Corporate finance can assist companies with keeping their promises

The holiday season brings with it a lot of joy as families come together but it’s a costly time of year too. Financially you can feel the pressure and strain of making your income stretch to cover gifts, food, holidays out of town and the like. Companies that offer a traditional Christmas bonus are in good favour with their employees and this can ensure loyalty, employee satisfaction and a consistent level of productivity and good work ethic. But not every company feels they can afford to do this unless they look into making use of corporate finance.

Bonuses are a straightforward contractual agreement

The specifics around benefits and thirteenth cheques are included in many employment contracts nowadays. There’s no mystery – you either can expect it or be made aware that it’s not within company policy. South African law says that either the bonus or thirteenth cheque must be stipulated in the employee’s contract. If neither is offered that must be outlined too. If the bonus is performance based then the employee performance metrics must be listed so that the staff is aware of what’s expected of them. What’s more, if the bonus or thirteenth cheque will not be paid at the end of the year then the company needs to inform their employees of this as early as six months ahead of time. If this doesn’t happen then the employer could land themselves in trouble for unfair labour practice. Corporate finance can assist a company who feels that they won’t be able to pay their promised end of year bonuses and the loaned amount can be paid back in the new year.

Bonuses generally come about as an incentive

Employees are expected to perform for this bonus money and it is considered to be an additional compensation for the employee. How much bonus is awarded is determined by the employee’s manager and the defined goals which have been allocated. By definition this is monies received beyond a normal salary commitment and is therefore substantiated as a reward for achieving a variety of pre-determined goals. Bonuses are a private issue of the company. The South African Labour Law has very little to say about bonuses and therefore companies who don’t offer bonus structures are not foregoing any obligation and there won’t be any repercussions. However, once bonuses are promised an employer cannot back out of the deal. They will come under fire from their staff members unless their contract stipulates that a bonus may or may not happen.

If a bonus is promised then it must be made good on

Ultimately, companies who historically offer their employees a bonus need to continue with their tradition. Employees work hard for the bonus at the end of the year because this is an expensive time of year. If a company comes under financial strain and can ill afford to hand out their promised bonuses then the option of corporate finance is available to assist.

What you should know about machinery asset finance

Running a business a notoriously difficult endeavour. We have to basically create a functioning entity that can run itself, successfully delivering on services or products, able to make monthly targets and quotas, pay staff on time and so on. Even smaller businesses have a lot to focus on, because we’re dealing with interests across a range of categories. Larger corporations that have expanded into foreign countries – whether in terms of opening stores or merely selling online to many different countries –  have far more to deal with. However, regardless of a business’ size the unifying concern for every one has to do with finance. If we can find ways to make our finances easier to manage, while still reaping in rewards for the business, then we must do so.

To that extent, it is worth considering the importance and impact of machinery asset finance as a way to help in precisely this way. Ideally, we can then facilitate business progress and make headway in becoming a more lucrative and profitable company.   

Defining the terms

Of course, it’s important to begin by asking what an asset actually is and then to ask: is machinery an asset? As Small Business Chronicle summarises:

“Assets keep a business afloat. They can be sold during lean times, used as collateral during expansion and help produce a healthy balance sheet. Business assets range from cash on hand, to buildings, to patents and logos.”

These assets come in three categories.

First, “tangible assets”, which means everything from buildings to office equipment. Such assets are not consumed, rather they are maintained. That doesn’t mean they don’t depreciate – i.e. lose value – but that is not the same as being consumed. Related to this is “capital asset”, which Investopedia defines as “significant pieces of property such as homes, cars, investment properties, stocks, bonds, and even collectibles or art. For businesses, a capital asset is a type of asset with a useful life longer than a year, that is not intended for sale in the regular course of the business’s operation.”

Second, “intangible assets” are those which can’t be touched. As the Business Dictionary defines it: “Reputation, name recognition, and intellectual property such as knowledge and know how. Intangible assets are the long-term resources of an entity.”

Finally, we also have “intellectual property”. These include: logos, trademarks, patents, brand names, inventions and so on. This category is a variation on what constitutes an intangible asset. Though it is part of “intangible assets”, it’s notable for differing from other such assets, according to SPH Value, “in that it is the result of conscious creative activity.”

Assets themselves are then further defined. For example, a current asset is another aspect to considers. As Accounting Coach defines it:

“A current asset is cash and any other company asset that will be turning to cash within one year from the date shown in the heading of the company’s balance sheet. (If a company has an operating cycle that is longer than one year, an asset that will turn to cash within the length of its operating cycle is considered to be a current asset.)”

