Category Archives: Management

How Nestle, Standard Bank & Deloitte muscled-me-out of a deal I brought to them

By Sean Goss. You can find him on Twitter @GossSgafcTruck owners

When I came into the owner driver game there were already substantial players. ABI/SAB already had these schemes operating within their depots across the country. Unions were vigorously opposed to them. My consulting firm was rendering normal services to entrepreneurs.

A few owner drivers wanted a Black firm to act as “Management Company”. We thus set up an additional firm, known as, Full Colour.

Within a month from the launch I faced difficulties with ABI management, for questioning their remuneration model. The problems surfacing in many probes today were identified way back then.

The Owner Driver Scheme that I built from the ground-up was the Nestle Scheme (1999 to 2003). This happened after drivers from Nestle approached me to explore this opportunity for “Black Empowerment”. We immediately approached management, who were very elated to “outsource” their logistics, and minimize union activity within the sector. With the logistics managers, we vigorously crunched the numbers and refined our costings of the models, to avoid the problems bedeviling other schemes. In short our model factored in all potential costs and guaranteed profits for the drivers. It was a success, until it was scuppered.

I devised an empowering model that would “hold hands” and gradually guide these budding entrepreneurs into self-empowerment. The model was two-pronged, i.e. rates would be paid into a trust account, vehicle leases would run from this account, with public, and goods in transit insurance. Surpluses would then be paid to the individual drivers’ bank accounts. Productivity shot through the roof and Nestle drivers were outperforming other schemes such as SAB/ABI, Kimberley Clarke, etc.

We concluded finance and logistic/fleet agreements with Standard Bank, which I had brought onboard. At the initial stages we managed two depots, Isando and Pretoria. Parties to the agreement were, Full Colour, Standard Bank, Nestle and the Drivers.

Within 6 months a white-owned management company was contracted to operate the rest of of the country (using my intellectual capital). This I regarded as fair competition, and had no qualms, even if they stole my strategies – until the Pretoria depot management made allegations of theft and fraud against me, summoned me to a meeting where I was humiliated by Standard Bank, (that I gave the business). This was in the year 2000. Deloitte (Nestlé’s auditors), audited the trust account, and save for some admin errors found no impropriety. The management, however terminated the contract, and I let it be…

A year later (2001), management at Isando started circulating rumours that I was “stealing” the owner driver’s money. In the spirit of transparency, I regularly provided management accounts and bank statements, dispelling all their fears. Drivers were doing well, earning more than Nestle bosses. A comical situation arose when management would claim I’m “stealing from the drivers” and yet complain in private meetings, that I was “paying them too much.” They would recommend that I operate like other management companies, or like Terrafin Holdings Ltd. I was shocked to learn that Terrafin, owned by Willie Rautenbach was contracted to Nestle. Google the fraud and theft that this company was responsible for, covered-up by Standard Bank and the press. Only Noseweek investigated this corruption.

Stannic goes along with R15m Fraud

I resisted all their efforts to become part of the “management company” system, i.e. being one of the anointed companies contracted to Nestle, paying the drivers a minimum wage and giving work to mostly white service providers. WEE. I empowered mostly black service providers.

Then the wheels came off. Nestle notified me that “their auditors”, Deloitte, were commissioned to conduct a forensic audit on my scheme, due to “countless allegations of theft”. I was prepared to co-operate but then I remembered that I lost a previous contract at Nestle Pretoria. After legal advice I informed them that I would not co-operate and that they could do whatever…I wasnt afraid of them.

As an accountant I have many friends in the industry and thus assembled and procured a specialized team of chartered and forensic accountants. We scoured through the records of the lost contract in Pretoria and uncovered huge fraud. (Bank statements and correspondence were still emailed/mailed inadvertently by bank). We pored over all this material and compiled a huge report, highlighting the malfeasance on the part of the White Management Companies.

