5 Accounting Categories that every Business Owner must understand.

There are 5 categories that I always emphasise that every entrepreneur must know and be clear about, for them to understand their businesses better.

1. Assets
These are valuable items with a long lifespan. Assets are extremely important in any business as we use them over and over again to generate income. We have 2 types of assets: Current assets and Non-current assets. Current assets are those that can change their position at any time, examples are cash, inventory, etc.
Non-current assets are a long-term investments for which the full value will not be realized within the accounting year. Examples are : property, plant and machinery, etc.

2. Liabilities
These are are the external parties that the company owes money to. Examples such as creditors i.e your suppliers
You might have obtained stock in credit and agreed to pay over a certain period. They become your liability as you are obligated to pay as per the agreement. A loan is also a liability as you are obligated to pay it back, with interest even. Just like assets, there are two types of Liabilities. Non-current Liabilities e.g long term loans such as mortgage, deferred taxes, etc. Current liabilities e.g accounts payable, short term borrowings, etc. Those that can be paid within a year.

3. Income
The monies that come into a business as a results of exchange of goods or services rendered. They are often referred to as sales because of its transactional nature. It is important to understand that a loan, though it has a positive effect of the company bank account but cannot be classified as income. A business need to render a service or sell goods in order to gain an income,obviously depending on the nature of business.

4. Expenses
The cost of operations that a company incurs to generate revenue. Examples of operational expenses are telephone, electricity, wages and salary. We often say “You must loose money to money”. It is in this notion.

5. Owner’s Equity
It is defined as the amount of money invested by the owner in the business minus any money taken out by the owner of the business. I often say the business and the owner can co-exist. Meaning one can borrow from the other should the need arise. However a clear discipline should be withheld. Accurate records should be maintained.

Understanding the above-mentioned categories will make you understand your business even more in terms of its positioning and the performance. They are not limited to accounting professionals.

Compiled by Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting (Pty) Ltd
A registered Accountant and Tax Practitioner.

Understanding your Business!

Getting out of Debt

Getting out of debt

I am sure this may be one of the difficult exercise you may need to embark on. But for a healthy environment is deemed necessary to happen to create a positive environment for yourself.

Let us first realise that the decision to cut off your debts does not only involves paying them off. It means changing your old ways of spending money.

I have few important pointers that will help you embark in this journey.

  1. Create a practical budget
    A budget teaches you how you must spend your money. Create it and follow through. The budget will help see if you have funds for certain things or not. Especially those that we can do without.

2. Get into the habit of buying things cash.
This will teach you to live within your means. Impulse buying almost disappear when you buy for everything in cash.

3. Prioritize paying off the debt with more interest rate
Make sure the decision to pay off your debts does not overwhelms you that you get the pressure wanting to pay for everything at once. Tip: Concentrate more on the debt that accumulate too much interest. Pay it off and move to the next.

4. Dedicate a certain percentage of your income to savings
As you create your budget, make sure you do not leave out at least 5% – 10% to your savings. This will help you with those unexpected expenses that you would not have budgeted for.

5. Generate more income
Cost of living is too high. To a point where even if you were to request for a raise you will still find yourself needing to stretch. Thus I say create multiple streams of income. This is necessary for everyone. It will help you a lot with cashflow.

6. Be patient
Acknowledge that it is not going to be easy to get yourself out of the trap. And unfortunately there is no easy way out.
Be careful of those programmes that promises to get you out quicker. Make sure you understand them before you sign up should you need their assistance.

Compiled by Ms. Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting (Pty) Ltd

SCALING YOUR BUSINESS

Many business owners are unaware that growth and scaling are not the same. Growth is defined as an increase in capacity, operations, and revenue, but this increase comes with a concurrent increase in costs for the company to earn more money.

Scaling entails gradually and steadily expanding a business to sustain its growth over time. Your company is scalable if it can handle increased customer demand without significantly increasing its expenses to meet that demand. With scaling, you sacrifice less to get the same results.

How do you scale your business?

1. Automate processes

If there is anything that the current pandemic has taught us as entrepreneurs is to learn how to be innovative. We were forced to leave our comfort zones. We had to convert some of our services or products sales to be obtained online. We learned to be more virtual. Some companies have also realised that they do not need staff full time at the office. Which became beneficial for both the employer and employees. Employers save in terms of office consumables, employees can now work flexible time and are able to spend more time with their families as they wouldn’t spend most of the time stuck in traffic traveling to and from work.

2. Offer skills and support programmes to your employees

In as much as customer retention is important to our businesses but the most important stakeholders in our organisations are our employees. Equip them with more tools and resources so that they can perform better. Keep them engaged and interested by facilitating with more skills and development to be effective at their jobs.

3. Have a plan to reach your target

When you have all your goals written down and plans on how to achieve them, you need to revisit them as often as possible so you can remain accountable. Scaling is an excellent time to be in check of your progress and reflect on the new direction your company is taking.

