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  • What to keep top of mind when starting and running a business

What to keep top of mind when starting and running a business

20 March 2015

Starting a business venture is always an exciting prospect but the elation is often quickly eroded when one is faced with the responsibility of both setting up and looking after the new-born entity. BDO KwaZulu-Natal's Director of Business Services, Hayden Quin shares three obstacles new businesses face when starting and running a business:

  1. The first hurdle is registering the entity itself. This is done through the Companies and Intellectual Properties Commission or CIPC. Applicants are well advised to arm themselves with patience and a competent service provider. With luck, it will not be too arduous a task to reserve a company name, appoint directors and allocate the required number of shares. It should be borne in mind that an annual duty is payable to CIPC on the anniversary of a company's formation and that failure to pay will result in the de-registration of the company.
  2. The next hurdle is registering for the holy trinity of taxes, namely Income Tax, PAYE and VAT. Sadly this is seldom an easy task; it's an administration game, so one should be prepared for paperwork. If all requirements are met, it should be possible to get away with one visit to SARS. For those who get it wrong, the cold hard benches at SARS will become familiar whilst sitting with dozens of others eagerly waiting for their number to be called. It is important to listen to ones service provider and be thoroughly prepared.
  3. Registering for UIF and Workmen's Compensation should be done simultaneously with PAYE. Once again, this is a paper game and relatively straightforward.

While the above hurdles are being negotiated, it is advisable to run another race simultaneously, one involving budgets and cash flow projections.

‘The path forward should be plotted carefully and this exercise will help determine how to go about reaching the finish line ahead of the pack,' says Quin. ‘This is perhaps the most important exercise when starting a company and failure to perform this process simply increases the odds of becoming one of the eight out of ten companies that do not succeed.'

‘Those who are not tenderpreneurs should be prepared for hard work and a modest salary as they negotiate favourable terms with suppliers and customers. They will no doubt be required to sign surety at some stage with suppliers and financial institutions,' Quin continues. ‘It is important to limit these sureties where possible, in both amount and length. It is also a good idea to keep track of them and request them to be returned when they have run their course. Sureties have a way of coming back to haunt people, so should be destroyed as soon as they are no longer valid.'

Customers must be screened and it is good company policy to take a deposit from them upfront, and to negotiate payment terms in advance if the contract is to be a lengthy one. Debit orders are also an effective way of ensuring that money is collected timeously.

‘The game is ideally to collect from customers on short terms and pay suppliers on longer terms. This is the cheapest form of financing available and may be the only option to begin with,' concludes Quin. ‘Banks have a limited appetite for risk and are unlikely to be generous before the first set of annual financial statements have been produced.'

Many will fall on the race to the finish line - eight out of ten to be exact. However, others have proved that the rewards are out there for those brave enough to start their own business and to proceed with care, diligence, a little flair and a lot of hard work.