South Africans who have emigrated or plan to permanently leave South Africa have until 28 February 2021, to effect Financial Emigration in its current form, or be faced with a more stringent process. National Treasury (“Treasury”) has laid down the new law and made it clear – the consequence otherwise is your retirement money will be locked in for three years, you are not allowed to touch it, and best apply it to your personal circumstances.

On Tuesday 13 October 2020 in Parliament, Treasury and SARS presented to the Standing Committee on Finance on a number of proposed amendments to legislation, which amongst others, would directly affect South Africans who have already moved abroad, or are planning on moving abroad. The feedback to stakeholders, specifically around the withdrawal of retirement funds upon financial emigration, was certainly one which was foreseen after it was proposed in the draft Taxation Laws Amendment Bill (“TLAB”) in July 2020.

These changes are outlined in more detail below.

Retirement funds and emigration

Treasury confirmed that it plans to change rules around financial emigration and the ability to withdraw one’s retirement funds, upon the conclusion thereof, replacing it with a new three-year lock-in period. The change is set to be introduced from 1 March 2021.

Over recent years, there has been a substantial increase of South Africans formalising their status as “non-resident” from both a tax and exchange control perspective, by using the Financial Emigration process, said Jonty Leon, Expat Legal Manager at Tax Consulting South Africa and Director of Financial Emigration.

With this, many had decided to withdraw their retirement funds from South Africa and invest in a more stable economy.

In its response, Treasury said that the three-year rule is a mechanism to ensure that there is a sufficient lapse of time for all emigration processes to have been completed with certainty, without affecting such workers whose residence status changes for reasons other than emigration.

“The current system of financial emigration imposes lot of strictures, not least its requirement that individuals close bank accounts and credit cards and repatriate funds that are taken out above the limits if return to the country before five years has elapsed.”

“The envisaged system as a whole will have much lower compliance burdens overall for those looking to move abroad, and therefore it is not useful to focus on the three-year requirement in isolation of the overall policy change.”

“Modernisation” or Something More Sinister 

According to Leon, the comments from Treasury have been that the system is being “modernised”. A term which has yet to be fleshed out by Treasury, with only simple explanations that provide no sense of understanding, such as, “One of the main objectives of the reform is to modernise the capital flow oversight system in a manner that balances the benefits and risks…”.

With the various submissions made by stakeholders on the issues foreseen with the proposed changes, Treasury provided little feedback on the important issues raised, often providing no explanation but for a one sentence response. “Government’s unwillingness to budge on the lock-in, incites fears of the looming worries of taxpayer’s retirement funds falling into the hands of government to fund social infrastructure in SA, changes to Regulation 28 and perhaps even an easy target for higher taxes on pensions or a wealth tax”, warns Leon.

This concern was brought up by National Treasury previously, where it was denied that the so-called “modernisation” and lock-in had any link to this possibility. However, with the unwavering determination to lock-in retirement funds from 1 March 2021, this becomes less believable. There is clearly a massive downside to anyone having their retirement funding captured in a system; so the question remains unanswered what corresponding benefit National Treasury plans to achieve by keeping retirement under state control.

The Time is Now

Treasury’s announcement appears to be the final warning – South Africans leaving SA have until 28 February 2021 to financially emigrate under the current dispensation, and thereafter to withdraw their retirement funds, before it is locked in for 3 years minimum.

“We are heading into unchartered territory, with a complete transformation of the financial emigration process – those that have been left behind will undoubtedly have tougher terrain to navigate come 1 March 2021”, reiterates Leon.







Using business as a catalyst for positive social change

The Vumela Fund has announced the provision of a significant debt facility to Letsema Consulting and Advisory, positioning Letsema to take advantage of growth opportunities, furthering their significant economic and social impact in South Africa.

Letsema, founded in 1996, is a 100% black-owned management consulting firm at the heart of a diversified investment group, providing a wide range of management consulting and advisory services to both the public and private sector in South Africa. Letsema has a history of strong performance and resilience in a very competitive environment. The broader Letsema group’s three divisions – Consulting, Investments and Foundation – work closely with high impact programmes to promote positive social change in their spheres of influence and emphasising the importance of values-based leadership. Letsema is a supplier to First National Bank (FNB).

“The gap between long term sustainable businesses and SMEs in an extended growth phase can be closed by increasing agility. The ability for small to medium enterprises to quickly respond to opportunities is hindered by access to capital,” says Vuyiswa Nzimande, Edge Growth Lead Deal Maker. “We believe in the long-term sustainability of the diverse and quality service offering Letsema has consistently provided over many years.”

The Vumela Fund was established in 2009 by FNB Business Banking and Edge Growth to help alleviate poverty in South Africa by creating jobs through supporting the growth of SMEs. FNB is committed to procuring from and supporting majority black owned SMEs.

Vumela currently has R588m under management, from FirstRand and the Jobs Fund, and to date has deployed R280M to more than 20 early stage businesses, creating almost 2000 permanent jobs.

“The Vumela fund continues to be an important vehicle through which FNB expresses its determination towards ensuring the sustainable growth of SMEs. With Letsema being a supplier to FNB, this deal illustrates yet again how our SME development strategy has been able to catalyse funding, market access opportunities and business development support. We look forward to the continued growth of Letsema and its continued contributions towards job creation and economic growth,” says Heather Lowe, SME Development Head at FNB.

The Vumela funding is expected to unlock operating cash flow over the term of the investment. This will enable Letsema to focus on organic growth and allow them the opportunity to pursue larger projects, training up young professionals whilst delivering quality engagements to its clients.

“In partnering with Edge Growth and the Vumela Fund, Letsema will be able to take advantage of very real market opportunities and scale appropriately to enable us to continue delivering real value to our partners and clients. We are grateful to the Vumela Fund for trusting us and feel privileged to be working with Edge Growth, the leading ESD fund manager in South Africa, says Derek Thomas, CEO of Letsema Consulting & Advisory.

