry, customers and competition to

determine what your real opportunities are and what threats or limitations you face.

n It helps you to take a good look at your company in order to objectively recognise its

capabilities and resources, its strengths and weaknesses.

n A business plan also prepares you for an uncertain future by encouraging you to

come up with business strategies and a contingency plan to increase your chances of

success further down the road.

n Putting your plan together will help you come to grips with the day-to-day running

of your business by highlighting the kind of operational management that will beneeded. In this way, ad hoc decision-making will be kept to a minimum.

n A business plan provides direction to management and staff.

Creating a business plan


23/5221

Key components of asuccessful business plan

Executive summary

This is a brief overview that emphases the key issues of the plan. It is more than just an

introduction; its the whole plan, only shorter.

The executive summary should have the following headings:

n The purpose of the plan (eg, to obtain finance, to attract investors, to stimulate

growth).

n Company description (including company name; industry in which it operates; key

products/services; key patents/trademarks; a short analysis of the market in which

you operate; characteristics of your target market; competitors and their activities).n Marketing and sales activities (your marketing strategy, eg, direct mail and

advertising; your sales strategy, eg, sales staff or commission agents; your

distribution systems; major customers; debtors information, eg, credit terms and

debtors book maturities; and a sales forecast or sales budget).

n Operating capabilities (including research and development, if relevant; major

achievements; ongoing efforts; current status; key suppliers; credit terms; inventory

details; production plan and a production budget).

n Management and personnel (key owners and managers names, positions and

expertise; key operational employees names, positions and expertise; ownership

structure and owners contributions).

n Financial overview (funds required and their use/application; historical financial


24/5222

summaries; capital injected or current borrowings).

The executive summary should not be longer than two pages, and should be the last

art of the plan that you write. By completing the rest first, it will be much easier to

identify the key ideas you want to convey in the first two pages.

Business description and overview

In this section you should provide an overview of how all the elements of your company

will fit together. Touch on your companys business history and major activities, but

eave the bulk of the detail for the later sections.

This section should include:

n Business and trading name/s.

n Legal information (such as VAT number, tax number, tax clearance certificate,

partnership or shareholder agreements).

n Location.

n Core business and market description.

n Main products/services.

n Debtors (describe the major potential customers, the credit terms the business

will provide compared to industry norms, bad debt procedures, credit sales as a

percentage of annual sales, and future market prospects).

n

Inventory (specify what kind of inventory shall be kept, such as raw materials, work-in-progress or finished goods, and the average value thereof).

n Creditors (terms arranged with suppliers and the delivery policies of these suppliers).

n Competitive advantage.

n BBBEE status.

n Industry bodies (voluntary or compulsory) with which your business is associated.

Market and environment analysis

This part of the business plan deals with your business environment and should cover all

the aspects of your companys situation that are beyond your immediate control. This

includes the nature of your industry, the direction of the marketplace and the intensity

of your competition. You should consider issues relating to the broader market as well

as to your immediate environment.

Broader issues may include:

n Economic forces and international factors.

n Social/cultural and technological trends.

n Ecological issues and natural raw materials.

n Political and governmental developments.

Immediate issues may include:

n Trade associations and trade unions.


25/5223

n Media and consumer groups.

n Public utilities.

n Transport and communications.n Government regulations.

When writing the market analysis, be sure to include the following information:

n The history of the industry.

n The future potential of the industry in terms of outlooks and trends.

n Details of your products and services.

n A description of the primary target market and your market position (market share;

future market share potential; the leadership position or potential position of your

business and products).

n Business analysis (sales trends in the market over the last three years and the

expected trends for the next three years; the most profitable products/services now

and in the future; the impact of technology on the business).

n Competitive analysis (who the significant competitors are and which market

segments they serve; their strengths and weaknesses; the threats that they pose

both now and in the future).

Company strategy

The section on company strategy combines everything that you know about your

usiness environment and your own company, resulting in your projections of the

uture. When discussing the overall company strategy, include the following:

n A description of your market penetration strategy.

n An outline of your planned geographical penetration.

n A description of the distribution process for your product/service.

n An explanation of your pricing and growth strategies.

n An outline of any product support systems.

n An explanation of how you will identify prospective customers.

