Tips for Start-ups and New Businesses
I remember 9 years ago when Anlo Financial Solutions was a start-up business and I had the same questions. Being a CA, you would think I would know all the answers, but the truth is, I knew the theory but I did not know how to practically apply the theory in my own business.
I asked everyone I knew and phoned and researched until mid-night and I learnt a lot of the lessons the hard way.
But here are my top tips on what to know when you are a start-up or new business.
Register your business and keep all the documentation safe.
Why is this important? Because the registration documents are your statutory documents and contains your Memorandum of Incorporation, Incorporators details and registers. If you never issue shares to any other people, the incorporators are the shareholders of the business. These documentations will be used when you open a bank account and will later in the business’s life act as the foundation of how your business is registered and who is the responsible parties. You can get copies from the registrar but need to pay for it again and in some cases can take months to obtain.
Open a bank account.
You can not run your business from your personal bank account if you are a registered company. This is against the law. Every business must have its own bank account and operate separately to the directors and shareholders. This is also very good practice as you ensure your business and your personal affairs stay separate
Shareholders are not the same as directors.
People have this misconception that shareholders have the same rights as directors in a business. Shareholders are the owners of the shares and only have the right to rewards like dividends. Directors are responsible for running the day to day affairs of the business and are remunerated through a salary or remuneration. You can be both but be careful not to withdraw money from the business and cause a debit loan account (you owe the business money) as this can have a HUGE tax liability consequence. Also remember that you can not take dividends from a company if the company is technically insolvent (liabilities are higher than its assets)
Register for PAYE when you have employed individuals. This includes the directors taking a salary. The South African Revenue Service has been very strict lately on applying this rule because directors are required to submit a provisional tax return if they take drawings from the business and in the past directors have not complied with submitting a provisional tax return personally. If you are certain that the directors will be taking a monthly drawing or remuneration and the income is above the personal tax threshold, please register for PAYE and run a monthly payroll.
If you get shareholders that buy into your business, ensure there is a proper shareholders agreement.
Working with businesses for several years, I have seen to many good relationships and friendships break up and end badly because proper agreements are not in place. All new businesses have the hope and dreams that they will succeed, and they use resources and other people to grow and build this dream. If any relationship problems arise it is always good to have a proper shareholders agreement in place that guides the relationship and something to fall back on
If you started a business or you are the sole shareholder and director of a business, please have a will in place
Get insurance. Most small businesses need General Liability and Property Insurance as a minimum and if you have employees, you will need Workers' Compensation Insurance as well.
Register for VAT when your turnover goes over or will go over a million rand in a 12 consecutive month period. Please remember this is turnover and not profits.
Keep proper record of transactions. Use an online accounting package like Xero or Sage to ensure you know what your business is doing financially. If you don’t know what or how to do accounting, ask an external accounting firm to help you. And ensure you set yourself financial targets and measure your actual figures to the budgets and analyse the differences and grow from the lessons your learnt,
Marketing and advertising are important – But ensure you measure your attempts and successes. Don’t just blindly pay for marketing and don’t measure what you get for your marketing spent. And make sure the marketing and advertising is in line with your business goals.
The most important thing is to have fun. Being in business and starting up a new business can be very stressful, but it can also be very rewarding. You learn so much and meet new people every day.
I love what I do, and I wish all businesses can get the joy from having a business like I do. Employing staff is stressful because you must ensure you can pay their salaries every month, but it is amazing when the whole team works together and achieve success.
If you are a new start-up business and need to consult with someone who has been there, give us a call.
We work with new-start businesses who are for the first time facing the challenge of setting up and managing their business financial accounts. We offer an accountancy package tailored to your needs as you start and grow your business.
We offer advice, support and insights into understanding your finances. We take the worry, anxiety and time out of managing your tax, bookkeeping and filing of accounts.
We are unique in that we don’t simply file your accounts - we offer advice, support and guidance when you need it. We keep you up to date with the change in regulations and rules that apply to you so you can focus on growing your business.