We need to speak about growth and scaling as soon as our businesses start operating. Often we glamorous being small business owners long enough. Let’s allow in opportunities to expand.

Happy trading!

Compiled by Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting. Dikeledi is a registered Business Accountant, Tax Practitioner and Business woman.

To book a consultation with her please email her personal assistant on PA@matsobanemetja.co.za

Scaling your Business

ADVISE TO A NEW AND EVERY SMALL BUSINESS OWNER

It is a new year and one of your new year resolutions may be to start a business. Whether as a side hustle or full-time it doesn’t matter, it is still a business. I have compiled the following few pointers to assist in building your entity

1. Register your business
Having your entity registered will sort of force you to have all the lagalities in place. Have the name, registration number so you will be able to open a separate bank account for your Business. It will also be easy for people to do business with you. Having your brand identity, Invoicing clients for easy payments, etc. This will encourage more people to work with you.

2. Save a certain percentage every month from your profits
The main principle of business is to make a profit. And that in turn helps us achieve the secondary principle which is growth. The same way that you used to have a savings account under your personal capacity, we can implement the same habit in our businesses. Having money saved will help your business with the cash flow. You do not need to wait for invoices to be paid to keep a float. Cash flow is the heartbeat of every business. Money saved can aslo assist with buying more assets for the business.

3. Track your Fuel and travelling expenses when using one vehicle for both business and personal
When you are starting in business you obviously do not have much of assets to use for business thus you end up using the one car you have for both business and personal. To help control these expenses so that your personal expenses do not overlap to the business, please make sure you keep track of your mileages and fuel use. This will help you stay in control. In true essence your personal traveling expenses should be covered by your salary. Thus, if it is not possible yet, you need to help yourself by creating proper systems in place so you can remain disciplined.

4. Develop a Bookkeeping system / routine
You do not have to purchase an accounting software for this to be possible. You can make use of an excel spreadsheet to record all your transactions. If you can, please hire a Bookkeeper or an accountant on a retainer basis. They will help in making sure that the transactions are categorized accordingly. Where you may record a loan as an income for e.g a professional will help correct the Misallocation so the data captured reflects the true performance and position of your business. If you cannot afford to pay the retainer on a monthly basis please check if they have any flexible payment methods to accommodate you.

5. Earn a salary from the business
It is not easy but it is important. Your salary will help to cover your personal expenses. You need to still contribute towards your retirement savings, life covers, medical aid, insurances, etc.

6. Hire an Accountant who understands small businesses
An experienced finance person will help reduce tax obligations by introducing ways to save your cash. In South Africa we have various legal ways we can take advantage of to save up on taxes. Big businesses are exploring them, Small businesses must follow suite. This technicalties do not only help us in monetary value but assist in gaining momentum and exposure. You will have to consult with me at a fee to learn more on this 

A lot goes into running a small business as you wear many hats as a start-up. Thus it is a lot easy to overlook this important factors and only realize when it is too late

Compiled by Ms. Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting. Dikeledi is a registered Business Accountant and Tax Practitioner.

To book a consultation with her please email her personal assistant on PA@matsobanemetja.co.za

Business Blog!

Helpful Financial Tips in planning for 2022

1. Learn to budget
Working within a budget assist us to remain in control of our spending. Budget serve as a guideline to remain in control of our finances. If you know how much your monthly income is, and are able to write down your expenses in order of importance this will help you to not overspend. And you will also avoid emotional spending. We need to learn and practice to live within our means.

2. Invest and Save
Have a separate investment account for each project you would like to achieve and set a goal. For e.g if your goal is to make renovations for your house or installing new furniture, set a goal and time frame and start saving towards the project. This will help and avoid us in obtaining unnecessary credit that we might not be able to pay in the future. Especially if your goals can be achievable by using cash. Cash is King!

3. Multiple streams of income
There is no best time to start a side hustle than now. If there is anything that the pandemic have taught us in the past 2 years is that one income is not enough. We need to be innovative and see what else we can do to generate extra income outside our 9-5
Our day to day job offered us skills that we can utilize even outside our normal work. You can use your unique talents to create extra income. Work on it, plan and perfect your craft. You start and improve as you work. Practice make perfect. Don’t wait for the perfect time, there is never a perfect time to start. Start where you are with what you have. The rest will follow.

4. Pay your bills on time
Paying on time save us from incurring interests for late payments which will eat up on the same income. You don’t want to pay a 12 months debt for over 24 months just because of the growing penalties. Paying on time also has the benefits, such as lifting up one ‘s credit score. We need a positive credit score for the big purchases such as buying a house, vehicle, etc.

5. Set short and long-term goals.
This point is taking us back to point 2. Simply because saving can be used for our short term goals whereas investing is mostly for long-term. Proper planning and discipline is required in order to achieve this.