Nestle management were unaware of my investigations. When summoned to their meeting on 9th October 2002, I brought my material with bundles for all parties present. Management looked confident and assumed I would be pliant, like before. I surprised them with my damning report and shocked them further by suggesting that the Scorpions be brought in to investigate their entire scheme, and that Deloitte could not be trusted since they were implicated in Terrafin cover-up and other worldwide audit scandals (then rife in 2002).

What surprised me was how these normally diplomatic managers/ business people turned into foul mouthed rude people. They verbally attacked me and tried to cast aspersions on my character. I dug in my hills and decided to leave but knew I have upset their little applecart.

Within one day, my normally cordial Black partners turned hostile. I then learned that they were called by Nestle and instructed “to talk to me”. I would not budge. I senior director from Deloite turned up unannounced and begged me not to proceed with the investigations. A week later my “partners “changed the locks on our office, kicked me out, blocked me from accessing the bank accounts (bank never notified me) and I was left destitute and unemployed.

I then sued Nestle for R1million rand and my lawyers commenced with preparations. Mysteriously one evening I was followed by a 4×4. Several attempts to drive me off the road were made. I contacted my friends, who came to my aid and we drove the thugs away. Documents filed at my house, also mysteriously disappeared, after a”Telkom Visit.” I suspect it was all part of a ploy to bully and scare me into dropping the investigation.

My family pleaded with me to drop the case for my safety and move on, which I did. But when looking at events today – the bully tactics and thuggish behaviour of established business such as the “closure of opponents bank accounts” and your own Black people sell-you-out for money and economic terrorism, I can relate.

Why Most Partnerships Fail

It is often recommended that budding entrepreneurs consider partnerships to establish strong businesses. It is seen as a solution to the ills that befall the “one person”, show. Different skills are combined when are partnership is forged.

Many successful partnerships have been going for years, especially in legal, accounting and medical firms. And businesses benefit greatly from the diversity of skills, as well as the injection of capital.

Unfortunately it is not all smooth sailing. For smaller firms, a substantial amount of partnerships have turned out to be nothing, but disasters. No binding partnership agreement, nor any other amount of counselling or consulting will save a partnership if it starts to unravel.

Business Partnership divorces can be even more traumatic and stressful than a marital divorce. Prolonged, subsequent court battles also takes its toll on the affected individuals.

Unlike bigger firms, partnerships in smaller businesses come about,almost always, as a result of friendship and family relations. Its with this “taking on”, of friends and family, where most of the problems lie.


An established sole proprietorship business, decide to appoint a partner. This partner has never worked in the business since its inception. He is nevertheless, elated to part own a business.
Of course, the new partner is entitled to a salary and demand all the other perks that comes with running a company. When the partner learns that he must forgo his total or part of salary in tough times, the tension starts to mount, inevitably leading to a collapse of the partnership.


A business owner is approached by an “influential deal maker with all the corporate or government contacts”. Out of desperation for business, the current owner gives the deal maker a share of his business. But as months go by, no new business transpires. But our new partner demands a salary and perks. Conflict erupts and that spells the end of the partnership.

The two scenarios, above are not exhaustive, but just two examples of typical, causes of partnership break ups.

In most, but not all, partnerships are people who want the benefits, without the responsibility that goes with running a business. Since we are social beings, we want to extend that friendship into our business lives. Beware, nothing destroys a friendship, like a business relationship, gone sour!Running a business is stressful and demanding, dont add to the pressure by taking on a partner,who cannot handle these challenges. Develop a management team, and delegate, but retain your equity in the company.

It is a fallacy, to think that you need a partner in your business to make it a success. Yes you need help, but does it really warrant taking on a partner?

Take on a partner as your very last resort, when you close to retirement for instance.


Tax Planning for the Small Builder or Contractor

The failure to plan for tax prior to a business being formed leads to inevitable tax problems that could so easily have been avoided, have the contractor considered reading widely.


