“The only real mistake is the one from which we learn nothing.” (Henry Ford)
Without revenue targets, businesses are unable to measure their performance against past years, reward employees, or accurately forecast and plan. Targets set by leaders for individuals or teams can shape morale and expectations for employees and bring accountability to team actions.
But it doesn’t always work like this. You might have found yourself in the unenviable position where your targets are consistently being missed – despite your team leaders reporting that their teams are giving it everything they’ve got. Here are four reasons why this may be happening – and what you can do about it.
Reason 1: You set the wrong goals
For many leaders, revenue targets are calculated by simply adding a percentage to the previous year’s turnover to show growth. While this system may seem sensible, it’s actually very wrong.
When setting revenue targets, you must consider a number of factors that go beyond the achievements of the previous year (or quarter), and the current inflationary environment. Consumer behaviours change; sometimes overnight. The market adjusts and new competitors are always springing up. What’s more, a new technology could arise, bringing new challenges or rendering one of your products or services obsolete.
The first step to setting accurate revenue targets is gathering all the data. Once you’ve done a thorough analysis of the market, competition, and consumer behaviour, you should look at each product or service you offer and evaluate its existing sales and potential for new sales. Setting individual targets should result in much more realistic numbers.
Reason 2: Short-term thinking
Pressure to show growth can cause you to rely too much on channels that deliver speedy growth. It’s easy to fall into the trap of doing things for short-term benefit, rather than building your business one brick at a time. Loads of things that are time-consuming and have no obvious short-term gain could eventually reap huge rewards – things like building an organic online presence or nurturing a business community.
The demand for short-term growth can also lead you to abandon strategies that do work simply because they don’t show immediate success. There’s almost always a lag between implementing a new strategy and seeing an impact on your bottom line – often a little patience is all it takes.
Reason 3: Failing to plan
Having a revenue target is not the same as having a plan. At the end of the day, it’s your staff who will convert the proposed numbers into a reality. Your teams must be given the tools they need to meet your revenue targets.
Have your numbers factored in a new competitor? Then your staff need to know how to market around that new competitor, and your sales teams need to know how to answer the questions they’re going to get about the competitor’s products.
If it’s growth you’re after, will your current team be able to handle the extra hours needed to achieve it? Or do you need to add staff? If you need new staff, have you allocated budget for hiring and training them? And have you considered that they’ll operate at a slower pace in the beginning?
Your accountant (that’s us!) can help you gather the necessary data to turn your sales targets into an actionable, budget-friendly plan that makes them a reality.
Reason 4: Bad sales pipeline
You can only sell to customers who actually need your product. You can kiss your revenue targets goodbye if your sales team isn’t getting enough good leads. Without good leads, salespeople start changing their behaviour, wasting time trying to sell to clients they know won’t bite and/or giving deep discounts just to get a hit.
Poor-quality sales pipelines manifest themselves through deals that either don’t close or that take a long time to close. If this is something you’re seeing regularly, here are three questions to ask yourself:
Remember, revenue targets are most often reached by those companies that have gathered accurate data and planned effectively to reach those goals. Your accountant should be on speed dial when you’re putting together revenue targets (and coming up with plans to make them work).
“If you can laugh together, you can work together” (Robert Orben)
There’s no requirement or obligation for companies to host a year-end party for employees, clients or suppliers. This is true even if there’s a company tradition of an end-of-year bash, or where there may be expectations of a year-end party for clients or suppliers in certain industries.
Read on for the lowdown on the pros, cons and tax implications of hosting a year-end party (or parties).
The benefits of year-end functions
For many, a year-end party is a highlight. A great meal, free drinks and the opportunity to mingle socially with your colleagues. It can even be a motivator when linked to company performance over the year. Here are a few other benefits:
The possible drawbacks of year-end functions
The first step in arranging a corporate event should be setting a budget. Consider the costs – and the potential rewards – carefully. A boring or cookie-cutter party could nullify all the benefits – even if it’s not lavish. That’s why you need to make sure you host a thoughtful event that creates a positive and lasting impression of your company.