“As our discussions advanced, I cannot overstate the excellent working relationship that has been formed between our two organisations, a partnership we hope to further explore in the years to come.”

The word “Letsema” is of Sotho origin, meaning people coming together to work for a common purpose. This partnership mirrors that core value which founder Isaac Shongwe positioned back in 1996 when he started Letsema. It will continue to guide Letsema into the future.







While the country was under lockdown, it appears SARS and National Treasury have been hard at work, using this time to refine the law in SARS’ favour. These changes do not refer to the Covid-19 tax relief changes but are aimed at closing tax loopholes and to simply give SARS and the National Prosecuting Authority more teeth. Ask your accountant or tax advisor to help you understand the amendments and their impact on your tax planning and tax compliance strategy.

1. Raising of tax assessments by SARS simply using an estimate

SARS has had enough of taxpayers ducking and diving from their tax administration obligations. In terms of the new amendment, SARS has the power to raise an estimated assessment where the taxpayer does not respond to a request from SARS for relevant material, but this has been thought through carefully. The law amendment also now ensures that taxpayers will be barred from lodging an objection if the taxpayer does not submit the material requested. Should SARS have you on their radar or have questions subsequent to a lifestyle audit, ignoring a request for relevant material means SARS can raise an estimated assessment and impose penalties and interest. Getting untangled from this, even where you are innocent, will become far more difficult. Make sure you take your accountant’s calls or respond to their emails, as adopting the ostrich approach will get you into deep trouble.

2. Employer provided bursaries

Are you an employer who has tax structured bursaries, including for relatives of your employees? Or perhaps an employee who has benefitted hereon in the past? The law on this has been amended substantially and from 1 March 2021, using employer-provided bursaries as a mechanism to structure your remuneration from a tax perspective is no longer allowed. These bursaries must be disclosed on your IRP certificate, and not doing so is a criminal offense. Thus, there is no place to hide hereon and this is truly something of the past. There are now very limited instances where this tax exemption can be utilised, as part of a tax optimal total reward strategy.

3. Withdrawal from retirement funds upon emigration

Have you emigrated or are you planning to emigrate from South Africa in the near future, with retirement funding in a pension preservation fund, provident preservation fund or retirement annuity fund? You are on borrowed time if this is the case and you need to urgently finalise and file your financial emigration application, before 1 March 2021. If you miss this deadline, your retirement funds will be locked-in for at least the next 3 years in South Africa. We also expect more to come from the compulsory preservation of retirement funds, meaning the government may have the final say on how your retirement funds will be dealt with in future.

4. First good news item – unexpected tax relief for South Africans working abroad

Many expats were concerned that they would not make the 183-and-61 day tax exemption, as a result of the lockdown. SARS has kindly proposed to reduce, for a limited period, the 183 days requirement to 117 days. This rule change creates interesting tax planning opportunities and requires a deeper look for anyone who was outside South Africa for more than 60 days continuously in 2019 or 2020.

5. Living Annuities and termination of trusts

The era of setting up personal trusts left right and centre has come to an end with the introduction of section 7C. There are still instances where old trusts make sense and limited instances where one’s objective is asset protection. But if you think that creating a new trust will benefit you, perhaps you should get a second opinion from your accountant. You may sound important over dinner referring to your trust or even prevent your children from fighting over who gets the beach house, although inevitably they often still do. But do not think for a second you will pay less tax, as the opposite is true. Where you have a trust with a living annuity, you need to be aware of the new law changes when considering the death of an annuitant.

6. Circumvention of the anti-avoidance rules for trusts

SARS has now amended the legislation in order to curb the abuse of the introduction of low interest or interest-free loans, advances or credits for trusts. Just to rub salt in the wounds of those who still persist in thinking trust structures are tax-efficient, SARS has now shown that you need to stop listening to trust advisors who keep trying to find the next loophole. As SARS sees it, they will close it, leaving you with an overly complex trust structure that needs untangling.

7. Reimbursing employees for business travel

SARS has kindly relaxed their strict regulations when excluding business travel expenses. This is, however, subject to the employer’s policy provisions. Make sure your company travel policy is updated to utilise this tax relief. This is very much part of the equal pay for equal work value methodology for responsible employers where employees were left with little recourse regarding these tax burdens due to an oversight or the employer’s failure to execute the instruction for reimbursement.

8. Roll over of amounts claimable under the employment tax incentive

Excesses of Employment Tax Incentive claims for non-compliant tax employers will now not be rolled over at the end of the PAYE reconciliation period. This is to protect taxpayers once they do become compliant.

9. Tax treatment of secured non IFRS 9 doubtful debt

If you own a business that has been negatively affected by Covid-19, you need to talk with your accountant regarding this change. SARS proposes to make provision for the amount of debt to be reduced, differentiating between taxpayers that apply IFRS9 and taxpayers that do not.

10. Potential tax avoidance caused by dividends deductions

Taxpayers were able to structure their investments in order to issue financial instruments to the investors that yield dividends, while it receives interest or other income on its financial assets, thus avoiding tax implications. The new amendments now mean that taxpayers will no longer have the advantage of this loophole.

11. Refund need not be authorised where the matter is under criminal investigation

The proposed amendments further include that where you are subject to a criminal investigation in terms of the Tax Administration Act, any refund owed to you by SARS will be withheld pending the outcome of such investigation. We can only hope this will not be abused by SARS officials, as we stand reminded by the fact that the Tax Ombud has found SARS guilty of delay tactics in paying refunds.

12. The most critical tax law change! Inclusion of the words “Wilfully or negligently” in tax prosecution

Getting an admitted tax attorney involved on your taxes ensures legal privilege. SARS’ seemingly harmless inclusion of the words “willfully and negligently” when it comes to lesser tax offences increases liability for non-compliant taxpayers, with prosecution resulting in imprisonment or a hefty fine. By not simply updating your details, forgetting to do something, or making an unintended error can now land you in real trouble. Perhaps now is the time to take your tax administration and compliance extremely seriously, as SARS has just acquired its biggest ammunition yet to discourage non-compliance.