The legal structure for the building business is crucial. Many builders (and other types of businesses) are oblivious of the impact taxes have on the type of legal entity considered. There are three popular types of legal entities. I.e., the close corporation, the PTY (Ltd), or the sole proprietor. More on how taxes affect these entities later.


a)      Compulsory Taxes and registrations.


On establishment of the business, there are some compulsory taxes and statutory matters the business will have to register for.



  • If a CC, Income Tax. Or the Income tax number of the individual(s), for a sole 

      proprietorship or partnership.


  • Value added tax (VAT), but only if the business generates more than R1million per month turnover (R84 000) per month. Or voluntary registration if a minimum of R50 000 per annum can be proven.


  • Whether the business employs people or not, Pay-as-You-Earn (PAYE), tax remains compulsory. So if you the sole owner/director, you remain liable for tax.


  • The PAYE returns are submitted monthly, and VAT bi-monthly.


  • Register any employees at Department of Labour for Unemployment Insurance.


  • And importantly for the building industry, Registration for Occupational injuries (WCA), also remain important.


The tax rate for companies is currently 28% of profits. But SME Contractors can qualify as Small Business Corporations, which entitles them to a reduced rate of 15%!



b)      Legal Tax savings

  How to maximize taxes.


  • Building contractors can use capital allowance on the equipment that they own.


Company A generated a profit of R40 000, and did not use allowances, so it was compelled to pay (R40 000 X 15%)=R6000.00 tax.

Company B, also generated a profit of R40 000, but valued all their assets/tools and arrived at a value of R80 000. The allowance wear and tear is about 25%. Plus they took advantage of s12B allowances, which entitles them to a 50%, write off on equipment. Calculation (R80 000X25%) =R20 000+(R80 000X50%)=R40 000, Total R60 000.


All taxable profits (R40 000-R60 000), were wiped out, and the business owes zero tax!



  • Vat input on all equipment purchased once off, is also claimable.



If you cannot be guaranteed regular income, it would be advisable to remain a sole proprietor. There are advantages to this. A company will be taxed separately from its owners. So even if the company benefits from tax savings the owners still have to pay tax. If you a sole proprietor however, you can benefit from tax savings in your business, since these savings will be off set against your personal income.



a)      Tax Clearance and compliance certificates.


It is important for contractors that consider doing business with the state, to have a tax clearance. A tax clearance is obtained from SARS, and basically states that your business taxes are up to date.


For workers employed by your business, a certificate from the Department of Labour for Occupational Injuries, also have to be obtained.


In Some cases, businesses also have to be registered at the Building Council.



b)      Conclusion

       To comply with all of the above, a proper administration should be in place. Or 

        the contractor should opt for a skilled accountant or tax practitioner!



Sean Goss

Tax Advisor




Small Business Management, A Balancing act- Part One

So you have taken the plunge, and embarked on the painful, yet rewarding journey of starting you own business. With so many books on small business management, and advisors offering help, what do you do? As always the answer is never straightforward, but here is my humble contribution, to these vexing small business management questions.




Managing a business, is an exceedingly difficult exercise, as all small business people, only discover, after having established the business. For the most part, business management is a balancing act.




Allow me to expound on this balancing act. If a plumber quits his normal job, to go into self-employment he will be an expert in his chosen field, and remain confident that the money will roll in. Later on, he runs into cash flow problems, customers shortages etc. He then comes to the sobering realization, that business is not the bed of roses he thought it would be.




A small business owner concentrates at what he is good at, i.e. computer services, building, carpentry etc. But any business, no matter, how big or small needs an admin department, and an operations/production department. No matter how good you are at what you do, if you lack certain skills and competencies in administration, you business will constitute part of the 75 to 80% small business failure stats. 




You might create a workshop for you product and services, but do you have a proper administration department? Businesses collapse due to a lack of proper administration.


Here the balancing act comes in. Divide time equally between your administration and operations duties, as a small business owner.




Many new business owners cannot grasp the fact that an inadequate administration department leads to eventual business failure. This compels me to provide numerous examples to my clients.