There’s also always a risk that staff, suppliers and even clients might conduct themselves inappropriately. This can cause reputational damage and sour working relationships. In extreme circumstances your businesses could even be held legally liable for employee behaviour.
Is it tax deductible?
A company year-end party for staff can be a tax-deductible expense where it’s regarded as a non-taxable occasional meal.
Where clients or suppliers are entertained at a year-end function, expenses such as meals, venue hire and live entertainment can be claimed as a tax deduction, but only if you can prove the expenses were incurred “in pursuit of business”. This means keeping a comprehensive schedule of the entertainment expenses along with the date, the venue, the company and people entertained, and the purposes of that entertainment (for example, prospecting for a new client) to prove to SARS that the expenses were genuinely business-related.
A claim for entertainment expenses is likely to be flagged for investigation by SARS, so don’t risk it unless you have verified your tax position with us and your ability to prove that the expenses claimed are legitimate business expenses.
Remember also that input VAT cannot be claimed on entertainment expenses, including but not limited to business lunches and dinners; annual functions; and expenses incurred for entertaining clients at restaurants, bars and night clubs.
To host or not to host?
If you are considering a year-end event, we invite you to rely on our expertise. While we won’t offer to help with the décor, we can assist you to weigh up the pros and cons for your specific business. We can help you to determine a budget and take care of all the tax stuff, so you can enjoy all the benefits of a corporate function with confidence. Cheers to that!
“The hardest thing in the world to understand is the income tax.” (Albert Einstein)
With an increasing amount of business being conducted online, it’s perfectly possible to live in one country and earn an income in another. If you are conducting services for global corporations and earning foreign income in another country, you could get caught up in a world of tricky tax situations. Under these circumstances, you can find yourself being taxed twice, both in the country where the business is conducted and here at home in Mzansi.
To prevent this scenario and encourage South African residents to bring valuable foreign income into the country, the government has enacted Double Taxation Agreements (DTAs) with 79 foreign powers. If applied correctly at tax time, a DTA should mean you don’t pay tax twice. But how does this work, and just where are the pitfalls?
Check your residency status
Many people incorrectly believe that DTAs mean that income earned in a foreign country is taxable in that country. While the exact terms of each DTA are different, most DTAs actually give taxing rights on employment income to the residential country, unless the services are rendered elsewhere. This means that if you live in South Africa, you should pay all of your taxes in South Africa. On this basis, any taxes also paid to the government of the country in which the income was earned might qualify you for tax relief in South Africa.
Surprisingly though, in some cases, and depending on the domestic legislation in the particular country, an individual may find themselves tax resident in both South African and the other country, regardless of where you live. This can have enormous implications on your legal obligations and the taxes you end up paying. Luckily, all DTAs cater for such instances, with a set of rules to apply to determine which of the two countries you will ultimately be deemed tax resident in.
That’s why it’s vital to ask your accountant to first examine the laws and determine just where you are officially resident and how the specific DTA applies in your case.
Do you need a tie-breaker?
Some South African residents working in foreign countries should normally be given tax residency certificates by the country where they make their income. But don’t fall into the trap of assuming this means you’re not a South African tax resident. More likely you now have dual residency for tax purposes and will be required to apply a tie-breaker test under the specific terms of the relevant DTA to determine just where and how you need to pay taxes.
For something that was supposed to make things simpler and decrease the tax burden on residents earning money overseas, DTAs can actually be somewhat onerous.
Does the DTA even apply?
The fact that there’s a DTA between South Africa and the country of your income may fool you into thinking you’re automatically exempt from paying taxes in one of the two countries, but this is not so. DTA relief is something that must be proven in South Africa before it can be granted. SARS will want proof of your claims – only once they have satisfied themselves that the income is earned offshore will the DTA exemptions apply.
The bad news is that if you do not have the relevant supporting documentation, SARS may choose to view the omission as a material non-disclosure. The good news is that your accountant can help you assess what documentation you need.
“In the business world, the rearview mirror is always clearer than the windshield.” (Warren Buffett)
Every business should conduct an extensive review of its business operations at least once a year. Doing a review allows you to track your company’s progress towards achieving its goals, to evaluate current strategies, practices and operations, and to determine what’s working and what isn’t. Think of it like going to the doctor for an annual checkup.
