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.

Financial biases to overcome in 2017

Humans are flawed creatures and therefore we know that no decision will ever be perfect. People can never have all the facts nor can they predict the future. Things will happen beyond anyone’s control, deeply impacting their lives. Whether it’s the shock of a TV show host becoming the president of America or Britain “leaving” the European Union and shaking up global markets, events occur that change everything. While people will not be able to predict the future, there are steps anyone can take to help minimise their ignorance and that can help people avoid making bad decisions in future.

Because 2016 has been a terrible year for many, it’s worth considering ways to make 2017 better. One way is to start reconsidering how we think and how we come to believe certain things. This leads us to considering heuristics and biases. Such deep thinking is one New Year’s resolution anyone can make, even though it might be hard to follow up on.

What is a fallacy and heuristic?

As the Internet Encylopedia of Philosophy defines it:

“A fallacy is a kind of error in reasoning… Fallacies should not be persuasive, but they often are. Fallacies may be created unintentionally, or they may be created intentionally in order to deceive other people. The vast majority of the commonly identified fallacies involve arguments, although some involve explanations, or definitions, or other products of reasoning.”

Everyone reasons. By “reasoning”, behavioural experts mean people’s ability to reach conclusions through logical steps. For example, hearing noise on the roof and seeing puddles outside, people can “reason” that it is raining. But no one is perfect in their reasoning, so it’s justifiable to assume everyone can make fallacious claims.

These fallacious claims can impact big and small beliefs, affecting entire world views or merely minor deceptions. Shortcuts, in terms of thinking, are not themselves bad: these are known as heuristics. They simply allow people to reach conclusions faster, due to mental shortcuts. Of course, there can be a heuristic bias, in that the way a heuristic that is used leads to a faulty or inaccurate conclusion due to bias.

To best understand what a fallacy is, it is more useful to name them. All have a central theme of miscalculation running through them.

Ad hominem

During election seasons, people get very passionate about their beliefs. This often leads to arguments and debates, but passion tends to provide fertile ground for fallacies. People are engaging with their hearts more than their minds. In the American election, for example, candidates would often dismiss each other because of party affiliation. One candidate might dismiss another’s claim because the other candidate belongs to a particular political party. Yet merely being part of a group does not, in itself, invalidate a claim. For example, if Candidate A claims the Earth is spherical, Candidate B can’t say Candidate A is wrong because Candidate A is a Democrat. The Earth remains spherical, regardless of who makes the claim.

While a heuristic – mental shortcut – might be that someone’s affiliated group informs large parts of their beliefs, that is not sufficient basis on which to judge the soundness of their claims. It’s important to look out for this, as it’s a very common way to ignore other people’s perspectives.

Appeal to authority

A common heuristic is to highlight the conclusions of experts. After all, if people who have studied their whole life on particular subjects reach a conclusion, their views will be informed. Yet that is not always the case – and, importantly, them merely saying so does not give their claims veracity. For example, as Fortune magazine highlighted:

“On the March 6 edition of Face the Nation, Hillary Clinton spoke about the retroactive classification of more than 2,000 emails she sent on her personal server while Secretary of State. ‘Colin Powell summed it up well,’ she told host John Dickerson. ‘He was told that some of his emails from more than 10 years ago were going to be retroactively classified, and he called it ‘an absurdity.’”

“If reclassifying old emails is wrong, it’s because it’s unconstitutional, or because it’s a violation of FBI policies, or something else intrinsic to the activity itself, not because a respected person has so declared it.”

While it’s reasonable to accept Powell’s authority, it is not sufficient enough to simply believe his claims. There are actual documents, laws and policies anyone can point to which can justify Powell’s views. In other words, anyone should reach Powell’s conclusions if they could see his reasoning. It would not be merely his authority which makes it so.

In 2017, it’s important to be on the lookout for how people treat and appeal to authorities when making their claims.

Either-or fallacy

A common issue during elections is that the criticism of one party makes people believe critics are supporters of the opposition party. The fallacious belief is, if somebody criticised Hillary Clinton it meant they supported Donald Trump. But this is not true. First, there were other candidates during the election. Second, it is possible to criticise all the party candidates, without supporting any one of them (either in terms of choosing not to vote or not doing so because one is ineligible). What’s on display here is the “either-or” fallacy (also known as the black and white fallacy and false dilemma).

This is where only two options are allowed. One either supports a person, movement and so on or is against it. This ignores multiple middle roads or abstention, thus giving false choices (hence the term “false dilemma).

In people’s individual thinking, it’s time to put aside the notion that only two paths exist, when the complexity of people shows how wrong this is.

These are just three of the top fallacies that often crop up in everyday thinking, but which have longterm consequences for popular beliefs. It’s easier to make them than it is to avoid them, but that shouldn’t stop us making some effort toward reducing their negative impact on us.

Being financially prepared for the end of year

The end of the year brings some pretty heavy financial commitments. There are holidays, festive season gifts and revelry, and back-to-school expenses, to name a few. If you are unprepared, you might find yourself unstuck or faltering on a repayment. On the flip side, solid planning and preparation can mean a stress-free and relaxing festive break. Taking out a responsible personal loan can help provide a little breathing room and there are a number of ways that you can prepare for the inevitable strain on the wallet that December to January brings.