Product or service research and developmentAs you develop this section, bear your readers in mind. Too much detail is likely

to confuse and frustrate anyone who is not intimately involved in your business or

industry. However, ensure that you do the following:

n Describe the current lifecycle stage of the product/service and the factors that

might influence this position. Every stage presents a unique set of market conditions

and planning challenges. The different stages also require distinct management

objectives, strategies and skills.

n Examine any new technologies or scientific approaches that may find practical

application in the next three years. Also list factors that may limit their development

or market acceptance.

n Describe new products/services that you plan to develop to meet changing needs.


26/5224

Financial review

The financial review covers both your current and expected future position. You should

include at least these basic financial statements in the business plan:

Pro t and loss account: This presents the proverbial bottom line. Calculate net profit

y adding all the revenue received from selling goods or services and then subtracting

the total cost of operating your company.

Balance sheet: This is a snapshot of your financial status at a particular time. It details

the assets owned by the company, the money it owes to third parties and, ultimately,

the worth of the business.

Cas low statement: This is a record of the flow of cash in and out of your company

during a particular period. It tracks where money comes from and where it ends up.

It is a good idea to include a three-year financial projection, taking into account

growth and inflation rates. An accountant can help you to prepare these documents.

If your business is new, include pro forma financial statements supported by adequate

rojections of the balance sheet, income statement and cash flow statement.

Action plan

In conclusion, you may want to draw up an action plan that describes how you intend

to put your business plan into practice. This section could highlight any anticipatedchanges in management or business structure, as well as new policies or procedures you

expect to implement. You could also outline any additional skills required by you, your

anagers or your employees to make the plan work.

Before switching off your

computer, check the quality and

comprehensiveness of your businessplan against these ten questions:

1. Are your goals tied to your

company mission?

2. Can you point out the major

opportunities?

3. Are you prepared for threats?

4. Have you defined your customers?

5. Do you understand and can

you frequently assess yourcompetitors?

6. Are you really ready for change?

7. Do you know your strengths and

weaknesses?

8. Does your strategy make logicalsense?

9. Can you validate and substantiate

the numbers?

10. Is your plan clear, concise and up

to date?

Refer to Standard Banks Business

Banking website www.standardbank.

co.za for more information on how to

formulate your business plan as well as

a business plan template.

Ten quality control questions


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How much is enough to start with?

Starting a business is a bit like moving into a new house you are usually well prepared

or the obvious expenses, but the hidden extras can break the bank.

During the start-up phase of a small business, the business owner needs funds for

once-off costs as well as at least six months of working capital. Plan for things to cost

ore than you think, and include this budget in your business plan.

If you are not sure what your expenses will be, make finding out part of your due

diligence. Research similar businesses in your industry and aim to uncover any general

expenses that you might not have thought of. If possible, consult an accountant who has

small business experience.

Typically, start-up costs include:

n Expenses before the starting date, such as market research, registration fees, legal

fees, office stationery, design and printing of corporate identity (business cards and

letterheads), registration of a domain name and creation of a website, installations

and utility connections (if moving into a new property).

n Start-up inventory (if yours is a product-based business).n Cash reserve to support the company during the early months, before sales reach

break-even levels.

n Assets, such as fixtures and signage, office furniture and vehicles (either purchase

price or down payments).

n Long-term or fixed assets, such as property and equipment.

Your start-up budget should also allow for initial monthly operating expenses, such as:

n Rent, mortgage payments and loan repayments.

n

Website hosting and equipment leases.n Salaries and wages.

n Ongoing advertising and marketing.

Basics of finance


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n Insurance.

n Tax and utilities payments.n Transport.

n Office supplies and consumables.

Beware of the hidden costs

Hidden costs are those you dont see, dont always expect and which seldom feature in

a business plan. These costs vary, depending on the size and nature of your business,

and can include:

n Monthly interest on your business overdraft.

n

Bank interest charged by suppliers when you pay them late.n Interest lost when customers pay you late, or when you pay a third-party supplier

before you have been paid by your own client for a product or service.

n Maintenance, eg, IT support and vehicle services.

n Depreciation of property and equipment.

n Money lost by spending time on tasks that could be outsourced.

n Commissions and administration fees of, for instance, benefit plans.

n Employee turnover. This is one of the most substantial hidden costs in business

today. Remember that an employee costs more than his or her salary. Factor in the

cost of additional equipment, office furniture, perks, recruitment and training.

You cant always avoid these costs but being aware of them helps you to minimise their

impact and plan for them in your budget.