Exploring the evolution of the accountant

For a long time, accountants were considered bean-counters, which is essential, but they’ve become much more than just number-crunchers. They’re essential business partners and will be vital in guiding small businesses through the challenges ahead.

Our State of Accounting Research found that 97% of accountants believe that they can support economic growth. And our State of Small Business research found that 28% of businesses wanted their accountants to act as a full-on business consultant. This is an increase from the previous year, when it was just 11%.

Technology has been one of the key factors enabling this shift, allowing accountants to step away from manual and repetitive tasks. Our research found that 87% of accounting firms use at least some cloud technology, and many others have turned to automation.

“Cloud technology has given our clients and us an advantage during the sudden forced remote working around the world. Already having real-time access from anywhere to your finances has made recently forced adjustments easier. In 2020 we found ourselves helping more new businesses migrate to the cloud than before. Being in the cloud as a business is no longer optional,” says Montaque Swanepoel, the founder and CEO of CFO360.

While this model has proved successful for early adopters like CFO360, many businesses are still struggling. According to our research two-thirds of accounting firms struggle to hire talent with the right technology skills for future growth. Here is how we can – and must – support accountants so they can guide small businesses.

Cultivating the right skillset

Our research found that 35% of accountants reported that their firm seeks candidates with cloud skills, and this number is bound to have increased due to Covid and remote working. Cloud competence is no longer a new skill, and businesses will increasingly be seeking out advisors with these skills.

To support this shift, the industry needs a strong pipeline of technologically skilled accountants. It’s encouraging to see education providers stepping up to ensure that graduates are equipped with up to date skills.

Cultivating the right skills in the next generation of accountants, as well as among current advisors, is critical. We can’t rely entirely on the next generation – firms need to be upskilling teams to close this gap now. It’s positive, therefore, to see that 76% of firms have invested in training staff in new skills over the last year.

Preparing the accountants of today

The evolution of accounting is already well underway. Our pre-Covid research found that 54% of firms believed they would manage both finances and business advice in the near future. And 38% even reported that offering advice on growth would be their accountants’ primary responsibility, while just 8% thought they would remain focused entirely on the numbers.

As Montaque puts it: “We have realised as accountants, our roles have started to shift in the last couple of years. Although the need for tax compliance, bookkeeping, and accounting is still necessary and always will be, for the small business owner, the need for strong business partners and business advisory has grown. With the right technology and the right advice, many business owners have capitalised on growth opportunities or adjusted to weather the storm. With some industries thriving and others struggling, the business advisory role, supported by the right technology, has never been more important.”

There are plenty of resources out there to help enable this shift, as well as technology partners and constant efforts by software-makers to make their offerings easier to use and more powerful. For instance, current accounting apps already tie into bank feeds, automating financial data capture. So simply updating to the latest apps will already save accountants’ time.

Getting through the challenges ahead

Accountants have already played a massive role in supporting their small business clients as they’ve had to adapt to survive. They are the unsung heroes of our ongoing recovery. But the industry will need the right support to weather this storm. The technology community and accounting bodies must work together to create the right support network for accountants and small businesses alike.




How to get your pricing strategy right and increase business profitability

Value has to be the primary driver in setting a pricing strategy. This can then deliver both higher profits and improved customer satisfaction. Andreas Hinterhuber’s extensive research shows that business efforts to increase prices result in higher profitability than those to reduce costs. He sets out below the key components to increased business profitability.

1. Value-based pricing: The driver to increase short-term profits

No business can afford to ignore the importance of pricing. Ensuring you are competitive as well as profitable is a central element of the FD role in any industry. For many FDs, though, pricing strategies are often left to out-of-date formulae and allowed to stagnate. Perhaps a new approach is needed.

Pricing – the profit driver

Pricing has a dramatic but frequently underappreciated effect on profits. A study of a sample of Fortune 500 companies showed the impact of pricing exceeded the impact of other elements of the marketing mix on profitability (Hinterhuber, 2004). An increase in average selling prices of 5% increases EBIT by an average of 22%, while other activities, such as revenue growth or cost reduction tend to have a much smaller impact. So why does pricing have a bigger impact on profitability than other tactical measures, such as growth or cost reductions? The answer lies in understanding and analysing customer value.

Value-based pricing

Pricing is clearly a key profit driver; however most companies get it wrong. They base prices on costs or on competitor benchmarks. Of course both of these should influence the pricing decision, but they should never be top of the list.

Conversely, only a minority of companies – between 15% and 20% – based their prices primarily on customer value (Hinterhuber, 2008). Substantial empirical research over the last few years has confirmed that value-based pricing is the only pricing approach that leads to higher profits (Liozu and Hinterhuber, 2013). By contrast, cost-based and competition-based pricing are likely to be detrimental to company profitability.

So what do we mean by ‘customer value’? It is the willingness of the customer to pay and is the sum of the combined benefits that accrue to the customer as a result of purchasing a given offering. It can be calculated and quantified as “the price of the customer’s best alternative – reference value – plus the value of whatever differentiates the offering from the alternative – differentiation value” (Nagle & Holden, 2002).

Value-based pricing is especially appropriate for highly differentiated products. But it would be a mistake to assume it is only appropriate for products with a clear competitive advantage, such as branded tablet PCs or life-saving pharmaceuticals. Value-based pricing should guide pricing decisions for apparent commodity products as well.

Consider a recent case study in the highly-competitive global chemical industry. Executives at this company assume themselves to be operating in a commodities industry, and are convinced that – in order to achieve meaningful sales – prices for the chemical in question need to be set at parity to price levels of the industry leader.

Workshops with executives and focus groups with core customers and distributors led to the discovery of a number of differentiating factors between the company’s main competitor and its own offering.