Track

Before you can do anything about finances, it’s important to understand your spending habits. Tracking will help map these out. By recording everything you do over a period of at least 30 days, you will have a far clearer picture about where your money goes. The longer the period spent tracking, the greater clarity you’ll have about expense patterns. Time constraints, however, may force you to act on your data after just a month. Tracking will also allow you to see an honest depiction of your expenses vs. your income – useful data, should you be thinking about a loan.

There are many apps available to help you track expenses and it might also be a good time to use an online personal loan calculator to determine how much money you can qualify for, should you require more finances. Tracking gives you a benchmark against which you can set goals.

Compare

A tangible record of expenses, empowers you when making decisions about what to cut. The festive season can be a little overwhelming when it comes to expenses, so you should try be ruthless. An important, somewhat logical disclaimer here, should be that you shouldn’t spend more than your income allows. Budgeting is an important skill to learn. Even if you’ve used a personal loan calculator to determine what amount of money is necessary to apply for, you should still be responsible. And scale the festive revelry accordingly – gold bullion in the Christmas crackers is probably not the greatest choice, if you can’t afford to meet your mortgage payments for December.

Prioritise

Established goals give you something to work towards. Determine which expenses are more important, and which (if any) can be pushed out to January. An example would be festive gifts. Buying these in January instead of in the more traditional months of December, might make for an awkward conversation with an expectant friend or family member. New school shoes in December, however, would be equally useless, given that the children are more likely to spend the summer barefoot or in takkies.

The great thing about having tangible tracked data, is that you can see exactly where you’re able to save money to make up for shortfalls. Realistic reflections on expenditures can help: do you want it or need it?

Act on

Even the greatest plans are worthless if you fail to act upon them. Many people go through great lengths to develop financial strategies to help them cope just to discard it all when the time comes to make an unplanned or pressurised purchase. And this is why so many people suffer through January and February the following year.

An actionable plan also allows you to be a little flexible. If an unplanned expense is made, a quick budget review can help save the money down the line, balancing it out. Acting on your plans is about making your money work to your benefit through regular management.

Of course, this all assumes that you’re able to implement these four steps with more than a month left till the sharp end of the festive season. But, while 2017 is a new year with fresh opportunities, 2016, could’ve been a financial disaster, making planning and saving simply impossible. In this scenario, you should seriously consider making use of a personal loan calculator to determine if a loan is a responsible way forward. A personal loan ensures that you don’t take out money that’s already been repaid to a loan – the main advantage over using a credit card.

While credit cards are a popular choice during this period, credit card debt can be a vicious cycle. A personal loan with the view to paying it back over a short period of time, is a far more attractive prospect. Application for a loan can help bring peace of mind during this particularly expensive season.

At the end of the day, saving throughout the year should be your preferred method of doing things, and while 2016 may see you take out a loan, 2017 is sure to be easier with a strong plan of action.

Take control of your personal finances heading into 2017

Life has a habit of derailing even the best-laid financial plans. And if 2016 is anything to go by, then 2017 is set to be an absolute rollercoaster. Thankfully there are goals that one can set that can help absorb the up and down nature of finances. It’s a good idea to distinguish between goals and dreams. One’s goals are simply dreams with an action plan. This helps convert a simple desire into tangible results – especially true for financial goals since there’s often regular monetary investments. Here are a few goals that one can set to bring more financial freedom in 2017.

Set your goals early

November is the perfect time to set goals for the following year. One should take the time to write down their goals for 2017 and to share them with others who can help keep one accountable.

Increase your emergency fund

A well-stocked emergency fund can lift most of the financial strain from one’s shoulder. In a topsy-turvy financial world, one’s emergency fund can help cushion any unexpected blows, such as a loss of a job or major medical expense. One of the greatest personal finance planning tips is putting money towards an emergency fund to give oneself breathing room of between three and six months.

Get out of debt

Ignoring the good debt vs. bad debt debate completely, the great thing about this goal is that anyone can (and should do it). If one’s to get the most out of their finances then it’s an absolute must. Getting out of debt means that one has full control over their income – a useful place to be for saving and investment purposes. It also helps one be more flexible in their lifestyle. That new job opportunity or those last-minute travel plans are a lot less risky if one is without the anchor of debt.

Start planning for retirement

This is an important goal, regardless of whether one is 18 or 35. Even if one absolutely loves their work, retirement plans are a major outlet for financial freedom. And the earlier one begins to put money towards retirement, the easier it is once the time eventually arrives. There are a number of reasons that might keep one from retiring when planned, making proper planning all the more important as it’ll allow more flexibility.

Give up a costly habit

Everyone has their vice. And it’s usually expensive. If one can cut down on a specific habit and rather put the money aside for savings, then one will be in a far stronger position come the end of the year.

Reaching a point of financial security has nothing to do with luck. It’s a simple matter of making sound financial decisions and sticking to one’s established goals. And it’s never too early to start.

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)