How a financial manager can help you when starting your own companyEmma
So you’ve decided to take that brave leap into the unknown: you’re starting up your own business. At first that meant a lot of meetings, phone calls and celebratory drinks. Then, the excitement made way for sleepless nights as you began to come to terms with what starting a business actually means. That inevitable “what have I gotten myself into?” feeling can be tamed by educating yourself around the practical steps of getting your business going. First off, get yourself a part- or full time financial manager. This person should not only be someone who brings financial insight and leadership skills to the business, but someone whose vision, working style and personality complements yours. They will become your sounding board, confidante and, at times, your life raft as you set out on these unknown waters.
Doingbusiness.org has conducted detailed research into the steps required to start up a business in various economies. They look at the process from the perspective of the entrepreneur, and their insights include understanding the bureaucratic legal hurdles faced by those who are starting out in South Africa. We draw from some of their insights and combine them with our own.
Register your company
At university you started out each year by registering, and starting a company is no different. You’re required to declare the type of business you intend on running with the government-mandated Companies and Intellectual Property Commission (CIPC). You have four ways of doing this: online at www.cipc.org.za, by visiting a CIPC self-service terminal in Johannesburg, Durban or Cape Town, by email or at some bank branches (check with your local bank to see if this is available to you).
Open a bank account
Your financial manager needs to submit proof of your identity and the CIPC company registration documents at a bank of your choosing in order to open an account. Consider going for a cheque account rather than a savings account, as the former usually has lower charges per transaction. Later, your financial manager can look for suitable savings mechanisms that yield higher interest and returns on extra cash and savings.
Register for income tax and withholding taxes at the South African Revenue Service
As a small business, you are liable for the complete host of taxes applicable to any company in South Africa. The next task for you and your financial manager will be to register for them. This will require a trip to a SARS office. Doingbusiness notes the following: “The Companies and Intellectual Property Commission (CIPC) and the South African Revenue Service (SARS) are linked electronically. When the entrepreneur visits a SARS branch to register for income tax, SARS retrieves the information previously provided by the entrepreneur to the CIPC.” Once that linking process has been completed, you will need to register for the following: Pay as you earn tax (PAYE), Unemployment Insurance Fund (UIF) and the Skills Development Levy (SDL). Your company will be required to pay these taxes on behalf of each of its employees. As of this year, companies with an annual income of R73 650 or less are not required to pay income tax.
Register for VAT
While you’re at the SARS office, you and your financial manager will need to register for value-added tax (VAT) on a VAT 101 form if you have an annual taxable turnover of R1-million or more. Companies with a turnover of less than that amount are not required to register for VAT.
Register the company with the UIF fund
So you’ve already registered to pay UIF, but your financial manager now needs to ensure that your company is registered and recognized at the UIF office. This is a step that is often overlooked and forgotten. Its relevance comes into play when one of your employees needs to claim from UIF (think maternity leave or the unwelcome possibility of retrenchment). That employee won’t be able to claim from UIF if the company isn’t registered with the UIF fund, which will mean your financial manager will have been making UIF contributions to no benefit.
Register with the Compensation Commissioner
If your employees face any level of occupational risk (and almost all companies do), you’ll need to register employees with the Compensation Fund. Registering with the Compensation Commissioner means that, under certain circumstances of injury or damage, your employees will be compensated by the state. The registration process will require the company to undergo risk assessments, so it’s a good idea for your financial manager to have conducted a preliminary risk analysis before this point.
The bureaucratic requirements around taking your business from an idea to a working organisation can seem overwhelming. But partnering early with a financial manager and taking things step by step will turn this into a manageable process; one that allows your business to be fully compliant with – and protected by – the law. Contact The Finance Team to get in touch with a great full-, part time or interim financial manager who can help guide you throughout this time.