Here are some to ponder on:



    • A potential customer sends you a fax or an e-mail requesting a service or product. The fax or e-mail goes missing. By the time you have located the e-mail, the potential customers have gone to the competition.


    •  You don’t maintain a customer list or e-mail list. You have many products and services to offer, but customers don’t know about it! You lose business.


    • You don’t maintain records on how much your customers owe you, and is therefore not in a position to collect.


    • You’re phones go unanswered, or messages are not noted from prospective clients.


    • Inadequate stationery (no business cards, letterheads with contact info)


  • You don’t maintain proper books of account, so spending and income patterns are not monitored, leading to stock and /or cash losses.




Jack up your admin department, to the same level of your operations department within the first three months of your new business. I am not suggesting you spend less

time on operations, only equal time on administration. That is a good start, but the balancing act  between admin and operations department goes much deeper. 

Small Business Management, A Balancing act- Part Two

As depicted in part one, business management is about balance between your admin department, and your operations department (your service or product). Both departments are equally vital your business’s survival.


More sub-departments, however, are necessary to ensure the efficient running of your business. The hard work, and even the fun, really kicks in when sub-departments are established. These sub departments, are not mysterious. They well known in business, but rarely implemented. It’s just that small businesses assume that only big business needs them.


Admin sub-Departments:

  1. Office Management: Office furniture, computer equipment, printers, faxing, correspondence, e-mail, incoming and outgoing mail, filing and storage, legal/contracts.
  2. Human Resources: Staff requirements, hiring and firing. If the business is very small this department can fall under office management.
  3. Marketing: Central files of clients, prospects, ezine publishing, e-mail lists and  auto-responders. Website, Advertising on and of-line.
  4. Finance: Bookkeeping, taxes, debtors, creditors, banking, cash management.



Operations sub-Departments:

  1. Production: The main product or service of the company.
  2. Quality Control: What is the quality of the service we render? Do we check products prior to delivery. Are clients called to verify their satisfaction?
  3. Training: If staff lack core skills, mistakes are inevitably made, which could cost your business thousands. Regular courses, internal training, and even further college studies might be needed.


If the preceding sub departments are in place, no further departments are necessary, be it a business with 1 owner and employee or a company employing 20 000 people.

Would additional staff be required, to run these departments for a very small business?

No additional staff  have to be employed, the owner wears different hats, in different departments. Divide time between all departments.


As the business grows one employee can take up, a position as “Operations Manager”, overseeing the three departments under him/her. A competent secretary can become “Office Manager” , later on she/he can assume the “Admin Managers” position.


Small business owners are normally bogged down in Production and Finance, to the detriment of all other relevant departments. Your excellence in your product means nothing if the product is not marketed (marketing department), you cannot market, if no proper contact or e-mail lists are maintained, (office management). And if you have a office, you market extensively, and manage your finances well, you will lack capacity without training for yourself or employees (training department). All

departments are inter linked, and equally important, whether you big or small. No getting away from that.



Is Your Business Loan for Expansion or Consumption?

The biggest concern with most budding entrepreneurs, is the availability of start up capital. A wide array of organizations, are availing funds to small business. Business loans  however, are becoming more difficult to secure. Many determined entrepreneurs have managed to scrape the necessary funds together, and build their businesses without any outside loans or funding. They however, are in the minority. Other small businesses, on the other hand, still failed despite the injection of loans into their businesses.

Many businesses, successfully securing loans have squandered their loans on irrelevant luxury items and assets not useful to the business. Lending institutions are continuously tightening the lending criteria, to avoid problems of this nature.

This article will not focus on loans failure statistics or debate whether a business loan is indeed necessary. Here I will attempt to address the proper utilization of a business loan for the growth of the business.

Funding of a business can come in various forms, i.e. loans from government, loans from a bank, second mortgage over property, equity/venture capital, loans from family or savings or investments.

When business owners calculate their requirements, they invariably add in their inventory and overhead costs to their capital requirements, such as machinery and equipment, and arrive at a total loan requirement, comprising capital and working capital requirements.