What about machinery?

Every business requires technology to work, whether through computers or larger production tools. This is what we consider machinery. It is used to help conduct business and is not stock, premises or even part of the business premises. This isn’t to say such tangible assets aren’t essential, only that we must be strict about our definitions.

This is why it’s reasonable to ask, is machinery considered a current asset? Considering machinery will be used long term to actually conduct business, we can presume the answer is no. Machinery is there long term for as long as the business continues to operate. Ideally, if it’s helping us fill quotas, make profits and so on, the machinery isn’t being kept so that it can be turned into cash within a financial year.

We can then ask: is machinery a capital asset? The answer is yes. It is still property of the business, but it is not being sold within the year but held long term. This is the exact definition of capital asset, as we defined it above.   

Once we understand the importance of these terms we have greater clarity on what it means to operate a business. These are various tools we can and do use, but not knowing how they fit into a business structure means miscalculating business decisions. This isn’t merely to help our accountants, but also gain insight ourselves. All of this knowledge, of course, is aimed to improve and enhance the business. Armed with this knowledge, we can hopefully make better, more lucrative decisions about our businesses in future.

Modern building security design ideas

Working productively requires a number of elements to manage in order to achieve success. Aside from having stable electricity, internet access, equipment and so on, we also require security. Being able to function well won’t mean anything if we and our employees are fearful of break-ins, hacking and other criminal activity. With that in mind, we should consider some ways to create and manage our working space to make it as secure as possible.

Security as action

Security is a broad term, especially when it comes to business. As the Business Dictionary defines it, security is:

“The prevention of and protection against assault, damage, fire, fraud, invasion of privacy, theft, unlawful entry, and other such occurrences caused by deliberate action.”

Naturally, this encompasses a wide range of interventions. The first of these should be how we act and behave. We can’t rely solely on objects to protect us.

We also must act in ways that reduce the likelihood of unwanted actions occurring and targeting us. For a business in a building, this could mean taking courses or encouraging activity such as double-checking doors are locked, securing mobile devices and preventing access to the network, regular password and login changes and a range of other interventions that differ according to a business. For example, BizMove recommends that keys be treated with greatest care.

“Issue as few keys as possible. Keep a record on the keys you issue. Exercise the same care with keys as you would a thousand dollar bill.”

Security as technology

Of course, we can only do so much. What we want from buildings is to have technology or other more advanced interventions to help combat potential dangers. This could mean anything from industrial sliding door systems to security personnel on site. It’s advisable to obtain an alarm system, where only employees will know the access code. This should be tied to an armed response unit, who can respond at any time – day or night – to issues.

We might also want to install cameras to help catch perpetrators should there be any. There are too many stories of employees being untrustworthy and this can be used as evidence against them at any kind of hearing or trial. This helps deter future wrongdoing.

Also, it’s probably advisable to have a safe on site, but maybe not the keys. However, keeping a safe on the premises might only be a beacon for those who want to steal from it. If possible, keep any monies somewhere else.

(Picture credit: nishom / Pixabay)

Healthcare and business in Africa

Africa is fast becoming a continent the rest of the world takes seriously. Producing world-class products and creating leading businesses, the continent is breaking the stereotype of being behind the times. Unfortunately, though progress is being made, that doesn’t mean some long-standing problems have been overcome. Many of these are problems affecting African business, too, since what happens to the continents’ citizens will affect companies.

Healthcare in Africa

South Africa might be the country where the first heart and first penis transplant took place, but that doesn’t mean everything’s okay. Like many African countries, the lack of infrastructure has led to numerous problems with its health system. Though there are plans in place for a national health insurance, the reality has not seen the light of day yet. Many are still not covered or can’t afford healthcare.

This is reflected in other African countries. As the World Health Organisation noted:

“Even in the absence of a major health crisis, many African countries struggle to deliver quality and affordable health services. For coverage of several basic health services – including family planning, immunization and improved sanitation – sub-Saharan Africa lags well behind the rest of the world.”

Despite the region accounting for approximately 25 percent of the world’s disease burden, we only have three percent of its doctors. Households throughout the continent also put themselves in debt trying to pay for or pay back healthcare costs.

Business intervention

Of course, increasing wages and salaries is one way to help people with healthcare. That’s not a viable option but can be considered as priority for managers wanting to maintain their strong workforce.