While there was not a dramatic difference between the two products, we found a number of small but meaningful distinguishing characteristics between the two products. Using internal evaluation and field-value-in-use assessments, we tentatively quantified the additional customer value for these differentiating features.

We found small differences in logistical know-how, in product quality, in ordering costs and complexity, in vendor competence and in customer knowledge added up to a positive differentiation value of 8%, allowing the product price to be up to 8% higher than the customer’s best alternative. The highest possible price is, of course, not necessarily the best price. But after applying a series of price optimisations, competitive simulations and estimates of customer reactions, we calculated the most profitable price point to be 5% above the best available alternative. The final price of 105 will – although higher than competitive prices by 5% – still be convenient for customers, since this price is below the maximum value of 108.

When basing price on customer value remember that:

  • even so-called ‘commodities’ can and need to be differentiated;
  • the sum of many small differences in product characteristics can add up to a significant difference in customer value;
  • even apparently small price premiums over competitive products (e.g. 5%) translate into significant profitability differences between companies;  and
  • price and value premium between two competitive offerings needs to be sustained over time.

2. Steps to implementation

Clarity on goals

The first step in the successful implementation of value-based pricing is to define the objective of the company. As much as improving profitability seems a straightforward objective, different companies may pursue different objectives during different stages of their own life cycle.

Growth in absolute revenues (as opposed to growth in profits) is frequently an important goal – especially for products with network externalities. Finally, the growth for ancillary products (e.g., razors versus blades) may be the main consideration behind the overall pricing strategy in case of interdependencies between products.

Mutually incompatible goals of profit maximisation, revenue maximisation, and the maximisation of sales of ancillary products require substantially different pricing strategies.

Know your customer

Customers have a subjective measure when deciding to buy or not – value. The value a customer assigns to the product and which determines the price a company should charge can be assessed by asking a few questions:

  • What is the underlying need customers are willing to pay for? Answering this question allows a business to understand how customers are best served, what variables of the product or service make them chose you over competitors and ultimately allows the company to assign a monetary value to the variables that are important to customers. And of course, charging for them.
  • What are commonalities and differences between market segments that affect customer willingness to pay? This question is probably the most crucial for companies willing to charge different prices for different segments, yet it is still relevant for those who have only one price. Theatres leverage the willingness of different customer segments and offer lower prices during weekdays and afternoons, in order to maximise the profit from a perishable offer.
  • How much more is the customer willing to pay? How can that threshold be increased? Some products can be easily customised and in this case, willingness to pay appears on a single-sale basis. For other products, customers self-select and companies must look at what makes their products unique against comparable competitors’ products and then analyse the monetary value to such differences.  Customer willingness to pay can be measured (although not as easily analysing costs) and the most widely-used approach for measuring customer willingness to pay is conjoint analysis, which, if augmented with qualitative data – e.g. focus groups, customer observations, ethnographic research – yields actionable results. Customer needs change Champions of value-based pricing routinely analyse how changes in customers need affect perceptions of value, and so calculate the maximum willingness to pay.
  • How do different price points affect the bottom line? Once data is gathered, a company must understand how these new price points will impact sales. The result can often be in terms of different prices for different segments and one must ask what the likely economic value is created based on the weight of each segment, which is useful data to take into account for the second and next key element of pricing decision.

Know your company

Each company is different and different cost structures will allow different degrees of leeway for implementing short-term, impactful pricing strategies. A simple issue arising is the effect that an increase in price might have on demand. Since even small price changes have a substantial effect on profitability, we need a structured approach to understand how price and volume affect profits.

A structured way to calculate this is through CVP (cost-volume profit) analysis. It allows us to calculate the required volume increase to compensate for price reductions, and the maximum affordable volume loss associated with price increases, if the overall goal is to maintain profits.

For example, a product or service has a 30% contribution margin. A 10% price reduction – e.g. a special one-off discount granted to a customer – requires an increase of 50% in sales to keep overall profits constant. The implied price elasticity of demand is unlikely in practice. Conversely, a 10% price increase for the same product maintains its profitability even if volumes decline by up to 14%. The implied price elasticity of demand for price increases is considerably lower.

Know your competition

Competitive analysis is an important aspect to take into account when deciding what strategy to implement. A thoughtful look at competition may show unexplored markets, or better segmentations by others, as well as unserved niches or needs that the firm can tackle.

It can also be important to assess the effectiveness the strategy is going to have in the arena. Price wars often come from overlooking the power of pricing, such as when companies with new superior products charge the market average without considering the value they create; this forces competition to respond fiercely.

In other situations, and against common sense, companies may charge a premium to gain market share by eliciting exclusiveness and high quality in the mind of customers, as well as distinguishing their offering from the competition. In some situations, the pricing strategy adopted by some players may influence and actually determine the competitive structure.

3. Making it work

The final step on the road to successful pricing is to implement and follow up the pricing decision. It all comes down to setting price and leveraging the newly discovered value of the company’s product or service.

The decision to change price in itself is not enough – a correct implementation is key. A few guidelines can ensure that the price orientation (the ability to set prices based on value), matches the price realisation (the ability to enforce the prices):

  • Communicate value. The company will gain a better understanding of its own value proposition when it analyses the key attributes of its consumers. What emerges from that stage should be constantly communicated and the consumer reminded of the reasons why he or she chooses you over competitors. This is particularly true when the customers are big companies whose purchasing departments have to justify expenditures: they must be able to explain the ‘value they are getting’ not ‘the money they are spending’.
  • Company effort. Having the support of all stakeholders in the company helps make better decisions. Also in a previous stage, technical developers and sales managers can provide useful, if not critical, insights on value since they are the ones dealing directly with the product and the customers.
  • Pricing rules. Those responsible for the change must make sure there won’t be deviations from list prices, unless specified and for given order sizes. For example, when dealing with a sales force paid on revenue rather than profitability, sales managers may be inclined to give discounts to close a deal.
  • Negotiation and value communication. Companies that champion price realisation tend to have a sales force that knows why the price reflects the value the company is delivering, and is able to communicate this factor, escaping the downward spiral of negotiating price reductions.

