Financial Year End – A time of Reflection and New Beginnings

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Contributed by Nicolene Schoeman – Louw of Schoeman Law Firm, Cape Town

 

For obvious reasons, this is a very busy time of year for any business. It is also a time of reflection on the year gone by and the goals set for it. Whether these were achieved and if not, why not. As such in this time is important to reflect on the lessons learnt in order to steer into doing better business and further to celebrate the achievements.

Despite the associated financial and legal administration it is important to ensure that the necessary measures are revised or implemented to accommodate the ensuing year’s goals and business objectives.

 

  1. One of the key measures is to ensure that all agreements embody the ensuing objectives and update these where necessary.

For example, if the business is aiming on improving its Broad Based Black Economic Empowerment (hereafter BBBEE) Score, as envisioned in the Broad Based Black Economic Empowerment Act of 2003 as amended, in order to increase the business it does with government and larger businesses. The business may thus elect to implement an employee share scheme or take in a “black” shareholder by example. These transactions should be carefully constructed in order to avoid unintended tax and debt consequences for company and employee / shareholder alike.

Similarly, staff role clarification may be required in order to increase productivity and thus revenue, which entails amendments to the contracts of employment, job descriptions and human resources policies.  This, in addition to various affected systems and processes that will evolve with the implemented changes.

  1. If increasing cash flow is an objective on the other hand, revising client payment arrangements and supplier agreements’ are key. Besides it being a valuable cash flow tool, it is also an important measure to establish transparent business practices towards clients and suppliers alike.
  1. Ensuring supplier agreement terms are generally and financially viable are also an important measure in protecting the business ‘credit rating. Particularly as the National Credit Act 34 of 2005 as amended and its regulations provide for suppliers (creditors) to list defaulting debtors without issuing formal legal process. As such, avoiding misunderstandings regarding payment terms and ensuring that these are clearly agreed are from the outset vital in the protection of the business’ credit worthiness capital.
  1. As for client payment arrangements, in terms of the National Credit Act 34 of 2005 as, suppliers who extend credit to their customers, even in instances where this is an unintended outcome due to goods being supplied or services being rendered and payment deferred (payment following the rendition of services or supply of goods), must comply with the provisions of the said Act. This may even depending on the nature of the business or transaction entail registering as a credit provider or can even adversely affect the timelines in collecting outstanding debtor accounts.
  1. From a consumer rights perspective, transparent dealings with customers are increasingly important in terms of the Consumer Protection Act 68 of 2008 as amended. Customers are generally entitled to good quality and suitable products and services as aligned to their needs.

 

 

In Conclusion, therefore, it is important that a company’s objectives for the coming period are not only strategically aligned to projected and actual financial performance targets, but also legally implemented in a way that makes sound business sense. Contact an expert at SchoemanLaw for assistance today.

 

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