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Financing options

The hunt for finance is an ongoing challenge for most small businesses in South Africa.

Depending on how much you need and what you need it for, there are various funding

options to get you up and running, as well as to help you provide for a rainy day.

Before deciding how to finance your business, talk to someone who can provide you

with expert advice, such as a business banker. Standard Banks business bankers offer

ractical advice and will answer any questions you have about your business banking

equirements.

These business bankers are situated at local branches across the country. They will help

you to evaluate your business plan, set up accounts and arrange finance. They also have

access to a team of support staff and analysts who will ensure that you get the best

anking services available.

You are welcome to visit any business banker at any Standard Bank branch should you

equire assistance when you are out of town.

To find out where your nearest business banker is located call 0860 012 345 or visit

the branch locator on the Standard Bank website www.standardbank.co.za

Financing options for every need

1. Overdraft: An overdraft is the ideal way to help you manage your cash flow on a

daily basis. It is linked to your current account, is available when you need it and is

epayable on demand. You only pay interest on how much you use and not on the full

available overdraft amount.

. Business loans: These are the most likely sources of credit for small businesses.

Different banks offer different types of business loans, varying in minimum andaximum loan amounts, repayment periods, terms and conditions and value-adding

eatures such as the ability to withdraw funds that were deposited over and above the

agreed monthly repayments. Banks require a business plan and cash flow projections in

order to evaluate the viability of the business for which you require a loan.

3. Contract finance: Another option available to small businesses (and especially Black

Economic Empowerment companies) is contract finance. A small business might be

awarded a contract to do a particular job, but might not be able to access the finance

eeded to start the work. Contract financing, as supplied by Standard Bank, is when

the bank enters into a cash flow lending agreement on the strength of a firm contract.

A specialist team reviews the contracting environment and assesses applications on an

individual basis. As the business performs on the contract, so the bank pays regulated


30/5228

amounts into a controlled account.

Contract finance can be considered when a business has:

n A contract from a South African blue chip company or a national or provincial

government department.

n A written, signed contract to supply goods or services for a defined Rand value

within a defined period of time.

n A contract for a minimum of 12 months.

Collateral is not always necessary to obtain finance against a contract. However, the

usiness owner/shareholders must be willing to inject some of their own funds into the

roject or contract.

. K ula guaranteed loans: These are for small businesses that do not have enough

assets to put up as collateral for a bank loan. To assist you, the governments small

usiness finance agency, Khula, offers a credit scheme that provides an indemnity to

the bank should your business fail to repay the loan. The business itself is not involved

in the application to Khula for this indemnity; rather, the bank will facilitate this while

the business merely applies to the bank for finance in the normal way.

The amount of collateral required for a loan differs on a case-by-case basis and

depends on a number of factors. To qualify for a Khula-supported loan, the sole

roprietor or majority shareholder, member or partner must be the following:n Willing to make an own contribution to the business. This may be from 2,5%

upwards, depending on the size of the loan. This contribution can be either cash or

equipment that will be used in the intended business.

n A full-time employee of the business.

n A South African citizen.

n Living in South Africa, which must also be the businesss principal place of operation.

A Khula indemnity can be applied to all businesses, with lending up to R3 million,

egardless of their ownership status. In other words, white-owned businesses and start-p, existing or expanding businesses can qualify.

5. Vehicle & asset finance: his is the ideal way to finance all your new and used

usiness vehicles and assets, in the following ways:

n Instalment sale: he asset becomes yours when you make the last payment, but

you can use it from the start of the agreement period.

n Leas ng: he asset belongs to the bank, but you use it and pay rent to the bank.

At the end of the repayment period you may choose to buy it, refinance it or

continue renting it.n Full maintenance lease: This is ideal for vehicle owners who dont want to concern

themselves with car maintenance.


31/5229

n Finrent: This package allows you to rent an asset without the burden of owning it.

n AccessF nance: This allows you to lower your interest by paying any extra money

you have into an AccessFinance transaction account. If your business happens toneed cash, you can withdraw the extra money from the account.

6. Commercial property finance term loan: his is a term loan primarily aimed

at helping business owners to purchase commercial, industrial or retail property. In

certain cases the loan can also be used to upgrade or improve a property. For property

developers a commercial property loan offers building loans for the construction of

commercial or industrial buildings.

The minimum amount you can borrow is R500 000 and the interest rate is linked to

rime. The loan is repayable over ten years in equal monthly or quarterly instalments.