Businesses can help by examining the variety of medical insurance plans for individuals. This can either be part of an overall healthcare plan for the business or information can be provided to employees, alongside financial assistance to help them balance their budgets. This should be of particular concern if the employee is the main breadwinner, with children, since it is not only their own healthcare they need to concern themselves with. Unfortunately, if we’re a business we’re not only shouldering the problems of the one worker but their entire family, too.

More can be done to get governments to care. Businesses sometimes have more power than individuals to bring to leaders’ attention the situation in the country. Here, this could mean businesses becoming active in particular causes, lending resources to help bring about change.

(Picture credit: Frontier Official / Flickr)

Understanding unit trusts before you buy

Investments are a complicated minefield of hopes, dreams and confusions. Even the smartest people enter ignorant and leave confused, sometimes striking it big when making particular decisions. Financial experts study for years to have some understanding of how markets work and what it means to have a sense of financial security. Yet, in these turbulent times, we must be more proactive than ever when considering what our money is doing.

To that end it’s worth considering the security of unit trust investment.

What are unit trusts?

The stock market is notoriously incomprehensible, yet powerful. Everyone knows it can change the fate of countries in a heartbeat, with little idea of how it manages this magical feat. One way the average person engages in the stock market is through investments. A popular investment vehicle – i.e. a way to invest – is a mutual fund. As Investopedia defines it:

“A mutual fund is an investment vehicle made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.”

These are operated by money managers, who take the fund’s capital “and attempt to produce capital gains and income for the fund’s investors”. One popular type of investment that uses mutual fund structure is a unit trust investment.

Unit trust outlined

As indicated, unit trusts follow a mutual fund outline. Except, the major quality is that with these kinds of investments, the funds go to individual unit owners, not reinvestment into the fund. This also allows for control. As What Investment notes: “Investors can buy or sell units at any time. As people buy units, the pool gets bigger; as they sell them, it gets smaller.”

The goal of the unit trust is to obviously provide a return to investors. This happens “either in the form of capital growth (an increase in the price per unit) or income (dividends paid to the unit holders in proportion to the number of units they hold).”

Unit trusts are also known for being secure, since it’s managed by experts but also overseen by others (trustees). They’re also known for being open-ended, allowing investors to focus on those areas they believe most benefit them. Security and ease of access make unit trusts ideal investment vehicles for those wanting a gateway into the world of investments.  Before that happens, though, investors should begin learning what different categories of unit trusts means.

(Photo credit: Tristan Martin / Flickr

Core business skills necessary for success

Whether we’re students or experienced business managers, everyone involved or interested in business must have a core set of skills. Businesses are of course different, operating in multiple industries, delivering a range of services or products. However, uniting almost all of these are core categories – customer care, quality service and others – which means there are qualities every business-minded person should focus on.

This matters in terms of personal education as well as how we hire.

Learning

Unfortunately, no one will look at us twice if we have nothing to show. While having an extensive list of jobs on our CV’s might be somewhat impressive, it’s nothing alongside actual qualifications. Showing we’ve studied fields important to our industries goes a long way to being taken seriously. When trying to form relationships with new people, they can already trust us to be competent about subjects we’ve studied. They know independent evaluations – degrees or diplomas, for example – certify our experience. Whether we’re studying management or doing marketing courses, certifications go a long way to enhancing our standing with others.

While this is certainly not the only way to show our expertise, it’s universally regarded as a safe way to do so. As the BBC noted:

“Research found, for instance, that in Brazil, having a tertiary education offered workers a 200% premium in lifetime earnings compared to those who hadn’t finished high school. In Greece, Korea, and Turkey, the premium gap was 70%.”

Tech skills

Understanding  the tools we work with goes a long way toward enhancing productivity. Businesses should look out for tech-minded people and managers should continue learning about the latest tools and trends within their industries. This keeps us ahead of curve in a rapidly advancing world.

Marketing

There’s no point providing excellent, knowledgeable service when no one knows about the business. Marketing can make or break any business, regardless of size. However, standing out above the crowd is hard work – especially when new technology presents unique ways to be creative. With online tools, social media, 24-hour news cycles, the eyes of the world are always watching – this means, though it might be easier to get our name out there, it doesn’t always lead to the attention we want. We must be able to present our business and services in desirable ways, leading to more customers.

We must develop effective marketing skills, regardless of what industry we work in.  

What South African businesses can teach the world

There’s little doubt, on a number of levels, South Africa plays on the world stage. With world-renowned authors, scientists, business people and even Hollywood performers, South Africa has offered a lot to the world. Yet, a lot of stigma still shrouds South Africa and the continent in general as being far behind. While in some respects, this is of course true, in many ways stereotypes can be harmful. One way might be to reconsider the various business lessons that South Africa can teach the world.