In conclusion, pricing is one area where small changes can set a company apart from competition. Value-based pricing is a road that secures results in the short run; it also sets the direction for a path toward serving customers better, in light of the understanding of what value really means to them.

The original version of this article, written by Andreas Hinterhuber, partner and Evandro Pollono, senior consultant at Hinterhuber and Partners, Innsbruck, Austria appeared in the May 2014 edition of the ICAEW Finance and Management Faculty magazine.




New Google Search Feature Makes Pandemic Shopping Easier

The pandemic purchasing struggle is real, and Google wants to help. The search giant this week rolled out new Shopping results to help users safely and easily support local stores.

Whether you’re in the market for a new work-from-home laptop, decide to splurge on an autumn jacket or want to make the most out of summer with a backyard barbecue, Google can now zero in on what’s available nearby.

Simply tap the Shopping tab and select the Nearby filter (or add “near me” to your query) to narrow the retail range to neighboring stores; Google highlights opening hours, distance and whether the business offers curbside/in-store pickup or delivery. Plus, the direct link to navigation means you just might arrive before the doors are locked.

Not willing to risk your health just to find that the electric kettle you’re eyeing isn’t in stock? A new product carousel makes it easy to preview a store’s available items — including pictures and prices — without leaving the house.

“Shopping in person comes with new challenges these days, but luckily stores are making it easier to adjust,” Google Shopping Product Manager Swati Trehan wrote in a blog announcement. Those businesses interested in helping shoppers find their store hours, locations, products and pickup options online can create or update their Google profile and upload a product feed. “We’ll keep working to provide more helpful answers to your shopping questions and needs,” Trehan continued, “so that you can safely and easily pick up what you’re looking for while supporting the stores in your community.”


Why You Can’t Afford to Be Bad at Bookkeeping

Maintaining your books isn’t something you should do solely as a tax-savings strategy; it can also prevent you from losing your sanity and getting dragged into a potential lawsuit over commingling your funds. Here are five significant reasons for maintaining a separate checkbook and set of books for each of your businesses:

1. Corporate veil.

First and foremost, maintaining a separate checkbook substantiates the corporate veil, one of the primary reasons for forming a new corporation. Having a separate checkbook shows you recognize the company is its own distinct entity. Furthermore, separate checkbooks will hopefully encourage you not to commingle personal and business funds.

2. Tax savings.

Separate banking will improve bookkeeping procedures, prevent payments from being missed, and provide better records to improve your tax return.

3. Audit protection.

Having a separate checkbook will improve your chances in an IRS audit. The IRS will often disallow a number of expenses when personal and business expenses are commingled in a single checkbook.

4. Less stress and more sanity.

One might think having separate checking and bookkeeping for a new company is cumbersome, unnecessary, and possibly even a waste of time. In fact, this procedure saves time and money in the long run. When your books are disorganized, you’ll feel constant stress to take care of it, and this ultimately can cause you to feel undone.

5. Improved decision making.

Having a separate checkbook starts the process of better bookkeeping, expense tracking, and budgeting, which leads to quality decision making. How can you expect to be a successful business owner without accurate records? You owe it to yourself and your business to keep good books.

The next step is implementing a system for tracking income and expenses. It’s absolutely critical for small-business owners to at least consider QuickBooks as their primary accounting software system. Yes, there are a few alternatives to QuickBooks, but not many, and even fewer worth considering.

QuickBooks is the most affordable, user-friendly, efficient, and effective accounting software ever written. That may sound a little cheesy or over the top, but it’s true. Here are just a few things that QuickBooks can do to help you become a better, smarter business owner:

  • Keep essential information at your fingertips. QuickBooks generates reports that allow you to easily stay abreast of your business’s most important financial information, like profit and loss by product or property, accounts receivable by customer, sales reports, or expense reports.
  • Better use of your online banking system. QuickBooks allows you to harness the online benefits that many banks offer. It coordinates with most banks, even lesser-known ones, to provide instantaneous information so you can download transactions and reconcile your data with ease.
  • Collect more of your accounts receivable. QuickBooks allows you to generate professional-looking invoices that can be delivered via email and offer your customers the option to make online payments. You can also generate statements and create various reports to determine who your high-risk customers are for collection purposes and to help you make better decisions regarding your accounts receivable.
  • Delegate your accounting services with ease. If you are the type that hates bookkeeping, QuickBooks will still make your life easier. Once you understand the basics—and I recommend that every business owner at least master the basics—you can delegate tasks, from reconciling to overseeing financial reporting. QuickBooks will even allow your CPA to log in online to access your financial data while doing your accounting.
  • Pay your business bills efficiently. Let QuickBooks track your accounts payable so you can better manage your cash flow and pay bills when it’s most convenient for you. Ultimately you’ll save on past-due fees and interest, and you’ll be able to interact with your vendors in a more professional manner.
  • Receive payments immediately. Accept credit card payments online, and have the funds recorded directly in your QuickBooks file. You can even upgrade your QuickBooks software and tech supplies to integrate a point-of-sale (POS) system with your cash register and merchant/credit card machine.
  • Access your financial information anywhere. The online version of QuickBooks allows you or your accountant to access your books anywhere you have an internet connection.
  • Use scanning software to track receipts. Scan in receipts through a service like NeatReceipts, which immediately records and categorizes the information in QuickBooks. You can then keep a copy in your cloud storage of all receipts and contracts for audit and legal protection.


The list goes on and on. Please take this suggestion seriously; the sooner you integrate this system into your business, the sooner you’ll see money savings, greater revenue, and more profit. Don’t be afraid of QuickBooks—embrace it, and it will set you free! OK, that was a little much, but I can promise you this: It will save you money, and you’ll also get addicted to the little “ping” you hear every time you enter a check or item in the register.

