by Aleshia van der Ploeg, Director, VDP Legal Consulting
Do you know your business? I mean, do you REALLY know your business? Do you know what your finances look like or does your accountant simply handle that? Do you know what money is coming in or going out every month and are you actually making a profit? Do you know what contracts you have entered into, what the actual terms are and how long they are valid for? Are your tax returns up to date or do you assume your accountant is responsible for that too?
It is unbelievably scary how so many business owners are so busy working ON their business that they don’t actually know what is happening IN their business. Accountants not doing their jobs… Employees ‘diverting’ money… fraud….huge overdrafts and knee deep in debt… the list goes on.
I used to practice a lot of family law. I was blown away by how many women thought they were living the high life, left all the household finances up to their husbands, had no money or bank accounts of their own, and had no idea what their ante nuptial contract actually said. When it came time for divorce, in the majority of my cases, they had no money of their own to employ an attorney, they were completely surprised to find out that they were up to their ears in debt and they were heartbroken to realize they had signed an ante nuptial contract that stated that they were not entitled to anything at the end of the day. It is a very sad reality.
As I have become more involved with entrepreneurs and SME’s, I have come to discover that it is a very common occurrence for this to happen in our businesses too. We have all heard the stories of employee’s stealing ‘millions’ or the age-old ‘it’s my accountants fault’.
Do you know that YOU are ultimately responsible for filing your tax returns, even if your accountant submits the return on your behalf, and YOU are responsible for any penalties and interest for the late or non-submission of your return.
I had a client who owned a shop, and the location of the shop was a key-factor in running a successful business. She did not realize that her lease agreement was one of her most important ‘assets’. Unfortunately my client thought her rent was due on the 7th of every month (not the 1st as stated in the lease). Due to numerous (accidental) late-payments on the lease, there was a clause in the lease giving the Landlord grounds to legally cancel the lease on this basis without any notice. My client, who had invested a substantial amount of money in setting-up the shop, had to close down her entire business and lost her investment, due to the simple little error of not knowing what her lease agreement said.
Make time to work IN your business. Set up structures for weekly or monthly feedback and reporting on all the important aspects of your business. Draw up budgets, inventories and forecasts. Make sure your tax returns and financial statements are up to date. Conduct a yearly due diligence on your business which includes reviewing all your contracts, service agreements and any other legal issues; look at key issues of the business, including profits and financial risks. It may be worth it to hire a lawyer who has experience in this area - they know how to look for red flags that you may have missed on your own.
Aleshia van Der Ploeg LLB (RAU) was admitted as an Attorney of the High Court in South Africa in 2006. She is a member of the Law Society of the Northern provinces. She has 10 years post-qualification experience in corporate, commercial, labour and general law. She practised as an attorney and served as a Director before forming her own consulting firm. www.vdplegal.co.za | Email firstname.lastname@example.org
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