Challenges as ladders, not walls

South Africa does not have a strong currency and has numerous problems when it comes to infrastructure and service delivery, according to experts. Despite this, the country still manages to have some of the best education in the world, as evidence by numerous major international places recruiting from South African universities every year. However, Instead of moving overseas, many South Africans embrace their circumstances and make something positive out of it.

One famous example is Cyril Ramaphosa. Growing up during the harsh times of apartheid, Ramaphosa qualified as a lawyer, became an MP and then chairman of the constitutional assembly, drawing up the post-apartheid constitution for the country (one of the best and most liberal documents in the world). Then, he left politics altogether. As the BBC reports:

“As white businessmen tried to accommodate him, Mr Ramaphosa acquired a stake in nearly every key sector – from telecoms and the media (where he rarely interfered in the editorial independence of newspapers he owned) to beverages and fast-food (he owns the South African franchise of the US chain, McDonalds) and mining.”

He’s now one of the wealthiest people on the continent. This shows the challenges he faces he used to lift himself higher. These obstacles are like ladders, rather than walls that block him. This is an ideal every business person can embrace.

Space matters

Two of the most well-known South African-born business people are Elon Musk and Mark Shuttleworth. Both men have a vested interest in space. Musk created SpaceX, which is aiming to revolutionise space travel, so that people can live on other planets. Shuttleworth famously became the “first African in space”.

Shuttleworth is also prominent for his developments in terms of the the internet. He showed local businesses why they could and should consider website hosting in South Africa. His company focused on security, primarily, which was often a concern for local businesses.

Regardless, Shuttleworth then spent time and energy getting himself into space. Both these men showed this is where our investments should be aiming. Certainly, if people from a country in Africa can realise this importance, other more prominent countries should be doing so, too.    

These are just some of the most powerful examples of business people who lead by example. Hopefully, by having a broader understanding of South African entrepreneurs’ success, more people can see South Africa as leader rather than one being left behind.

What businesses must consider about staff wellbeing

No one likes being sick – especially when it means losing out on work. Of course, employers make allowance for sick days, since people are human. Unlike vacations, taking a sick day means not working because of forces beyond our control. At least with vacations, we’re choosing not to work and have the option to do so in emergencies. Sick days can remove that option of working.

However, sometimes being sick doesn’t have to mean we’re not working. Rather it can mean making allowances so that work can continue. This is what businesses need to consider when it comes to sickness and work.

Don’t go for the extremes

Instead of responding to sick days by writing those days off, we should consider alternatives. As one business expert Martin Brewer notes: “It is … possible to feel too ill to get into the workplace but fit enough to sit in front of a computer and work.” The problem is employees need to know what the policy is regarding this. Brewer suggests: “You may well want to introduce a formal rule or policy (perhaps it can be included in your sickness absence policy) about home working and illness.”

Of course, this is dependent on the nature of the work itself, whether the employee has internet access at home and so on. Sometimes the best thing we can do is find a compromise. This benefits the business and the employee, since work is not missed and the employee doesn’t have to worry too much about whether they have to play catch up, will receive verbal warnings and so on.

Home work

This highlights another area worth considering: health experts have warned, for several years, that long commutes are bad for health. And no less a magazine than the Harvard Business Review recommends letting employees work from home. There’s evidence to suggest increased, not less, production. If employees do work less, then these are not employees we should be hiring in the first place.

Backup plans

Sometimes work must be rescheduled and meetings shifted. This means we must always have a backup plan to cater for sick employees or other emergencies. Indeed, we should rather consider staff sickness as we would any other unforeseen hindrance to productivity. However, unlike loss of electricity or robbery, staff sickness can be managed in terms of compromises.

Reach out to staff

We should also create environments where staff don’t feel obligated to work through sickness. We don’t want them producing work while in a drug-fuelled or pain-riddled haze. As a business, we should always be reaching out enquiring about their current and future state – everything from their daily health to their plans for retirement annuity, savings and the like. We need not be invasive but we have every right to ask since this concerns the business’ ability to operate.

2 cognitive biases hindering good business decisions

Everyone has biases preventing them from making the best decisions. This is not so much a criticism of people’s abilities as it is a description. People are not robots or computers, meaning are human aspects infringing on the ability to look at situations purely rationally. What matters is recognising what these are and what people can do to reduce their impact in decision-making processes.

What are cognitive biases?

