JOHANNESBURG - Owners of small businesses are expected to balance numerous responsibilities, such as managing the operations, production, marketing and human resources.
The importance of complying with legal, tax, labour and safety or health regulations can become submerged by the day to day pressures of the business and seem overwhelming, especially when the business owner procrastinates and shifts them to the back burner.
While most of the legal requirements a business owner needs to comply with occur only annually, they are but one of the many obligations in the early stages of the business cycle where the owner may be operating with a skeleton staff.
The impact of non-compliance cannot be overstated and in many cases a costly penalty or lawsuit could lead to the demise of the business and shift the owner’s attention away from the core management responsibilities.
As Paul McNulty, former US deputy attorney general, was known to say: “If you think legal compliance is expensive – try non-compliance.”
Here are five ways business owners can best approach red tape and compliance:
Be informed, know your risks
The first step is to familiarise yourself with all the relevant legal requirements as a business owner in a specific industry. It is imperative that you understand the legal requirements of owning a business and how the tax system affects your business. Labour laws, the Basic Conditions of Employment Act and the Consumer Protection Act, are designed to protect the interests of your business and the rights of your employees and customers.
The more you know about the required compliance frameworks, the better you will be equipped to obtain assistance from professionals like accountants and lawyers whose services are necessary for compliance.
Start by studying the basic guidelines available on the websites of the various implementation agencies, such as the Companies and Intellectual Property Commission.
It is imperative to regularly speak to advisors, mentors or compliance experts. Attending information workshops or courses is an efficient way to up-skill your knowledge.
Set your priorities
As a business owner, you are often too busy to become an expert in each area of compliance. Every day requires prioritisation of the day’s tasks and problems as well as remaining compliant with various regulations that govern your business. Get the basics right first and then improve on your compliance while running your business.
Prioritise tax compliance
Non-compliance with the requirements stipulated by the SA Revenue Services (Sars) or late submissions can lead to unnecessary and costly penalties. Fortunately, many Sars systems are designed to simplify the tax system. For example, you do not have to register for VAT until your turnover exceeds R1 million or pay the Skills Development Levy until your monthly payroll is about R40 000.
Avoid non-compliance costs
As a small business, it can be tempting to temporarily avoid compliance issues. However, when the business expands and grows to a size that will put your company on the radar of the compliance agencies, you may face severe penalties if you do not comply.
It is important to stay one step ahead of the game by approaching the agencies in advance for assistance in becoming compliant, rather than waiting to be caught out before you act.
Obtain professional advice
Accountants and lawyers help businesses to remain compliant, but some have been known to take advantage of the ignorance of business owners by over-charging for simple routine tasks which you can easily do yourself or are not necessary in your business.
Some accountants charge business owners as much as R3 000 to compile an information manual in terms of the Promotion of Access to Information Act, without telling them it has never been promulgated and probably never will be.
The more you educate yourself on compliance, the lower your accountant’s and lawyer’s bills will be. Accurate bookkeeping and financial statements are vital sources of information which can be used to improve aspects of your business like lowering production costs or setting the correct market related pricing.
By maintaining your financial records for such purposes you will obtain value from the cost and time spent on remaining compliant with accounting and legal requirements instead of viewing it as an unnecessary burden on your business.
Ben Bierman is a managing director at Business Partners Limited
- BUSINESS REPORT