Financial management and the yes man

Financial management and the yes man

Yes man, we need discipline On the matter of the man who became Finance Minister for a day, the talk on the street is that he is a “yes” man. Every political commentator who writes on this subject, supports the opinion that the last thing this country needs at this point in time, is a yes man. Growth is down, unemployment is up, government spending is out of control, and corruption is widespread. What this country needs is financial discipline, and you will not get that with a “yes” man. Financial management, you won’t always receive a yes Similarly in business, in order for a company to thrive, the chief executive needs a financial executive who challenges him. He needs someone who is prepared to second guess him, someone who is prepared to point out the financial and tax implications of that creative idea, even if it means raining on the parade ground. Every successful chief executive needs a strong financial manager on his team. I wrote before about how the successful industrialist, Andrew Carnegie, prided himself on the fact that he surrounded himself with clever people, and he listened to them. Outsourced financial management, rescue can mean no Whether you are hiring a full-time financial executive or utilising the option of outsourced financial management, do not fall into the trap of settling for the person who you think will not challenge you, someone who will only tell you what you want to hear. Furthermore, do not underestimate the importance of the financial manager as a key player in your organisation. It is not a coincidence that most of...
Government needs Financial Management

Government needs Financial Management

Financial management, and our government The axing of the South African Finance Minister has been widely met with disbelief. At no time, in recent history, has the country been more in need of competent financial management and financial discipline than now. Speculation is rife regarding the reasons for the replacement of a minister, who has served with two previous finance ministers, with someone who, by all accounts, is comparatively inexperienced and incompetent. Whatever the reasons were for this ill-judged decision, the consequences will undoubtedly be dire for the economy, and for the country and its people. white space It can wait Similarly, in business, there are many reasons why business owners neglect the issue of having competent financial management. Some reasons revolve around avoidance of compliance costs, while others pertain to the perceived cost of a financial manager. The cost of financial management is often seen as a grudge expense. This is now white space Financial Management, is it that important? Like our real-life example above, if avoidance is the issue, it will catch up with us at some stage, and the consequences of avoidance will prove far more expensive than the cost of compliance itself. If the cost of having a full-time financial manager is deemed prohibitive, or excessive, there is the option of outsourced financial management, which gives the business-owner the option of retaining the expertise of a financial manager to the extent that it is required. Financial Management- Outsource it At Leaders Business Solutions we offer Outsourced Financial Management solutions, in addition, or along-side, back end office support services to alleviate your Financial Management and other management issues. this is white...
Tax Compliance – does SARS make it more difficult?

Tax Compliance – does SARS make it more difficult?

DISCOURAGING TAX COMPLIANCE The other day I had to go to a branch of the South African Revenue Service to hand in a certified copy of my identity document. The alternative to handing the document in is normally to upload the document on e-filing. However, for some inexplicable reason, this facility was not made available to me. I stood in a queue at the SARS office waiting to state my business to the receptionist, after which I was told to take a number. A notice board in the reception area stated that the waiting time was four hours. When I queried this with the receptionist she replied “Wherever you go you have to queue”. The gentleman who handed me my number confirmed that I would indeed have to wait four hours to be attended to. Four hours to hand in a document! That’s half a day of production lost to the economy. Tax Compliance – does SARS make it more difficult? I looked at the people waiting patiently for their number to be called, there must have been at least two hundred of them, individual tax-payers, book-keepers, financial managers, tax consultants, business-people.  I marvelled at their dedication to tax compliance. Then a thought occurred to me. Why is SARS not doing more to encourage tax compliance? Why are they not making it easier for people to comply? Indeed, why are they not rewarding the compliant tax payers in this country? In the current economy our tax revenues are down, so we should be making life easier for tax payers, not more difficult. Modern times are not so modern We...

