Harbour & Associates

An opportunity cost is the cost of a benefit which is forfeited as the result of choosing not to do something. Let’s take an example. You are self employed and have booked a two week cruise at a cost of R80 000 plus airfare of R10 000. Just before your holiday is about to start, you get an offer to present a series of seminars on the health benefits of gluten free food products, which is what your company makes and sells. The organisers, Discovery Ltd, will pay you R120 000 for the seminars. If you decide to continue with…

I have already discussed whether a trader should trade through a company, but what about a service provider? A service provider is a business that supplies services rather than goods. Should it be a company? If the services are provided mainly (80% or more) to one client, then the company may well be classified as a Personal Services Company, in which case the client must deduct PAYE from all invoice payments. This often discourages the client from doing business with you. However, the same would be true if you sold your services…

If you are a small supplier of goods, you may be wondering whether would be better to trade through a company. The answer is usually “Yes”. The first question I ask is “Are you providing a service or supplying goods?” If you are supplying goods, then the answer is usually yes, rather trade through a company. Why? 1) Your customers will probably respect a company more than a sole trader. 2) Companies are taxed at 28%, individuals at from zero to 45%. You can balance your salary in such a way that the total tax is minimised. 3) The company…

It now only takes about a week or so to form a new company, so why buy one off the shelf? The main reason for buying a shelf company is its age. We have them aged as old as 2010 and never having traded. You may want an old registration number to give the impression that you’ve been in the business a long time, or you may want to back-date some kind of transaction, such as the company’s ownership by a trust and that clearly can’t happen before the company and trust were both registered. That’s…

We form hundreds of companies for clients with the result that, because meetings with me are free, I get to talk to hundreds of entrepreneurs. It is quite clear that many of them do not understand the distinction between a company’s promoters, shareholders, directors and employees, so here’s a guide. Now, I’m not going to get technical, so if you’re studying for an exam, go to the Companies Act for the full story. I just want to offer a simple explanation that everyone can understand. The Promoter(s) form a new company at CIPC by choosing a name…

It is almost certainly more tax effective to use your own car for business and submit a travel claim against a travel allowance rather than drive a company owned car. Because your travel claim is limited to your travel allowance, you will need to make sure that the allowance exceeds your estimated travel claim. If you keep a record of actual expenses paid by yourself, you may claim those expenses, but most of us claim the Deemed Travel Expenses which you will find here. You will need to select the year that you are interested in. Employers…

Most contracts state that in the event of a dispute, it must be referred to arbitration, usually by an advocate. This can be very expensive. A far better alternative is mediation. Here’s how it works – The two processes are very different. The easiest to grasp is arbitration as it is clearly defined by the Arbitration Act. Anyone can be an arbitrator as long as all parties to the dispute agree upon whom it should be. The arbitrator determines the procedure and his or her job is to hear evidence from all parties, consider the facts and the law and…

The Consumer Protection Act requires that all contracts with consumers be written in plain language, but this should apply to all legal documents. The first problem is that attorneys spent years at university learning all sorts of Latin expressions, known as “legal Latin”. having learned it, they naturally want to use it and, hopefully, impress their clients with their legal nouse. Wikipedia lists about 400 of them under List of Latin legal terms. To give you a few common examples – ante = before bona fide = in good faith contra = against de facto = true in…

We were on ISDN, but have since tried fiber, microwave fiber and LTE in different locations. Here’s what we found… Testing your upload and download speed. If you want to test speed with any of your connections Google “Speed test” and choose any of the options – they all work and are simple to use. There’s a perception that we download more than we upload, so often your download speed will be significantly higher than upload. However, if like me, you work on your office server from home via Teamviewer, they are equally important. PING speed is in ms (milliseconds)…

When we supply a new company registration or a shelf company for sale, the offer frequently involves 6 months’ free bookkeeping, followed by a health check. Why the health check? Because many new companies start badly and need urgent corrective action in order to survive… Here is a classic example of why your company needs a budget: During the Christmas break, we did the books for the first six months of a specialised food supplier company. I noticed that every so often they would lend a few thousand rands to the company and…

There’s a lot of confusion about the meaning of Annual Returns to CIPC, Annual Tax Returns and Annual financial Statements, so let’s try to clear this up. Annual Returns to CIPC CIPC is the Companies and Intellectual Property commission. Every company and CC must submit two Annual Returns. One confirms the Directors (of companies), Members (of CCs), auditors, company secretaries with contact details of all of these together with the Registered Office Address. The other is a Financial Accountability Statement. An annual return fee is also payable (anything from R100 to R4 000). The return is due from the anniverary…

