The quote today comes from Abraham Lincoln who said : “You cannot escape the responsibility of tomorrow, by evading it today!”
Actually this very topic came up with one of my colleagues yesterday. He is an entrepreneur – ‘a visionary’ he calls himself. His usual take on things to do with business is to get the business going – get it up off the ground and running and then look at things like registering it as a company or for VAT or PAYE or even get the books done or the policies and procedures put into place.
Personally, I really think that that is a stupid idea! I can just see everyone’s eyebrows raising and throats being cleared.
Ok, let me explain myself – so you’ve started business with this really brilliant product, that is unique to you. You’ve started on your own and pretty soon you have to employ someone because you just can’t keep up with demand. Before you know it, you’ve had to employ 10 people, you’ve moved premises three times and you now have to rent a warehouse to distribute from and you want to go national. Orders are pouring in and you really don’t have the capital to meet the demand of this growth spurt.
You go to the bank for a loan and here is where the whole thing begins to go pear shaped. You see you are still trading as a Sole Proprietor, so there is no Financial History on your Company, you don’t have a business plan never mind financials or projected sales or anything for that matter. No bank, or in fact an investor of any kind will lend you money without the right information.
To make matters worse, you seem to have employed a ‘rotten apple’ type individual who is hell bent on stirring up trouble and at this point you can’t do anything as you have not issued anyone with a Letter of Appointment and you are not registered with PAYE, UIF or Workmen’s compensation. Said individual keeps threatening to go to SARS and/or Department of Labour to report you, which would probably result in a SARS audit, which could become hugely costly for you as you are way over the minimum for VAT and you’re not registered for that either!
Pretty much a disaster, I am sure you will agree. So now it becomes a race against time trying to get all the documentation done and registered and you’re running around like a mad person trying to put out some fires (in terms of SARS and the Department of Labour), whilst simultaneously trying to light other fires (under the rear ends of the red tape bureaucrats in said financial institutions who grant loans) and still trying to meet your deliverables and manage your company.
Not a good place to be. Now if you had started in the correct manner by registering your company, then getting your financial stuff in order with a proper bookkeeper/accountant in place to give you monthly management reports, your bank accounts – just by themselves would have given you financial history that would be working in your benefit right from the beginning.
Then issuing Letters of Appointment to staff as you employed them and putting policies, procedures and templates in place to protect yourself from ‘rotten apple’ type employees who try and hold you over a barrel, would all have resulted in a completely different type of scenario.
Which situation do you think would have been easier?