The benefits of a year-end review
A year-end review enables you to evaluate business performance across business functions and to identify trends and issues before these become serious problems.
It requires checking progress on goals, objectives and key performance indicators (KPIs). This will reveal what is already working well (these processes can be enhanced and replicated), as well as what is not working – prompting you to realign the team or change tactics. All of this empowers you to chart a well-informed plan of action for the year ahead.
What should be included in an annual business review?
For a big-picture understanding of your business’ performance across the various business functions over the last year, a multitude of factors should be reviewed. Luckily, we can help with putting everything together.
The smartest way to benefit from a year-end review
Collating all this information may seem overwhelming, but with our professional assistance it can be done quickly and efficiently.
Our team will also assist you to understand the numbers and what the data says about your business. This insight will enable you to enhance or duplicate the processes that are already generating good results and to identify the changes necessary to obtain better results in other areas. It’s all about creating a solid plan for the upcoming year, so you can set your business up for greater success in 2025.
“Over the next few years, we are also implementing a global minimum corporate tax to limit the negative effects of tax competition.” (Enoch Godongwana, Minister of Finance, Budget 2024)
There have been significant shifts in the corporate income tax landscape in South Africa and globally. Recent trends noted by the OECD and The Tax Foundation include:
Corporate tax rates have declined from the highs of an average 40% in 1980 and 28% in the early 2000s to around 21%. South Africa has also reduced its CIT rate over the years, from 30% in 2000 to 27% in 2022 – but it is still substantially above the international average.
A new global tax treaty
Dubbed “an historic step towards changing the financial landscape”, 110 UN Member States, including South Africa, recently voted in favour of the terms of reference for a new global tax treaty. The UN says that all 193 UN Member States could vote on a finalised UN global tax treaty as early as 2027.
In the meantime, more than 140 countries have already agreed to this global minimum tax, and some have already implemented this tax reform, including South Africa. Finance Minister Enoch Godongwana announced in his 2024 Budget Speech that South Africa will be implementing the global minimum tax with effect from years of assessment commencing on or after 1 January 2024.
Why a minimum global tax?
Multinational companies use tax planning strategies, like moving profits to low-tax jurisdictions, to minimise their tax liabilities. A global minimum tax aims to ensure that these multinationals pay their fair share of taxes, regardless of where they operate.
This limits the race to the bottom of effective corporate tax rates for large multinationals, with countries competing to attract income by offering low tax rates and tax incentives.
On a social responsibility level, it goes without saying that companies should contribute fairly to the financial stability of the countries they operate in.
Who is affected?
A global minimum tax will ensure that any multinational enterprise group with annual revenue exceeding €750 million (+-R15 billion) will be subject to an effective tax rate of at least 15%, regardless of where its headquarters, operations, sales or profits are located.
Implementation in South Africa
Government plans to introduce two measures to effect this change for qualifying multinationals:
What is the expected impact?
A global minimum tax will ensure that multinational corporations contribute their fair share of taxes in jurisdictions where they operate, curbing tax avoidance and safeguarding countries’ tax bases. It’s expected to generate significant additional tax revenues for many countries, especially those in the Global South.
In South Africa, National Treasury predicts that implementing the global minimum tax will bolster our corporate income tax base by approximately R8 billion in 2026/2027.
Whether a global minimum corporate tax can deter corporate tax avoidance and evasion remains to be seen. Concerns have also been raised about the impact on companies’ competitiveness, likely increased compliance costs, and possible double taxation.
Will it affect SMEs?
In the long run, the changes should benefit smaller local companies. With a broadened tax base, there may be opportunities in South Africa to lower the personal income tax burden on individuals, or to consider more globally competitive corporate tax rates than the current 27%, which is well above the international average.
The change may also create a more certain and predictable global tax environment, which is conducive to long-term planning and investment decisions.
What needs to be done?
Qualifying multinationals should assess their effective tax rates for the income inclusion rule and domestic minimum top‐up tax from 1 January 2024. Their local and global tax planning, and financial structuring, may need to be reviewed and updated.