7. Bus ness mortgage: This loan offers business owners the opportunity to purchase,

extend, or improve a residential property where up to 50% of the property will be used

or business purposes.

You can borrow up to R10 million over a repayment period of up to 20 years. The

oan may cover up to 80% of the propertys assessed value and can be linked to an

AccessBond facility.

8. Debtor finance: This is a form of finance to obtain the working capital needed fora growing business. Standard Bank purchases approved trade debtor invoices with an

agreed portion, usually 75%, being paid at the time of purchase and a similar portion

aid on all future approved trade debtor invoices.

You can apply for debtor finance at Standard Bank if your business meets these criteria:

n A minimum turnover of R200 000 a month.

n Repeat orders from your customers.

n You sell on credit terms not exceeding 120 days.

n You trade with suppliers of sound financial standing.

n You have few trade disputes.

n All financial controls and administration should be fully computerised, allowing you

to produce a monthly income statement and balance sheet.

9. Guarantee y an : A guarantee by bank (bankers guarantee) is a written under-

taking in which Standard Bank agrees to make stipulated payments on your behalf

should you fail to fulfil or carry out specified terms of a contract. Guarantees may also

e issued for the purchase of fixed property and against cash cover.

The banks liability is restricted to the payment of a sum of money and under nocircumstance does the bank accept responsibility for the completion of your contract.


32/5230

Managing your cash flow

Poor cash flow is one of the major causes of failure in small businesses. You can turn

a profit but still go bankrupt if your business has a cash flow problem. Keeping your

inger on the pulse of your businesss financial health is a daily job.

Regardless of the size of your business, it is important to develop a cash flow forecast

to indicate the estimated money flowing into and out of the business over a period of

time. This will help you to set budgets and targets, and monitor performance.

Other ways to control cash flow include:

Keep over eads down: It is easier to save costs than grow profit, so dont buy new if

you can do with second-hand, and dont buy at all if you dont really need it.

Avo d cred t terms: Bad debts are the quickest way to sink a small business. Make sure

your payment terms are understood and agreed to in writing before a project begins or

a sale is made.

Debt collection: Follow up as soon as the money is due. A new debt is far easier to

esolve than an old one.Improve supplier payment terms: Negotiate preferential payment terms, extensions

of credit lines or discounts for early settlements.

Keep stoc / nventory to a m n mum: Stock costs money to buy, transport and store.

It can also be stolen, damaged or become obsolete. Managing stock sensibly is as

important as managing cash flow.

Budgets and budgeting

A well-managed budget is the foundation as well as the scaffolding that you need to

uild a successful business. It helps you to keep an eye on the future while tracking

ast performance. It also tells you what you can spend each year and how much you

eed to make, thus helping you to set goals and prioritise your finances.

Remember, though, that budgets are not set in stone and should be flexible enough to

take advantage of unexpected opportunities, if and when they arise.

How to make your budget work for you:

n Set specific goals, eg, to increase turnover by 10% while keeping costs static.

n Use as much data as you can when planning, eg, past statements and invoices.

n Be sure that each expense category is a fixed expense that occurs each month on a

set date for a set amount, like rent.

n Variable expenses, such as advertising, can be controlled by monitoring what you


33/5231

spend and reducing or increasing it accordingly.

n Ensure that you have money set aside for fixed or variable periodic expenses.

n Review your budget each month or at least quarterly to check expenses against your

financial plan. You may be under budget in one category and over budget in another.

Find out why and amend your budget accordingly.

n A budgeting tool is a must and should form part of your software accounting

package, either in the form of a ledger you keep manually or an Excel spreadsheet.

Financial statements

All your activities have a financial implication directly or indirectly and good

organisation is a must if you want your business to be profitable.

You need to know exactly how your business is doing and how successful you want it

to be, which is where financial statements come in. These are the statements most

commonly used in business:

n The income statement shows how profitable a business is by reflecting all income

and expenses over a period.

n The balance sheet is a key report that reflects the financial position of a business at

a particular point in time. It indicates what a business owns (assets), what proportion

of a business is financed with money from the owner (equity), and finally whatmoney is borrowed and therefore still owing (liabilities).

n A profit and loss account is a report of the companys profit on the sale of their


34/5232

goods or the provision of their services over a trading period, normally one year.

n Management accounts reflect the companys current liquidity position and are used

to help build cash flow forecasts and budgets. Management accounts compare yourliquid assets, ie, those that can be easily turned into cash, (debtors, stock/materials,

actual cash in the bank) to creditors, loans and taxes to determine cash on hand.

n A cash flow statement records your actual cash income and expenditure at the end

of an accounting period.