As Very Well defines it: “A cognitive bias is a systematic error in thinking that affects the decisions and judgments that people make.” Science writer George Dvorsky calls these “glitches”. A common example is how people use memory to make decisions, yet memory recall is notoriously faulty. This means making decisions on issues based on shaky foundations.

For example, some people tend to remember when things go wrong, not when things are going according to plan. It means misremembering the actual number of times, say, a business fulfilled their end of a contract. Disgruntled customers focus on those times they were upset, disappointed, complained and so on – not when the business satisfied them, which could often be more. They’re left with viewing the business from an inaccurate, skewed standpoint. This is the result of cognitive bias.

People’s behaviour having an impact on business is the focus of a lot research, especially in psychology and behavioural finance theory.  

Two examples of biases are worth considering, especially for people operating in the business sphere.

Confirmation bias

In summary, this is the well-known bias of “remembering the hits and forgetting the misses”. As noted above, people tend to recall specific aspects of situations because it fits with a particular narrative. This can be anything from how good a business is to political views. People dismiss or downplay those aspects with conflict with their perspectives. Instead of reconsidering alternatives or challenges to their views, people make these views seem more grounded by only remembering, finding and recalling other situations confirming the views they want to hold on to.

This is bad for business because it provides an unclear basis on which to make good decisions. Instead of making the best decision based on evidence and reasoning, people make decisions that best suit a long held belief. This makes it irrational and therefore bad for improving business.

Gambler’s Fallacy

When we put too much emphasis on past unrelated events to predict future ones, we commit the Gambler’s Fallacy.

A classic example is a coin toss. If it’s flipped nine times and lands heads, many will say the tenth will also be heads. Yet, this is incorrect: the increased number of heads has no impact on whether the next toss will be heads. There is no causal connection. The problem is people tend to make connections to events which are unrelated.

In terms of business, this means we might invest in particular areas because of their past success – yet we must evaluate whether past successes are indication of future. Naturally, there could be connections, but we should never assume as such. This would be committing the Gambler’s Fallacy.

Conclusion

All biases are connected by virtue of skewing the best decisions, by virtue of human behaviour. No one can escape these biases, but it is possible to recognise when they occur. Minimisation, rather than eradication, is the best outcome when trying to engage with cognitive biases. This increases chances of making the best decisions, for ourselves, our business and anything else requiring the smartest thinking.  

How some big American companies take care of retirement

At some point, we all will have to give up working. Age and exhaustion will prevent us from being able to enter any form of labour. Businesses also recognise this, offering employees packages to aid them in retirement. This makes for an excellent incentive for loyalty, since the longer an employee works for a business the more they’ll get out at the end. Some of the best companies to handle retirement are in America and it’s worth considering what they offer their employees.

What is a 401(k)?

In the USA, people often talk about a 401(k) as shorthand for retirement. The name comes from American tax code that governs retirement plans. This must be distinguished from a pension fund. As the Wall Street Journal highlights:

Pension funds were managed by the employer and they paid out a steady income over the course of the retirement.” A 401(k), however, focuses more on investment. Employees are able to control how their money is invested. “Most plans offer a spread of mutual funds composed of stocks, bonds, and money market investments.”

Unlike pension funds, employees cannot access money immediately. It’s also tied to the concept of “vesting”, or ownership of funds. As CNN points out, the longer an employee is with a company, the more they’re able to retain at the end.

Two major companies plans

Knowing this, we can better appreciate what companies have done for their employees in America. As Reuters noted in 2013, Bank of America moved its $19 billion 401(k) in house, serving 300,000 participants. “Bank of America’s 401(k) plan is the eighth largest in the United States in terms of assets, based on the bank’s most recent numbers.” Employees know that working for such a prestigious company provides many options – meaning they’re less likely to leave or find other work. Loyalty pays off, in this case quite literally.

Another notable company is Publix, a supermarket chain. They offer a slightly different plan. ThinkAdvisor points out:

“In a 2013 Forbes report, Publix said that a store manager with 20 years of seniority, earning between $100,000–$130,000, probably has $300,000 in stock and has received another $30,000 in dividends.

“There is no dividend reinvestment plan, although there is a 401(k) plan—to which Publix contributes 50 cents on 3 percent of pay.”

These companies are large enough that they can afford such plans. They’re also working within a long established tax system, in one of the richest countries in the world. Naturally, not all businesses are in such positions. However, it’s worth seeing that even big companies put a lot of emphasis on looking after employees – even after their labour for the business has stopped.

(Credit: 401(k) 2012 / Flickr)