The Money Trap

The Money Trap I once met a successful business lady through a business association. Her company had secured some large clients and apparently was doing well. She was enjoying the trappings of wealth, beautiful clothes, a fancy car, a house in an elite Sandton suburb. She used to attend industry meetings on a regular basis. One day she stopped attending meetings. I later heard that her business had closed down. I subsequently learnt that she owed many millions of Rands to the South African Revenue Service. I was surprised to hear this, as she sat on industry committees and discussed matters of ethics and compliance on a regular basis. I concluded that her non-compliance in tax matters was a matter of ignorance. Outsourced Financial Management – it was an option Knowing what little I do about her company, I have concluded that she could not justify a full-time resource such as a qualified financial manager. She paid the price dearly for not having access to this vital resource. The irony is that she could have made use of an outsourced financial manager. That way she could have had part-time access to the knowledge and expertise required to ensure tax compliance, as well as the on-going financial well-being of her company. Utilising outsourced financial management allows one to tailor the service to their particular needs. One person may need access to the financial management expertise on a weekly or monthly basis, another person may need the outsourced financial manger to supervise their bookkeeper, while yet another may wish to outsource the accounting and payroll function entirely. Too many business people...

Financial Management and the Economy

Economic growth? The economy grew by a mere 0.7% in the third quarter of this year after contracting by 1.3% in the previous quarter. As a result, overall growth estimates for 2015 have been revised from 2.3 % down to 1.2%. This would make it the lowest since the 2009 recession, and less than half of the twenty year average of 3.2%. Make or break formula How can the government improve the financial management of the country’s economy? According to the Sunday Times, the Goldman Sachs MD for sub-Saharan Africa, Colin Coleman says that the current combination of high unemployment, low growth and rising interest rates is a dangerous combination for the economy. He recommends creating a group of economic ministers who are centrally driven around the objective of growth and development. He also advocates the creation of an advisory economic council including captains of industry, trade unions, civil society leaders and economic ministers. Similarly, Iraj Abedian, CEO of Pan African Advisory Services, recommends that Government, Labour and Business need to work together to resolve the issues. This would mean wearing different hats. Labour would need to focus on productivity, while business would need to be more socially active. Government’s role would be to balance and protect national interests. Timing is everything Coleman said that his proposals regarding a government led initiative to work with business and trade unions had been positively received by government officials but that it might be a difficult challenge two years ahead of the leadership succession. This begs the questions. When would it be the appropriate time for government to address this urgent issue?...

The Impact of the Interest Rate Hike

Are you prepared for the interest rate hike? The Reserve bank has increased interest rates by 25 basis points. Market consensus had predicted that a hike was not expected. This was because economic data had been disappointing and because the inflation rate is within the target parameters. Many economists now think the increase is the right decision in view of a possible increase in US interest rates next month and the possible effect on foreign investment. Some also believe that the Reserve Bank needs to stay ahead of the curve. The Reserve Bank governor says the committee had seriously considered delaying the increase and watching developments unfold. Such a delay, however, could have led to second round effects requiring an even stronger response. Analysts are now divided as to whether rates will now hold for an extended period until late in 2016, or whether rates will reach 7.5% next year. The effect of interest rates The economic effect of the rate increase will be felt by the poor and middle classes. It was reported in The Times that 23.37 million South African are in debt and that the average consumer has four credit agreements. Furthermore, 5.2 million debit orders go unpaid every month. The effect will be felt more by pensioners and those in the informal sector. Those in the middle income group are already under increasing pressure as pay increases are slowing down while food and electricity prices are increasing. The poor will also be hit hard, particularly as many have loans through micro-lenders at higher interest rates. Consumer spending normally surges at this time of the year,...

Surrounding yourself with the right people

That which makes up a leader The famous industrialist, Andrew Carnegie, once suggested that his epitaph should read  “Here lies a man who was able to surround himself with men far cleverer than himself. “ It has been suggested that a strong leader is comfortable surrounding himself with various experts, knowing it makes him look better, while a weak leader fears that doing so will make him look idiotic. But this article is not about appearances, it’s about results. Andrew Carnegie built Pittsburgh’s Carnegie Steel Company, which he sold to J.P. Morgan in 1901, creating the U.S. Steel Corporation.  It was the first corporation in the world with a market capitalisation of over $1 billion, and still exists today. Andrew Carnegie’s company was responsible for many innovations in steel production. He was an incredibly clever man but he believed in the power of teamwork. He believed in utilising other peoples’ talents and strengths. This is how you lead An entrepreneur, or the owner of a small business, is often denied the luxury of building a talented team around him or her, because of financial constraints. This can lead to missed opportunities, poor business practices and increased business vulnerability. In such instances it is advisable to consider the option of outsourcing business needs and harnessing certain talent on a part-time basis. One of the essential needs that can be outsourced is financial management. Adequate financial stability and control, the ability to plan, expand, and obtain finance are some of the benefits that are enjoyed under a competent financial manager. In the world of business, one of the most important members...