Financial statements provide you with the information you need to measure your

companys success and to make sound financial decisions. They allow you to analyse

ow profitable certain activities are so that you can take advantage of those that make

ore money for your business and eliminate those that dont.

The statements are not, however, only for the business owners use. Even if you run

a one-person business, you must submit financial statements for tax purposes. Larger

usinesses are legally required to prepare a full set of audited financials at the end of

every financial year.

Financial statements provide a history of the businesss successes, clues to its future

viability, and essential information to financial institutions when you seek financing.

A number of role players are involved in the process of completing a full set of audited

inancial statements:

A bookkeeper records the day-to-day transactions in accordance with the money

anagement framework and system of the business. The bookkeeper also completes

the financial and management accounts on a regular basis.

An accountant deals with more specialised tasks such as preparing the year-end financial

statements and analysing them to advise the business owner on business strategy.

An aud tor conducts an official examination of the business accounts and financial

statements and expresses an opinion on their validity and reliability.

Bookkeeping chores

As with most other administrative tasks, paying daily attention to your businesss

ookkeeping is the best way to stay on top of your finances. This allows you to:

n Keep track of your business expenses and stick to your budget.

n Assess your daily, weekly and monthly sales to see if you are meeting your targets.

n Provide a bookkeeper or accountant with all the necessary information to prepare

financial statements for tax or other purposes.

n

Print your business bank statements regularly and go through them to checkthat the bank charges and debits are all correct. If you want to query a charge or

transaction, call or email your bank immediately.


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Proper invoicing

any entrepreneurs are so caught up in their big idea that they neglect business

asics, such as issuing proper invoices. A proper invoice should include:n Your business name, contact details and VAT number (if you have one).

n The invoice date and number.

n Your customers name and VAT number (if they have one).

n A description of the product or service for which you are invoicing.

n Amount due (plus VAT, if applicable) and date on which payment is due.

n Your banking details.

n A note asking customers to provide proof of payment via email or fax.

Collecting debt

An unpleasant reality of doing business is the fact that not all customers are good at

aying their bills and late payments and bad debts can create cash flow problems for

even the most successful business. Heres how to handle them:

Commun cate your payment terms. Is your invoice payable on presentation or after

30 days? Make sure your customer knows this.

Have a standard reminder letter. Once a debt is more than a week overdue, issue a

standard reminder together with a copy of the invoice or an account statement.

Follow up with a phone call. Dont rely on post or email. You need to contact your

customer in person to check that he/she has received the invoice and/or reminder

etter. Often there is a perfectly reasonable explanation why an invoice hasnt been

aid, eg, it was posted to the wrong address.

Get everyt ng n wr t ng. If your customer promises to pay your invoice within a

certain period, get the undertaking in writing. This provides additional proof of the debt

(should you need to take legal steps) and gives you a timeline in which to follow up.

If worse comes to worst and you have to take legal action, keep the following in mind: If

you are owed money in your personal capacity (ie, if you are a sole proprietor) and the

debt is less than R7 000, you can go to the Small Claims Court. A clerk of the Court will

elp you to complete the forms, send a letter of demand and set a date for a hearing.

If your business is registered as a CC or a company, or if the debt is more than R7 000,

you will need to use the services of an attorney, who will send out a formal letter of

demand.

The letter of demand serves as a notice that you intend to take the other party to court

if the debt is not paid. If the other party does not respond, your lawyer will issue asummons. Depending on the other partys response, you may have to go to court to get

a judgement.


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Why business banking?

Your personal finances and those of your business are not the same and should

therefore not be managed through the same account. Conducting your businessactivities through a business account makes it easier to keep track of all your

transactions and a finger on the pulse of your companys financial health.

Other benefits of business banking include:

n Simplified accounts and bookkeeping.

n Simplified compliance with legislation.

n A credit history. Should you need to apply for business finance, a business bank

account ensures that your bank is already familiar with your business and how it

conducts its accounts.n Access to a business banker who specialises in business banking solutions and serves

as your dedicated point of contact at your local branch.