If more than 40 percent of the loan requirement is for working capital, the loan would basically fund consumption and not expansion of the business. A build-in working capital requirement in a loan is understandable. But a high working capital component reveals nervousness, on the part of the business owner, in dealing with future uncertainties. Business is all about risk, so a loan cannot cover dangers that the business will inevitably face!

Working capital and day-to-day expenses should preferably be funded from current revenues, not loans. This is a contributing factor to loans being rejected. Since lenders are averse to funding operational costs, from loans. In the same way as loans and credits cards are dangerous to funding living expenses, so are loans used for the operational costs of a business.

Apart from the danger of utilizing loans for consumption, there is a basic reason why lenders prefer to finance capital equipment, as opposed to overheads. The reason is quite simply, SECURITY! A business that goes belly-up, can either return financed assets, or the lender can attach these assets to defray any costs incurred, by the lender. No recourse is available to the lender, if the bulk of the loan was applied to overheads.

When writing a business plan, for a loan, the business owner should clearly list assets required, its value, and importantly the projected return on that investment. The focus of the loan requirement should always be on capital needs. Many institutions will gladly provided a 10 percent working capital component inthe total loan, if the business plan is convincing. Another advantage would be the “own contribution”, by the entrepreneur. The higher the own contribution, the better the prospects of securing the loan.

It is advisable that any business owner should engage the support of financial consultants and accountants, not only prior to the loan application, but after securing the loan as well. A frugal plan, and budget should be drawn up to guide the business, as well as monitor the utilization of the loan. The budgets should also be split between normal income and expenses, and capital budgets. This will ensure that the business derives maximum benefit from the loan, boost revenues, so as to ensure that the loan commitment is settled speedily, hopefully before expiry date.



Contact the Author
Sean Goss

A Practical Debt Repayment Plan

The recession has pushed even the most financially responsible persons amongst us, into a debt crisis. The interest on arrear/late payments exacerbates the situation even further. The pile of bills is increasing, and it just seems that there is no way out. Or is there?


Debt management to each household or business is unique. No matter how appealing any debt management program sounds, it will only work if discipline and dedication is applied.


Here I offer a guideline tried by a few clients whom claimed that it not only worked but also became fun after a while.


For the Household


  • Collate all bills in a folder, and don’t discard any invoice, statement or letter of demand.
  • Take the balances from every single statement, and list it.
  • Transfer the balances on to a spreadsheet, starting with the most important, to the least important. (Mortgage, Vehicle repayments, electricity, groceries, etc)
  • Split the due amount between long-term and short-term portion.
  • Obtain totals. Don’t panic, even if totals reveal that you heavily indebted, this is a start.
  • Refine the spreadsheet, by listing the next 12 months.
  • Scrutinize the list and determine if there are any expenses/debt that can be considered unnecessary, such as cable TV, clothing accounts etc.
  • Under the monthly columns, start listing the priority payments, such as mortgage, vehicle repayment etc.
  • Target the short-term debts for elimination. Entertainment and food expenses should be slashed to cover one or two small debts.
  • If the totals reveal that payments are way above income, start playing around with the expense figures, by reducing each debt proportionally until it can be match your monthly income. Have one small debt that can be expunged completely.
  • Notice how extra cash is freed up after one month, to pay debts in the following months.
  • Follow through by looking at the complete picture on the spreadsheet.
  • Proceed to call your creditors, informing them that you will pay less in a certain month on a bill, and catch up in the following.
  • There are two important factors to bear in mind; PAY 80 to 90% of Priority Bills, and SETTLE, SMALL Bills. The amounts in-between can be stalled or deferred.
  • As you pay amounts on the spreadsheet, mark the items, and congratulate yourself.
  • After three months, you should notice an improvement, in your cash flow.

If it works, start paying extra on your debt.





For the business


The business owner has even more room to play with, than a normal salaried worker.