Get help implementing your accounting system

Be honest with yourself: Do you want to do the bookkeeping for your business? If so, great. But if not, who’s going to do it? Have a plan! Yes, this is my best attempt at giving you an “intervention.” Look at yourself in the mirror and assess your level of dedication, knowledge, and available time to implement and maintain your books. However, while it’s fine if you have someone else do the dirty work, you still need a general understanding of the process and accounting system so that you, as the captain of your team, can oversee the process.

The following are five options to consider when it comes to divvying up the accounting duties.

Option 1: Learn QuickBooks and input items yourself. I know this strikes fear in some of your hearts. In fact, this may be why your books currently aren’t getting done. But you still may want to hold off delegating any part of the process until you put in a few hours a week to learn the basics, like inputting figures. At the bare minimum, you need to be able to view and print reports and check the accuracy of the work.

Option 2: Hire a family member to keep up the books. This is a great way to have the teenagers or young adults you’re supporting financially earn their keep and teach them about entrepreneurship in the process. They’ll learn about the heart and soul of small business by doing the books. Adding them to the payroll is also a great tax write-off.

Option 3: Engage a local bookkeeper. This could be a local college student wanting internship/externship hours or a seasoned bookkeeper with affordable rates. It can free up your time so you can do what you know best: Make money for the business. This is also a natural step in the growth of a business before choosing the next option. Remember, this person will probably not prepare your taxes or do significant planning for you; they’ll simply maintain your books affordably so you can focus on more pressing tasks.

Option 4: Hire someone “in house.” You’d be amazed how quickly you can find a local college student or bookkeeper wanting to pick up some part- or full-time work for an hourly wage. This person could come in daily or a few days each week to input data and print reports. You might need to provide some supervision, or you could have your outside CPA train and supervise your in-house bookkeeper. It can be extremely convenient to have an employee available to keep things in order. You can also hire someone who can wear different hats and help with other tasks, like answering phones, scanning, doing collections, shipping, or running errands.

Option 5: Use your CPA or tax professional throughout the year. Many business owners like the comfort and security of knowing they not only have highly skilled accountants doing their books daily but the benefit of one-stop shopping for tax planning and quarterly and annual reports as well. It may seem more expensive, but the value of better long-term planning and a higher quality of books can far exceed the cost. More mature and seasoned business owners may naturally “graduate” to a more experienced bookkeeper when the time is right. At most firms, you can get an accounting support package tailored to your budget and needs.



10 Best Accounting Websites for Startups

In today’s world, an accountant needs more than just a brick and mortar office. They need to continually expand their knowledge, keep up with the latest industry insights, and be able to share their knowledge with people looking for financial advice. The same is true with your startup. You need to constantly keep up with accounting best practices to help your business grow financially.

I’ve been a CPA for almost 20 years now and keeping up with all the new regulations is a large task. Scouring the Internet for accounting sites that can educate and inspire is time consuming, so I’ve done the legwork for you. These 10 sites for small business owners are where I look for the best accounting advice to help keep my business up to date.

1. Accounting Coach

Accounting Coach was established in 2003 to allow students, bookkeepers, and small business owners to learn new accounting skills or to increase their present knowledge. Their goal is to make this educational material available without the cost of tuition, books and other expenses of formal education. The only requirement is an Internet connection.

Accounting Coach also offers a professional version of their program that features interactive tests and visual tutorials. Information about fees for Accounting Coach Pro may be found on their website.

2. Sleeter

The Sleeter Group was established in 1994 in Pleasanton, California. Their goal is to provide educational resources for accountants and small business owners. Sleeter has assembled a group of more than 700 accounting professionals to serve as consultants for members of the group and also provide implementation services. Sleeter holds an annual conference and trade show where the latest accounting services and software programs are highlighted.

Members of the Sleeter Group also have access to webinars, QuickBooks reference guides and 25 free QuickBooks assessment exams. They can receive discounted webinar access and admission to the annual conference.

3. The Blunt Bean Counter

Mark Goodfield is the author of the Blunt Bean Counter, a blog that offers advice on income taxes, finance and the role of money in our lives. Any individual can gain new insight from the Blunt Bean Counter. However, many of the topics are more relevant to the owners of private companies and those with a high net worth.

Goodfield has more than 25 years of accounting and finance experience and is a chartered professional account. He is a partner in a major Toronto accounting firm. The Blunt Bean Counter takes a realistic view of the world of finance and offers insight with a sometimes “no filter” approach along with a bit of humor.

4. Skoda Minotti Blog

Skoda Minotti was founded in 1980 with a vision to provide comprehensive accounting services that help their clients grow and prosper. They expanded their services to include business valuation and litigation, financial services and strategic marketing. Their blog has an extensive amount of information on each of these topics. Skoda Minotti also made a significant change to the accounting industry by allowing non-CPA ownership and investment in CPA firms.

While Skoda Minotti seeks to increase profits and help businesses grow, they operate under a set of core values. Community involvement, family values, and integrity are some of these principles along with having compassion for others.

5. The Economist

The field of accounting is a vital aspect of the business world but it is only one facet of the vast field of economics. The Economist accounting blog took this idea into consideration and has a number of entries covering world politics, business, and finance and culture. Readers may learn about the latest innovations in science and technology and learn about online and in-person events involving the world of business and finance.

The Economist offers digital and print subscriptions.

6. Accounting for Management

Accurate accounting is vital to the success of any business. Students of accounting must learn a vast amount of information to be able to secure employment in the field. Such individuals who may have difficulty grasping accounting principles may now find assistance from Accounting for Management.

Accounting for Management provides clear, concise explanations for all types of accounting situations. The site is divided into sections that involve examples, explanations, problems, and calculators. Site visitors may explore the site and find the assistance needed to increase their mastery of accounting.

7. Evergreen Small Business

Evergreen Small Business is a blog that offers a broad spectrum of advice for the small business owner. There is a section dedicated to frequently asked questions regarding tax accounting, financial planning and management for small business. Examples of their expertise can be found in recent posts include Using the Delphi Method for Small Business Problem Solving and Index Funds and Asset Allocation Even Better for the Wealthy?