Basics of banking


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n Access to a range of business banking solutions:

Transaction solutions such as a business current account, cheque card, cheque

book, ATM card, garage card and credit card. Payment solutions such as merchant services.

Cash solutions such as a Bulk Teller in your local branch or an Autosafe Mini at your

work premises.

A wide range of savings and investment solutions.

Lending solutions such as an overdraft, business loans, vehicle and asset finance, a

usiness mortgage, property finance, home loans, debtor finance, etc.

Wealth solutions such as insurance and investments.

Self-service and electronic solutions such as online banking.

n If you are thinking about exporting or doing business abroad, Standard Bank hasexperts in foreign exchange and trade-related issues who can provide you with the

necessary financing options.

n Standard Bank also has specialists in asset finance, debtor finance, property finance

and online banking, who can assist you with your business.

Standard Bank offers the following products for business banking customers:

Business current account You can deposit, withdraw and pay funds via various

transactions and channels, such as ATMs, Internet banking, Business Online and branches.

The account maintains accurate banking records, produces statements and helps you to

uild and maintain a banking relationship and credit risk profile.

Bus ness c eque card This card can be used like a credit card, but the money you

spend is taken directly from your business current account, much like a cheque.

One of the benefits is that you can use your business cheque card at an ATM to

withdraw cash from your business cheque account.

ATM/debit card With this card you can do your banking on the Internet, by

telephone, cell phone and at AutoBank centres. You can also use your card to pay for

urchases.

Garage card This card can be used to pay for vehicle-related expenses, including

uel, repairs, spares and tollgate fees. To make tracking your vehicle expenses more

convenient, you can have up to nine garage cards linked to your credit card account.

Credit card A business credit card is ideal for small businesses and can be used to

withdraw cash or pay for almost any purchase wherever you go.

Some of the benefits of the card include duplicate credit card slips for more accurate

account reconciliation, no transaction fees on purchases and improved cash flow thanks

to 55 days of interest-free credit.


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any business owners still choose not to use banks to manage their money.

nfortunately the world has changed to the extent that it is no longer safe, nor wise, to

eep large amounts of cash in your wallet or on your property.

Banks continuously improve their understanding of business customers and their needs,

and in recent years small businesses have become a specific focus area. Therefore,

when you start your own business, open a business bank account as soon as possible.

In order to do this you will need to take the following documents to your bank:n Original business registration papers.

n Green identity document or passport.

n A clean credit record.

n Two business trade references (or a business letterhead).

n South African income tax number (if issued and available).

n Any one of the following (to show your businesss street address and your

residential address): municipal rates and taxes invoice; water and electricity bill;

a bank statement from another bank; a recent lease or rental agreement; Telkom

statement; and letterhead of the business.

n Three months of personal bank statements.

Here are some basic explanations to help you understand the intricacies of banking.

The cost of banking

Banking costs fall into two categories:

1. Transaction-based costs, which are calculated per transaction. The more

transactions you do per month, the higher your bank charges will be.

. A fixed monthly fee, which covers a certain number of transactions per month. Ifyou exceed the number covered by the fixed fee, a cost per transaction is levied.

It is important to understand the value you receive for the price you pay. Benefits can

include the safekeeping of your money, interest earned on savings and convenience.

The bank records all activity on your account, so you can keep track of your money.

Not only do different banks charge different fees, but each bank also has different

types of accounts with different associated costs. It is therefore important that you ask

enough questions before committing to a bank and an account type.

There are, however, ways to cut down on banking charges:

n If you are a Standard Bank customer, always try to use a Standard Bank AutoBank. It

is cheaper than doing the transaction inside a branch or using another banks ATM.

Understanding banking services


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n Use your bank card or credit card to shop and recharge airtime; it is safer and costs

less than withdrawing cash.

n

Look after your bank cards. You will have to pay a replacement fee if they are lost.n Make sure there is enough money in your account for the payments that have to be

made, to avoid paying declined transaction fees.

n Where possible and practical, arrange with customers to pay their accounts through

direct transfers this will save you deposit fees.

n Where possible and practical, arrange to pay your suppliers through direct transfers

rather than by cheque or with cash.

n Make use of self-service solutions, such as ATMs, Internet banking, cell phone

banking and telephone banking. Not only is this cheaper than a branch but it also

saves you time. And time is money. Services like MyUpdates and Standard Bankscall centre can help you to keep track of your money, get easy access to statements,

balance enquiries, update information, increase or decrease limits, make payments

and inter-account transfers, and recharge pre-paid airtime, to name but a few.