You are starting a new business. Presumably you are serious about this and want the company to succeed. You see that FNB will register a company for free, or, whilst most websites offer companies for around R2 000 (with varying free extras), some websites offer them at ridiculouosly low prices. Hey! You might save yourself R1 000! Really? Here are some of the things that can go wrong… and probably will if you buy a cheap shelf company. Why you shouldn’t even consider registering a cheap shelf company online: The company gets registered with no name and ends up being…

Some of our competitors sell at significantly lower prices than us, whilst others have taken our prices as their benchmark. We needed to understand whether our product is price sensitive and if so, to what extent. That would enable us to decide whether to sell a bare bones product at the lowest price that we would be interested in, or whether to continue selling a product rich in extras, but at a higher price. You might have the same problem, so this is how we tackled it. Firstly, we decided on our lowest price. In our case, we could take…

I spend a lot of time solving people’s problems. They come and see me with a sitution which has been keeping them awake at nights and in almost every case, they go away with a solution. How? A typical question would be “Can a company be a beneficary of my trust and how do I put my assets into it?” Now, the first thing to realise is that this question is not the problem, it is related to what the client thinks may be the solution of their problem. So I don’t even answer questions like that. My approach is…

Yes, there are circumstances which require that your company prepares Annual Financial Statements, so let’s take a look at the what, when and why. The banks require them if they’re going to lend money to the company. Any other lender will require them. They may be required for a large tender. So, if they are required, what form should they take and who will prepare them? Financial statements should always be prepared to International Financial Reporting Standards, otherwise you may as well not bother. Who should prepare your yearly financial statements? Any competent accountant who has the appropriate…

It’s quick to form a company these days – about a week. But there are still some benefits to buying an existing shelf company rather than registering a new company. Benefits of buying an existing shelf company: 1. Time constraints due to tenders You might need a company NOW. This would typically be when you want to submit a quotation or tender and the customer will only buy from a registered company. 2. Specific company needs You may need a company with a particular registration such as VAT, Importer/Exporter and cannot wait while the registration goes…

I hear it so often, especially from artisan type companies like plumbers and electricians. “I’m either rushed off my feet or standing idle and I never seem to make real money”. The answer is simple. It all boils down to fundamentals. 1) Differentiate your company. That is, make it different to the competition. Quicker service, cleaner work, well dressed personnel, clean vehicles, prompt and professional quotations. Don’t stop there, think for yourself. 2) Tip top marketing. Google Adwords is best for this sort of service. It requires an excellent website that sells the client before they even call for a…

I recently had a client who wanted to buy a professional business plan from me for submission to the NEF for a business loan. Now that is not an unusual request – I’m usually busy with about six business plans at any one time. What made this one different was that she could give me no data to work from. Just imagine. You want to acquire about R2m from an NEF loan to start a shuttle service and you have no idea what turnover you expect, how many…

I continue to be disgusted by those amongst my fellow members of the auditing profession who have not told their clients that their company no longer has to be audited. It was the new Companies Act of 2008 (which actually only came into law in 2011) that changed things. If your company is owner managed and not doing hundreds of millions of turnover a year, then no audit is necessary. You don’t even have to prepare fancy financial statements. Owner managed simply means that the directors are the shareholders and (in the opinion of most professionals) still applies if a…

So there’s a business or a property out there that you want to buy. Why not keep it simple and buy the company that owns the business? The advantage is that you get the assessed loss, if there is one, to set off against future profits. You might also pick up a shareholder’s loan account that will enable you to draw tax free money out of the company rather than drawing a salary. Don’t be tempted! The risk that you will later find some skeletons in the cupboard far outweigh the above benefits. For example, the company may have signed…

General Business

What is an opportunity cost?

Should I provide my services through a shelf company?

Should I trade through a shelf company?

Should I buy a shelf company or register a new company?

Promoters, shareholders, directors and employees

Should I drive a company car?

Mediation as a means of settling disputes

Keeping contracts simple

ISDN, fiber, microwave fibre and LTE (5G)

Why your new business needs a budget

Annual Tax Returns, Annual CIPC Returns and Annual Financial Statements

What can go wrong if you buy a cheap shelf company or company registration?

Testing price sensitivity of your product

The art of problem solving

When do you need Annual Financial Statements?

Shelf companies serve a very useful purpose

Too much work and not enough profit

What a Business Plan Isn’t

Don’t pay for an audit

Buy the business not the company

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