  • The business should be in a position to extract an age analysis listing of all debts for a certain period.
  • All the data can be transferred to a spreadsheet and the long-term component can be added.
  • Due to economic conditions debtors are settling late, so different repayment terms should be negotiated with creditors.
  • The first priority for any business is salaries, followed by rent, telephone, transportation etc.
  • Split total dues over a four-week period, starting with salaries/wages.
  • Determine if there are any arrears on debt and its long-term component.
  • Create week ending payment targets, i.e. Salaries, per week, or month end date, followed by the 7th, 15th, 25th of each month.
  • Categorize your debts in the same sequence as above, as per priority.
  • Lets use an example of monthly debt/overhead of say R50 000, might seem compelling, but divided by four weeks (R12 500) it starts to appear more manageable. Remember, you used to pay R50 000, once of at a certain period, say the 30th, your attempts to remain loyal to your own creditors by trying to pay the same amount as before got you in this mess, but now we spreading this debt over four weeks to accommodate your customers.
  • Your own loyal, struggling customers will pay you late (recession), so we factor their late payments into our own repayment plan, as opposed to rushing to settle all creditors.
  • If it appears that you might not hit the weekly target, find alternative means of raising the cash, but stick to your repayment plan. This is vital, if you are going to make the repayment plan work.
  • If you make every payment target, consider paying extra on your debt.



We assume that we need more cash to survive. We can work with the little we generate, even in situations where we lost income this repayment plan can work.


Seek creditors cooperation as far as possible, since their understanding is crucial to the success of any repayment plan. What gets people deeper into debt is panic and disdain for their creditors. They avoid creditors for months on end, and when action is taken, they have to raise vast sums, to settle one creditor, leaving them in a precarious position, with regard to their other debts.


Readers are however, advised to seek additional debt counseling if they in serious debt.


Author: Sean Goss





Unconventional Budgeting and Cash Flow Forecasting

Budgeting in a small business is a neglected area. It is only when business plans are required that the business owner will prepare a cash flow forecast or budget.

Most businesses divorce the budget from the cash flow forecast. In fact, the cash flow forecast is only furnished when requested by the bank in most cases. Businesses have yet to learn that the cash flow forecast is a valuable tool for analyzing internal finances.


Collapse a budget and cash flow forecast into ONE. And allow the cash flow forecast to serve as your business’s financial map, for he next 12 months. Budgets are vigorously implemented, only when a business starts shedding cash. And major expenses are cut, drastically, when the owners and their accountants draw up budgets.


A budget will target, run away expenses, in an attempt to bring it under control.  The main expenses to normally go would be staff costs (lay offs), insurance, advertising and stationery. Telephones are barred and transports costs are reduced radically. So the budget is expensed focused.


Furthermore, if a budget was drawn up for previous years, it is highly likely that, sales could have been too optimistic, and cognizance was not taken of credit sales and its impact on cash flow. Hence my departure from accepted practice, and proposing combined cash flow and budget.


Overheads/ Cash outflow

I concede, that high overheads, is a killer for many small businesses. But the obsession with overheads is not going to save your business. You in business to grow sales and not to be bogged down by high overheads! If phone calls are barred, or the advertising budget is slashed, more problems would be created, than solved. Evaluate carefully if an expense is linked to business growth, and think twice, before slashing that expense. Say you incur an advertising cost of $ 10 000.00 per annum, and it can be proven that it brings in $ 20 000.00 in revenue. Reducing the budgeted amount by $5000 will affect sales severely. If revenue is down, increase the advertising budget. If you lack skills, budget for more, not less, employees. And increase the telephone budgeted amount, you need that phone, to call more prospects. Of course, weak advertising campaigns, unproductive calls, and lazy staff cannot be entertained. Budget accordingly, but be very analytical in your approach.