While this probably doesn’t apply to your business (yet), companies of all sizes should note the significant shifts in international and local tax policy. This makes our up-to-date, expert tax assistance a must-have for every company navigating the changing tax landscape.
“Always treat your employees exactly as you want them to treat your best customers.” (Stephen R. Covey, author of ‘7 Habits of Highly Effective People’)
Good business leaders recognise that regular employee performance reviews play a vital role in improving transparency, identifying talent, and enhancing performance – yet often this process is handled in a casual fashion or even not implemented at all. In fact, a recent study revealed that only 13% of employees and managers, and only 6% of CEOs, think their organisation’s performance appraisal system is useful. Even worse, 88% of respondents said their current performance review negatively impacted their opinion of the HR department.
Here are six tips for turning those opinions around and getting maximum value from your performance reviews.
Tip 1: Really listen
During a review it’s vital that the employee feels truly understood. Data shows that leaders who come to reviews with preconceived notions and a list of complaints are more likely to have unhappy teams. A massive 85% of employees would consider quitting if they thought their review to be unfair – and there is no surer way of making someone feel unfairly treated than to brush off their side of the story and make them feel unheard.
Companies should therefore focus on getting their leaders to:
Tip 2: Be transparent
Because performance reviews are often linked to raises and other benefits, it’s extremely important that the employee understands exactly why certain decisions were made. Giving clear, fair, specific and actionable feedback allows the employee to see how they can get a better raise next year and what they need to do to gain a promotion. Vague or unclear feedback only leads to distrust of the system – and of the company’s HR and leadership.
Tip 3: Keep looking forward
While the very name “performance review” suggests a look back over the course of the past year, it’s also the ideal time to project forward into the future. By using the review to set new goals and speak about career progression, your leaders will be able to motivate employees to do well. Knowing that you’re being considered for promotions or that there are rewards at the end of the tunnel is motivational. Little wonder, then, that forward-looking performance reviews have been shown to improve employee productivity by 13%.
Tip 4: Your employee’s opinion matters
A decent performance review is a conversation between employer and employee. It is a chance to listen as well as to speak, and this dynamic should be carried through to the very design of the review. Speak with both managers and employees about the reviews. Ask them what works and what doesn’t and encourage them to suggest things that would make the process more useful. Then actually adjust the review to accommodate these requests where possible. Employees who feel they have power and buy-in over the review process are far less likely to feel hard done by.
Tip 5: Little and often
According to many business experts, traditional annual business reviews are inadequate. Doing them once a year leaves you with too much ground to cover and places undue stress on the employee – who is then less likely to function optimally during the review. In fact, a recent study suggested the pressure can be so bad that 34% of millennials admitted to crying during their performance review.
By having more frequent and casual performance chats, and addressing any issues when they arise, companies can reduce stress and get better results. According to a report by ClearCompany, employees at companies that use continuous feedback systems are 65% more motivated and 66% more productive.
Tip 6: Be prepared
At the end of the day, an employee performance review is about reward and improvement. Before going into a review, it’s important to know exactly what rewards you’re able to offer, and how these can be implemented.
Work with your team to create a system that is not only motivational, but effective.
“The interim reconciliation process has become an integral part of the employer reconciliation and assists employers…” (SARS)
Employers are assisted by the interim EMP501 reconciliation, says SARS, because it makes it easier to:
Of course, there are other benefits, such as maintaining your compliant tax status, and avoiding wasting money on stiff penalties and interest.
It goes without saying that you want to reap all these benefits for your business. Allow us to help you to understand what needs to be done. We will be able to assist in ensuring a smooth, hassle-free submission process – even with the next deadline right around the corner.
EMP501 Reconciliation fast facts
Potential pitfalls
The EMP501 Reconciliation is an intricate process which creates many opportunities for errors:
This is an intricate and time-consuming process, and, as SARS puts it, “accuracy and timely filing are critical”.
Consequences of non-compliance
This is serious business. Inaccuracies or late submission can result in severe consequences.
The bottom line
The penalties are stiff, and the submission process is fraught with opportunities for inaccuracies and errors.