Evergreen Small Business was founded by Steve Nelson, a Seattle CPA with 30 years of experience in the field of accounting. Nelson specializes in tax concerns of S corporations, foreign tax issues and small business consulting. He also provides financial planning and works with individuals experiencing complex financial issues.

8. Accounting Learnatorium

Filing annual taxes can be a stressful time for any business owner. Not only do small business owners have to remain updated on changing tax laws, they must still maintain the daily operations of their company. This is especially true for service-based small businesses.

Due Accounting has created the Accounting Learnatorium in response to this unique need. This all started when my friend John Rampton approached me to write for his blog about some of the accounting tips that I’ve experienced over the years. While scouring the blog, I started learning more than I could ever have imagined.

The Learnatorium provides accounting strategies and other advice that can help small business owners handle the often daunting task of finding and working with the best accountant. The Learnatorium is updated weekly and also includes stress-reducing ideas and a few bits of humor to lighten the day.

9. FEI Daily

Change is constant. Accounting and other financial executives need to stay current on significant events and regulatory changes. The FEI Daily provides the most current news concerning the field on accounting, industry leadership, and compliance with regulations. Public policy and technology are other topics explored in the FEI Daily.

Financial Executives International was established more than 80 years ago. The group realized the need to evolve as the global conditions can change rapidly and industry leaders needed a source for to provide such information. Membership in FEI Daily is available.

10. Dear Drebit

Accounting professional now have a forum to discuss and receive answers on a number of accounting and financial issues. Dear Drebit allows site visitors to submit questions regarding accounting as it applies to a business valuation, health care reform, and a number of other financial topics.

Dear Drebit was created by Rea and Associates, an Ohio certified public accounting Firm. They have been in existence since 1938 and currently have 11 offices across the state of Ohio.


Keep Your Business Finances in Order With These 6 Tips

Do you find managing your business finances to be a pain? Although it may appear to be, and often is, tedious, keeping your finances in order is extremely important.

It helps you to project where your business is headed, and when you know exactly how your revenue and expenses are stacking up, you can begin to make more informed decisions for your business. Maintaining your financial records also makes tax reporting and payments a lot more manageable.

Don’t try to do it all alone. Leverage the talent and the tools that are available to you. Here are six tips to help you keep your business finances in order:

1. Keep your personal and business finances separate.

Mixing your personal and business finances will inevitably result in confusion. It might seem convenient to charge everything to a single card, but ultimately this will make tracking your spending far more complicated than it needs to be.

Begin by opening separate bank and credit card accounts for your business. For the ongoing tracking and measuring of your finances, and for tax purposes, this practice will take a major headache out of sorting your transactions every quarter, or every year as the case may be.

This will also take the guesswork out of the equation. If you want to be successful in business, you need to be able to monitor and track your key performance indicators. You need to know the score, and some of the most important elements include cash flow, expenses, revenue, profit and so on.

2. Choose accounting software that makes sense for your business.

When it comes to accounting software, there are a variety of different solutions. Think of Xero, QuickBooks and Freshbooks. The best online accounting software depends on your business, and it’s worth considering several options before making a decision.

If you haven’t moved your financial data from desktop software to the cloud yet, that should be your first order of business. Cloud-based tools allow you to view real-time insights, and they can be accessed from anywhere at any time. The ability to keep an eye on your finances on the fly gives you a great deal of flexibility as a business owner.

If you’ve already picked out an online solution, ensure that it’s the right one for you and your business. Today more than ever, there are a myriad of options to choose from, and if you aren’t satisfied with your current service, you can always make the switch to another platform that better matches your needs.

3. Consider hiring a professional bookkeeper.

Most people aren’t numbers people, and will never be excited about them as much as accountants or bookkeepers are. If managing your own finances is starting to get on your nerves, it’s time to look into hiring a qualified bookkeeper.

Many entrepreneurs have a tendency to try to handle everything themselves. But as with legal matters, the granular elements of small-business accounting aren’t usually within a business owner’s wheelhouse.

Although it’s easy to balk at the expense of working with a bookkeeper, they will be able to help you save money over the long haul. You’ll be freed up to work on high value tasks that keep the business moving forward, while your bookkeeper handles the tedium of number crunching.

4. Stay organized and plan ahead.

The aforementioned tips should help with keeping your finances organized. Moreover, monitoring your finances and projecting future revenue and expenses will enable you to make better long-term decisions for your business.

Without this information, planning ahead can prove challenging. If you aren’t looking at the future of your business, you could be taken by surprise. If you want to get ahead and stay ahead of the competition, you should plan as much as 10 years in advance.

You’ll be able to mitigate unwanted surprises if you stay ahead of the ball. Even if unexpected expenses do rise, if you’ve been practicing conservatism in your spending, you shouldn’t run into any major problems.

5. Make a budget.

Part of staying organized and planning ahead should include creating a budget. Many business owners view this step as dull and unnecessary, but the importance of a budget could be equated with the value of a well-formed business plan.

A budget is not a tool for planning out how every penny should be spent. Rather, it’s a framework that you can use to help you make clear-headed decisions, whether it’s increasing your marketing spend, or cutting expansion costs to keep your profits on track.

Make a budget and use it as your guide. Don’t allow it to force you into decisions you don’t want to make, but use it to make adjustments when and where necessary.

6. Find a trusted credit union in your locality.

Credit unions are invaluable to small-business owners, especially since they are often willing to provide loans at competitive rates. Make it a point to seek out the best one in your locality, and make sure they understand your business needs. The partnership could prove immensely beneficial.

Some of the other advantages of credit unions include fewer transaction fees and account service charges, as well as flexible, customized services.

Since credit unions are not answerable to shareholders, they are empowered to put your interests at the forefront. Credit unions also keep profits within the community, and help budding entrepreneurs get their dream businesses off the ground.