Cash Inflow

Very little emphasis is placed on the cash income component, in a forecast. The cash inflow is only relevant in relation to how it affects cash outflow. If the inflow is too low, an adjustment is made to outflow. Rather remain focused on how cash inflow can be boosted as opposed to reducing outflows. Be optimistic about your cash inflows, not your revenues.

Don’t project for expected revenues, project for cash revenues, deposits, advances, sale of assets, based on current trends. A picture will begin to emerge of what your true cash requirements truly are in the business. If the report reveals that limited cash resources would be available, it means that more creative methods should be devised to increase cash flow, not radical reductions in cash outflows!


It might seem foolish to spend more on certain expenses, when cash flow is slow, but panic and fear is your worst enemy in a time of crisis.


If businesses don’t grow, they contract and die. The quickest way to shrink is to radically reduce important overheads.


Most businesses that reduce overheads, drastically, continue to remain stuck in a cash flow crisis! Energy flows where attention goes…


Author: Sean Goss



Proper Inventory Control

Inventory or stock as it is also called, can devastate a business. A business carrying inventory has a much more difficult chance of survival, as opposed to a  business rendering a mere service. A service business has a reasonable shot  at surviving. Many business owners have major concerns with their inventory. 


Herewith, some of the most common difficulties associated with inventory, and its most probable causes.

a)      Business is booming, but cash flow is slow. (Debtor’s leniency/mark-ups)

b)      Business is slow, but inventory is low or short. (Shrinkage /pilferage)

c)      Lack of cash to “stock up”. (Cash flow planning)

d)      Inventory on hand remains high. (Slow moving inventories)

e)      Cannot find sufficient inventory. (Planning)

f)        Remain in a loss position. (All of the above)


Administration and accounting for inventory should become a habit. A lot of savvy is also required if you going to make your inventory carrying business succeed.


·        Start by doing a proper inventory count on hand and valuation.

·        Identify slow or non-moving items in your inventory lists.

·        List inventory that becomes obsolete rapidly (highly important with restaurants)

·        If possible, code inventory items electronically.

·        Research mark-up and margins, and implement a reasonable gross profit margin. (If it is too high, the goods will not sell, if it is too low you will remain stuck in a cash flow rut).

·        Prepare a spreadsheet for your incoming and outgoing inventory. If an advanced point of sales system is in place, which interfaces with your accounting system, even better.

·        Consider taking out insurance for possible inventory losses, like fire, theft or natural disasters.

·        Stay on top of your inventory on a daily basis.


The most advanced computerized inventory system however is not enough. Regular inventory checks, is of paramount importance.                                                                         Example;

Inventory on a computer screen remains “theoretical”. Pilferage and shrinkage in most stores is a common occurrence, and a variance in physical inventory and theoretical inventory, invariably always exists. A quick formula would look like this. Inventory on hand, plus inventory purchased, less inventory sold- at –cost, equals theoretical inventory on hand. Perform a physical count, and compare that to your book values (theoretical value), and you will swiftly establish if you lost inventory due to pilferage or shrinkage.


Don’t waste cash by purchasing slow moving items. Sell all that inventory at a major discount and start focusing on items that bring in the cash.

Be careful with extending credit. Inventory adds to your working capital woes. Don’t exacerbate the problem by adding bad debt. Try to be a COD business, or provide major discount for early settlement. If granting credit is the only way, ensure that you


also secure reasonable credit terms from suppliers. If suppliers insist on cash only, then credit is not possible. If suppliers can grant you 60-day settlement, you can grant 30 days to your debtors.


Set aside 30% of daily takings for future inventory requirements. The saddest aspect of small business is that they lack cash for additional supplies and expansion. A business credit card can come in extremely handy. Buy inventory in bulk using available cash plus the credit cards available amount. Deposit amounts set aside for inventory into the credit card, at your soonest convenience. Banks are averse to finance inventory, but they gladly furnish credit cards. Take advantage of this.


Sell inventory at markdowns if it moves slowly. A loss will be incurred on inventory sold below costs, but cash realized on these sales puts you in a better position to move ahead.