Wishing you a very successful year, filled with joy, wealth and prosperity!

Prepared by Dikeledi Seoloane, on behalf of Matsobanemetja Business Consulting (Pty) Ltd.

http://www.matsobanemetja.co.za

The important of Independency in Business

Business is not easy, we are most likely the generation that is classified as the ‘FIRST’ to embark in this entrepreneurial journey in our families. And that is thanks to our young democracy.
It is also understandable that in your early years in business you will feel the need to have some form of support or companionship to help through the journey. Though it is advisable, but make sure while you are learning you must also fight to be independent in business.


Here is the reasons why:

  • To avoid being taken advantages of
    There is no doubt that a business is a transaction, and that is the most crucial element of business. Thus no one will want to be in business and not want to benefit. You therefore need to make very calculative decisions when you feel the need to build some sort of partnership or working relationship with others. Make sure that you and your business will not be comprised. Follow through the formal procedures, have your agreements in black and white, policies in places, etc. to cover and protect all the parties involved but most importantly you must come first!

  • Learn to say No
    Having to reject things that do not add value to your business is probably the most important sign of independency. I can give an example: Potential customers may insist on a discount even on their first purchase. At times they become manipulative and promise you things that are not guaranteed. They say things like “I will bring you more client”, “I will connect you with my network”, etc. Tip: Do not become desperate for a sale. Being desperate leads to sabotaging yourself and compromising the business profits. If it does not make sense to you and the business, the answer is simply No

  • Be less available
    Not every opportunity that presents itself to you deserve your attention. Be passionate about your business to an extent that you analyze everything that you must get involved in. Some opportunities might be covered with gold and be promising but may however not bring you the gold but the misery and end up ruin your reputation. As much as business is about money, you need to remember that there are lots of elements that build a business. Things like integrity, character, values, etc. once you have presented yourself to the masses you need to be careful that you do not compromise on these elements.

Compiled by Ms. Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting – Accounting Firm.

http://www.matsobanemetja.co.za

Business Relations

In business, we build relations as we connect with different people on different levels. But how we connect varies. We connect with some as our customers and some as our associates. At times we are customers to others – if you observe closely, it is actually a chain.

On this blog I would like to emphasize on the importance of creating and building business relationships. There are certain requirements though that qualify us to be associated with certain individuals. And this will then measure the quality of the relations we are going to build.

1. Have pure valuable content
It doesn’t matter the industry you are in, businesses are built on similar principles. Your content will be built based on experience, often this is the one we need most unlike the ones we read about from the books. When we share real experiences that many relates to, it makes your content so pure and can easily engage on the solution or better approach. Your work will create content for you, the one that you will share and add value to others. It is then when you realise how important you are to your community or circle!

2. Do not over-burden your relations with “support my business” quotes
No one is obliged to be doing business with you. Just because we connect does not mean I am now obligated to be your customer. Business relations are not limited only to this type of transactions. You may sell to them without making it seem you are being pushy. If you choose to do things this way – I am afraid you might loose potential associates that you were indirectly going to benefit from. We need to also remember that a business is not built solely on sales hence relations are also very important.

3. Invest in yourself and your business
Just like in our own careers, business also need us to be in the know of what is happening around us. It could be in current affairs or just industry changes. We cannot depend on what we knew when we first started our businesses. We are living in evolving times, things changes all the time. Being equipped with relevant info help us to be more valuable to others. We cannot expect to always be on the receiving end. Business relations are also a transactional. They are a give and take kind of set up. We transfer skills, knowledge and experiences. Much as you expect to receive, you must also be willing to give.

4. Relationships are nurtured
As an entrepreneur, you already know how important networking is to the life of your business. But it’s not just about creating relationships with key individuals, other businesses, customers, and vendors. Your ability to foster and maintain these relationships is what will set you up for the growth and long-term success you crave. You need to keep in touch even if you don’t need anything. Give without expecting anything in return.
Business relationships are like watering a plant. Try to manage them with proper care especially if you value them.

Business relationships are key to business success!

Compiled by Ms. Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting – Accounting Firm.

http://www.matsobanemetja.co.za

Saving Cash as a new Business Owner

1. Run Your Business From Home

This is one of the easiest ways you can start saving a lot of money that comes into your business. With this, you have to carry out the feasibility of your business within the area from where you want to operate first.

Rather than waiting to raise cash to rent office space that will later be used as the business premises, it is advisable to run your business from your home or reach out to a friend or anyone who has a free room and use it to run your business. Paying rent every month is far way cheaper than renting out commercial space.

2. Buy Used Equipment

One mistake as start-up / entrepreneurs have been doing is starting a business with brand new equipment or machines. This is not the way to go. It is expensive for you considering the fact that you do not have a lot of money to play around with. The only cash you have is the capital for starting a business so the money that you have needs to be conserved.