The cost of borrowing money

Borrowing money from a bank, in the form of a loan, attracts the following costs:

1. An upfront fee for structuring the loan, based on the loan amount.

. A fixed monthly management fee for maintaining the loan.

3. Monthly interest payments, determined by the size of the loan.4. A monthly capital repayment that pays back the actual loan.

The last two payments are usually added together, resulting in a single amount to be

epaid every month.

When you want to borrow money from a bank, remember that you will need collateral

or security. Collateral is any asset(s) you own, such as a house, a building, investments

or savings, which you promise to hand over to the bank if you cannot repay the loan.

nfortunately, the smaller your business, the more collateral the bank may demand as

you will be regarded as a high-risk customer.

How to apply for a loan

It takes patience and a lot of paperwork to apply for a loan. It therefore helps to be


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repared and well organised. Whether you are a first-time loan applicant who has no

istory with the bank, or an existing customer who needs a larger-than-normal loan, the

type of information required is more or less the same. You will need to supply:

n A copy of your business plan and CVs of directors or members.

n Projected cash flow for the next 12 months and annual financial statements.

n Six months of banking statements for an existing business (if held at another bank).

n Up-to-date management accounts.

n The reason why you need the loan and a breakdown of what it will be used for.

n Personal financial statements of all directors or members.

n A pro forma balance sheet (showing your expectations).

n A copy of the offer to purchase or lease agreement.

n Company registration documents.

n Six months of statements of the directors or members personal bank accounts.

n Identity documents of all directors or members.

n Details of the owners contributions and the source of these contributions.

n Details of the security to be offered.

When assessing your application for a business loan, banks consider the way in which

the business is managed, its financial situation and prospects, security and collateral,

and environmental factors that may impact on profitability and sustainability.

How to conduct yourbusiness bank account

It is important to manage your businesss bank account in a responsible manner. This

will help you to maintain a good banking profile, which will come in handy when you

apply for credit facilities.

n Ensure there are sufficient funds in your account to cover debit orders and any

cheques that you issue.

n Keep your account active, ie, transact frequently or at least once a month.

n Never exceed your credit allowance.

n Keep your bank informed of any changes to your personal or business details, such

as addresses and telephone numbers.n Be honest with your bank about your financial position when applying for a new

product or service, or when changing details on accounts you already have.


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n If you find yourself in financial difficulties, talk to your bank sooner rather than

later. The sooner you discuss the situation, the easier it will be for the bank to find a

practical solution that suits and protects both parties fairly.n Never knowingly deposit a worthless cheque into your account, as this is fraud. You

will be liable for all losses and will expose yourself to criminal prosecution.

As a business owner, it is important to treat your bank as a business partner, and

ot as the enemy to whom I owe money. Fortunately, banks also prefer building

elationships with their customers in order to provide better service.

Building a good relationship with your banker need not be an onerous task. Here are

some tips to get you going:

n Be open and honest and provide as much information as possible.n Interview your business banker to determine how well he or she understands your

business and whether he or she needs more information.

n Keep your business banker informed of developments within your business by

inviting him or her to visit you, especially when you reach significant milestones.

Think of your bank as an investor in your business. It has a stake in your business and

eeds to be treated as well as any other stakeholder.

How to keep your money safe

It is much safer to keep your money in the bank than at your business or in your wallet.

However, you also have a role to play to ensure that criminals dont get their hands on

your hard-earned funds. Use these tips to be more safety-conscious:

n Your personal identification number (PIN) is your secret. Never tell it to anyone,

not even if they work for a bank or are family members or friends. Remember that

no bank official will ever ask you to reveal your PIN, therefore be aware of criminals

who claim to work for a bank and ask for your PIN.

n Be on the alert for muggings and card swapping at ATMs or other electronic banking

devices, such as credit card machines in restaurants. Never ask for, or accept, help

from a stranger.

n Inform your bank immediately if you realise, or suspect, that any of your cards,

cheques or other items that can be used to access your money, are stolen or lost.

Make a note of the reference number given to you when you report the loss, as this

serves as confirmation that you did report it.

n Make sure you get your card back after paying for purchases or withdrawing money

at an ATM. Report your card lost should i

business basics words worth final

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