In the restaurants business, 90 % of the inventory is perishable goods. Patrons, furthermore demand fresh food. And if the food purchased in a particular day, is not sold that very day, the restaurant will encounter serious difficulties. The remnants of unprocessed foods are useless, and nothing can be done, to recoup any losses. This clearly reveals, why the restaurant business is so difficult. Again, know what items on the menu will sell, and order only those items. Vigorous control over the kitchens where these supplies are processed cannot be overlooked. Negligent chefs and waiters cannot be allowed to waste those expensive foodstuffs.


Inventory problems cannot be isolated to one or two factors only. The reason why a continuous problem, with inventory persists is that business owners do not expand their investigations to a variety of complex issues. Managers and business owners should be “hands on”, and identify a problem as soon as it rears its head.

A presence on the shop floor is a necessity. Keeping an eye on employees as well. Inventory is stolen or wasted in many instances. Of course it is not possible to be all over at once, and losses are part of every business and unavoidable.


Pay attention to minimizing losses on all fronts, be it, inventory, cash, clients and the businesses reputation!


Author: Sean Goss





Setting Daily Cash Collection Goals or Targets

Open any book on business, or surf the net, and you will find information on goal setting and its importance. I am 100% in agreement with the setting of goals, but sometimes find fault with the distant or long-term goals. We set goals for the end of the year, or the month. Effectively, deferring the goal.


Long-term goals absolve its creator, of any immediate responsibility. So he/she goes into a “dream-like” state, hoping to accomplish the goal at month-end. When the goal is not attained, frustration sets in, leading to no further goal setting, and leaves the business owner in a rudderless state.


Most businesses set sales targets for a year or month. The sales will be recorded in accounting books, and substantial amount of those sales could be credit sales. So hitting the monthly sales target is excellent, but sales driven by targets would invariably be “credit sales”, and our old problem rears its ugly head again, CASH FLOW!


The conventional accounting for sales should be outsourced. The owner should be more hands-on with “CASH ACCOUNTING”, and set cash collection goals.

Try this cash goal setting strategy. Break down that huge goal of R 50 000 sales for the month, into manageable  “bite-sized chunks”, of say R2500 PER DAY! (That is 20 working days; a month has about 22 to 23 working days).  It prompts you into action immediately. From the moment you wake up, you have to work towards hitting your R2500 target at end of day.


And why not shift the focus away from a sales target of R 2500.00 to a Cash Target of R2500! Sometimes your cash and sales target would converge (Cash Sales), but as any good accounting student will tell you, it’s not the same thing.


Your cash target now becomes that debtor’s age analysis, not clients,(unless they cash clients off course) with outstanding payments, to your business. Plan your day, with only cash in mind, and embark on shrewd methods to extract cash from your debtors. Opt for a cash sale, rather than a credit one. Insist on a deposit, for a major job. If you have a credit card utility machine, go ahead and swipe that card!

Your deposits, credit card sales settled by bank that day, cash sales and cash collected, constitute your daily cash takings for the day.


Follow through by creating a spreadsheet with the following columnar sections

  • Checks Collected
  • Cash Collected
  • Credit Card payments settled
  • Direct transfers to the bank

 Another header in bold on your spreadsheet, should be your daily target. Provide columns for dates, and an important comments section. On the” comments section”, notes are made as to whether the target was attained or not. Be disciplined. You either hit a daily cash target or not. No “ifs” “nearly” or “buts” here.


SET YOUR ANNUAL CASH TARGET, and divide your annual target by twelve, and then by 22 to 23 working days, and you arrive at your daily cash target. Working


pro-actively on a daily target and attaining it everyday, equates to a monthly and annual target accomplished.


If you exceed your daily target by an amount equal to your daily target, you cannot relax the following day, and regard the excess amount as the next day’s target. It is another day, with a new target.


Implement this method, and see your cash inflow go through the roof! On a cautionary note, all cash should be banked, and don’t forget to save some of the cash!


Author: Sean Goss