Look for established companies in the line of your business and ask them about the availability of the equipment that you need.

They may give it to you at a lower price. Whether they sell it to you or just lease it, both ways are way cheaper compared to going for new equipment. If the equipment is leased to you within a certain time period, try negotiating to the lowest rate and utilize it to the maximum at that period. This is up until such time you can afford to purchase new equipments, either cash or by utilizing the credit facilities.

3. Use Bartering, where possible

When starting a business, the only thing that should stress you out is how best you can conserve cash within your business so as to enhance its growth. Without conserving cash flow, businesses would rarely grow. Exchange services with other business owners where possible. But careful not to force this view to others. Both parties need to be in need of each other’s services and must be comfortable. You don’t want to ruin beautiful relationships with other business owners that might think you don’t want to pay for their services.

And most importantly:
– Learn not to fake success especially when you are at a start up phase. Go through the struggles wholly, the sacrifices and the compromises. The experience will add more value to you and your business growth.

http://www.matsobanemetja.co.za

Income Statement

An Income statement is simply, Revenue less your raw material, less your operational expenses and having the net profit.

To simplify it for you, I always refer to the income statement as the “business payslip”.

Every entrepreneur / business person need to familiarize themselves with how to read their business income statement. It is, after all, the fundamental report for understanding financial performance over a period of time.

There are many compelling business reasons to make sure you’re able to produce an accurate income statement–beyond just understanding your net income or net loss. You’ll need an income statement for:

– loan / credit qualification

– investor contributions

– tax preparation

Additionally, the income statements provide a window into your company’s financial health and can be used to guide business decisions. Since banks, investors, and tax preparers already know what to do with your income statement–as the owner of the business, focus on understanding what you can do with it.

You really need to understand how well / bad the business is doing. For it to be a useful instruments, prepare the report as often as possible, advisable on a monthly basis. That way you are able to rectify errors were applicable sooner than later.

An income statement forms an element of Annual Financials Statement, but it’s purpose as discussed is to highlight the business performance.

http://www.matsobanemetja.co.za

Daily Bookkeeping Routine

Let’s do our books right while it’s still early in the year, shall we?

As a small business owner / entrepreneur we often focus more on the operations of the business. Though there is nothing wrong with that, we however need to remember the role the figures play in our entities. Knowing our business performance start with recording daily transactions, accurately so.

You might not have time to do all this, I encourage that you have an admin person to assist. This will help decrease the burden you will have to carry at the end of each day.

You just need to have someone who will understand what they will be doing with little supervision from your side.

Here are few bookkeeping routines that will help you run your business effectively.

1. Record your daily sales and cash payments.

This gives you an up-to-date look at your accounts, showing you the money moving in and out of your business.

2. If your business accepts cash, reconcile it against receipts.

Doing this at the end of each day helps you discover cash shortages or overages in a timely manner, so you can figure out where the money went and identify errors or theft. Having to wait for the Accounting period for this to happen it will cost you a lot.

3. Review and reconcile transactions.

If your using an accounting software and it is connected to your bank and synced daily, there’s no need to wait for your monthly bank statement. Many accounting applications simplify reconciliation by suggesting matches, so all you have to do is review and approve them. Spending a little time on this task each day is easy and eliminates a grueling month-end chore. It’s also a good time to review pending transactions for any errors or abnormalities that may be cause for concern, so you can investigate potential issues promptly.

4. Record payments you receive and deposit cash.

If you receive cash payments, deposit them daily to keep your cash flow healthy and your business account records up-to-date.

5. Record and categorize expenses.

You can just snap a picture of the receipt and jot a note about what it was for – rather than sort through a stack of receipts at the end of the month and try to remember what each one is, and if it’s a billable expense, which job or project it belongs to.

6. Record inventory you receive.

Entering inventory into your system the same day you receive it keeps your system up-to-date, giving you a more accurate look at your stock.

7. Invoice your clients.

Billing clients in a timely manner helps them pay you on time. The products or services you provided are still fresh in their minds and if there’s any discrepancy with the bill, it’s easier to talk about it now rather than a month or more after the fact. The longer you wait to bill your client, the longer it will take to get paid.

8. Pay vendors (creditors), or at least schedule bills to be paid.

When you receive bills, review them for errors and look at the terms. If your vendors offer early payment discounts, schedule the payments to take advantage of them. Otherwise, set payment reminders so you can pay your bills on time and avoid late fees.

9. Back  / Save up your data.

If you’re not using cloud-based accounting software that automatically backs up your data, back up your financial data manually every day. Doing so gives you peace of mind that you won’t lose your data if you have a hardware failure, file corruption or some other issue.

Happy trading!

Compiled by Ms. Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting – Accounting Firm.
http://www.matsobanemetja.co.za