The Compliance issue comes up again

The Compliance issue comes up again The CEO of MTN has resigned over the Nigerian regulator’s fine fiasco. Accountability is an unavoidable consequence when a company suffers a financial loss. If this company were a small/medium enterprise (SME), the impact of a fine equal to nearly double the previous year’s total after-tax profit would probably have been terminal. This is a question of compliance. The company had apparently ignored several directives from the regulator to terminate the services of unregistered sim card holders. The unanswered question is whether the CEO was aware of the continuing lack of compliance and whether he was aware of the potential implications attached thereto. Who is responsible for compliance? In the case of an SME it is the business owner or manager. But compliance has several facets. Firstly the business owner needs to be aware of the compliance requirement. Secondly, he/she needs to be aware of what the implications of non-compliance are. Finally, the potential financial impact of the non-compliance should be known. Financial Management and compliance Many SME’s struggle in what is an over-regulated business environment. They are often unaware of the many compliance issues they face. It is, therefore, critical that they have the correct guidance regarding compliance requirements and how such compliance can be achieved. The person who assumes the Financial Management of an organisation is often tasked with ensuring compliance. A company that ignores this important role player often pays the price. Hopefully, the price will not mark the demise of the company. Financial Management – Outsource it At Leaders Business Solutions we offer Outsourced Financial Management solutions, in addition, or along-side...

Financial Budget Planning

Financial Management – The Importance of Financial Budget Planning Many believe that financial budget planning is a process of sucking one’s thumb to come up with an attractive looking set of numbers against which we then plot our actual performance.  Actually, budgeting is a science which incorporates a great deal of measurements and observations to come up with realistic numbers designed to show us where we are heading, in fact one should also incorporate into this process, revised forecasts which are prepared continuously, based on changes in the business environment and resulting assumptions. But what happens when the budget does not “balance”? In other words, what happens when the budget has an unfavourable outcome.  Apparently, our current minister of finance Nhlanhla Nene is unable to shed any light there. He says that the economy is expanding too slowly to meet South Africa’s needs. He has not explored the political or economic reasons why this is the case, instead he is exploring ways to squeeze the taxpayer even further. To quote the German Philosopher George Hegel , “We learn from history that we do not learn from history.” What we can instead learn from the past Does anyone remember Reaganomics of the 1980’s? The four pillars of Reagan’s economic policy were to reduce the growth of government spending, reduce the federal income tax and capital gains tax, reduce government regulation, and tighten the money supply in order to reduce inflation. Despite intense economic analysis of Reagan’s term in office, the general conclusion is that the American economy performed better during the Reagan years than in the periods before or after. Some...

The Tax Revolt

THE TAX REVOLT  According to The Times published on 6 November, Judge Dennis Davis, who heads the Davis Tax Committee, told delegates at a recent international economic law seminar that South Africa is possibly headed for a tax revolt. The possibility of this revolt is attributed to the government’s failure to address the on-going corruption and wasteful expenditure. What does a tax revolt entail? Does it entail failure to comply with registration requirements, failure to submit returns, or just the failure to make payments that are due? The Judge reportedly merely refers to a breakdown in tax integrity. No tolerance Judge Davis is not encouraging a tax revolt, he is merely taking the temperature of South African society and making an observation. South Africans are becoming less and less tolerant of an incompetent, wasteful and corrupt government and have already had to endure an increase in personal taxes this year. The on-going e-toll saga and the university fee demonstrations (as mentioned in our blog on Financial (Mis) Management), give an indication of what we, as citizens, are capable of when we have a common goal to work towards. Financial Management as an antidote I am not a politician, or a political commentator, for that matter. However, personally, I believe in tax compliance. Taxation has been around for thousands of years, and, in all of its forms it is the most important and effective source of funding for a country. The economic implications of withholding tax payments, or failing to comply with the taxation legislation, are too disastrous to even contemplate. Hopefully, those charged with the responsibility of running this...