Final thoughts

The reality is that many business owners do not keep track of their finances. Whether you know it or not, this could mean missing out on opportunities to minimize your expenses and maximize your profits.

Preparing online business accounts can take time, but the end result is worth the effort. Even if you don’t consider finances to be the most important part of your business, streamlining your process will allow you to develop a straightforward step-by-step process as opposed to a search-and-find initiative.

Make the effort to simplify the organization of your business finances moving forward. This will allow for long-term stability and sustainability.



Delegation 101: How Entrepreneurs Can Boost Employee Productivity

If you’ve started a business, you know you have to wear multiple hats. In fact, you do a number of jobs you never imagined yourself doing.

Let’s say you start a dog-grooming business. You probably thought you’d spend your days grooming dogs. However, you also have to be an accountant and a marketer. You have to keep track of appointments and inventory while following up with clients and vendors. The next thing you know, you’re spending most of your time on these tasks instead of your original vision.

While that’s part of being a business owner, it’s not what you signed up for. You should be spending your time doing what you love, as well as on activities that generate income, not tasks someone else could do. That’s where delegation comes into play.

Delegating is simply transferring a responsibility to someone else. The dog groomer, for instance, could delegate tasks like tracking inventory and scheduling appointments to an employee. That enables her to groom more dogs, which means more money flowing into her business.

Delegating, unfortunately, is not easy. Like any other management skill, it needs to be developed over time. Done correctly, productivity and sales will rise across the entire business. With that in mind, here’s how small business owners can get started with delegation.

Let it go.

This is arguably the most challenging part of delegating. After all, it’s your business — you want things done a certain way. You may even believe you’re Superman or Wonder Woman and capable of doing everything on your own. That’s just not feasible, and you’ll quickly burn out. It also sounds like a toxic environment where micromanagement and lack of trust run rampant.

I know letting go is easier said than done, but it’s the first step toward delegation. You can do this by taking baby steps. Assign a small task to an employee to see what he can do. It could be something as simple as returning a phone call or doing research on a competitor. Now that you know you can trust him, you can gradually assign him more challenging tasks.

Not sure which tasks to delegate? Establish a priority system. Create at least four categories based on the degree of difficulty each task demands. The most skilled category should be kept by you, but the tasks in the lower-skill categories can be delegated.

Analyze your needs.

You don’t want to delegate everything. That’s why you need to start tracking your time. You can do this with a manual time log or an app like Timely or RescueTime. By getting a clearer view of how you’re spending your time, you can identify what to delegate and to whom.

Back to our dog groomer: If she discovers she spends a quarter of her time on accounting and bookkeeping, which she dreads, she could assign that to an employee who likes crunching numbers. This lightens the workload for the owner while giving the employee a new responsibility she enjoys.

Hire carefully.

Of course, a key component to delegating is knowing you’re surrounded by people who have the skills or knowledge to successfully complete the work you assign them. You don’t want to assign your bookkeeping or invoicing duties to someone who isn’t strong in math just so you don’t have to do it. That’s setting both of you up for failure.

During the hiring process, assess experience, potential and background. Don’t forget to ask for references and samples of candidates’ previous work. This will give you a stronger sense of their strengths and weaknesses. Most importantly, make sure you can trust them — ask questions to gauge how they’d handle different situations.

Also, take a look at your current team. If you don’t think there’s anyone detail-oriented enough to manage your bookkeeping, that’s a skill you want to pay close attention to when hiring.

Document everything.

This probably isn’t something you often think about, but take the time to identity the information, knowledge and processes that keep your business running smoothly. Then, write a clear summary of your systems and processes. This way, anyone can view these process documents and pick up where you left off.

Think though the delegation process.

Ramon Ray, a bestselling author, speaker, entrepreneur and influencer, has an excellent take on delegation: “If you want task delegation to work right, you must be clear on the outcome, and then delegate to the right person who is best suited for the task.”

Before delegating tasks to others, spend time thinking through the delegation process. This includes knowing exactly what you want to delegate. Be as specific as possible — vague instructions will only invite failure. Ensure you’re delegating tasks to the right people. Take into consideration their strengths and weaknesses. This builds trust immediately because you know the employee can successfully complete the work without you hovering.

Make sure the employee has everything needed to complete the task. Provide him with everything from instructions to login information so he can jump right in. And, of course, assign reasonable deadlines. Be clear about the outcome needed, as well as your expectations.

Use technology to your advantage.

Thanks to technology like project management software, you can see who’s working on a particular task and how he’s progressing. This prevents you from forgetting who’s responsible for certain tasks or wasting an employee’s time by scheduling a progress meeting.

You can also use technology to share, schedule or provide online training opportunities to strengthen your team’s skill set.

Most importantly, you can use channels like email, Slack or teleconferences to frequently communicate, share information or collaborate.

Encourage ownership.

Encouraging ownership is one of the best ways to make your employees more motivated and productive. When you assign a task to someone, give him complete control of the assignment. This means letting him decide how he’ll finish a task or solve a problem. It also involves building trust by being respectful and transparent, listening and making sure each team member succeeds.

Furthermore, you can encourage ownership through delegation by properly training your employees, guiding them instead of commanding them and making sure they know how their work contributes to the big picture. Following up with feedback helps these employees grow and shortens the time needed to get them to expert-level work.

Develop feedback loops.

Speaking of feedback, when an employee has done well, let him know. Offer genuine praise, and give him a shout-out in the next newsletter or meeting. If he had trouble, offer some constructive criticism so he can get it right next time.

You also want to give your employees the opportunity to share their thoughts on what you’ve done. Did you provide them with enough information and resources? Did you assign the right tasks to the right people? Asking for their insights can help you delegate more effectively in the future.

If you want to spend more time doing what you love, you have to get comfortable with delegating. By thinking through what others can do — and what it takes to ensure they do it well — you can spend more time on your business’s whole reason for existing.