ACCOUNTANT REBUILD & - ISSUE 40 l 2021 - SAIPA
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PROFESSIONAL
ACCOUNTANT
OFFICIAL JOURNAL OF
REBUILD
&
RESTORE
CPD
60 MINS
(Unstructured)
1 Professional Accountant ISSUE 40Backl 2021
to top
contents Adapting to Change
in Turbulent Times
When Disaster Strikes, the Underinsured
Pay the Highest Premiums
04
07
What makes Fraudsters
Different from Real Accountants 10
Managing Business Fear
through Planning 13
Returning to the Office: Positive Cultural
Changes resulting from the Covid-19 Pandemic 16
Business Recovery
What you Need to Know 18
Are Accountants Ready for
the New Normal Disruption? 25
A Checklist for
Business Advisors 27
Growth in
Table of
Crisis 30
To Retrench or
Not to Retrench 32
Hidden Solutions for
Mental Health 33
Established 70 years ago,
the Chartered Accountants (SA) Medical Aid Fund, was designed to offer
superior benefits to its qualifying members in the accounting profession.
Our excellent cover, unmatched personalised service, and our real
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Visit www.camaf.co.za for our eligibility criteria, call us on
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3 Professional Accountant Back to top
Chief Executive message
ADAPTING
T
accounting profession has to be
all hands-on deck, as the pace of
TO
change requires agility and pro-
activeness. As a professional body
SAIPA, is committed to preparing
Change
our members to navigate through the minefield
of doing business in trying times.
Many businesses have been hammered
by the impact of the Covid-19 pandemic,
IN
and more recently by the politically aligned
civil unrest. Many businesses have incurred
Turbulent
severe losses, and unfortunately some became
casualties of the July unrest in KwaZulu-Natal
and parts of Gauteng.
Times
Concerns about political instability and civil
unrest continue to bubble close to the surface.
Many ask, quite understandably, whether the
dust has settled or if another storm is brewing.
The proliferation of fake news creates paranoia
in businesses, civil society and the economy.
IMPACT
ON SMEs
In this environment companies are
understandably hesitant to make long term
decisions. Our small and medium sized entities
(SMEs) are suffering the most and the sum of
those who faltered has a detrimental impact on
economic recovery and growth. However, this
impact has not been fully quantified yet.
The recent release of the country’s
unemployment figures in the second
quarter gives us some idea. According to
Statistics South Africa (Stats SA) the headline
unemployment rate hit a record high of 34.4%
in the second quarter.
When considering the expanded definition
of unemployment, the picture looks far worse,
with 44.4%, or almost 12 million people being
unemployed. This does not reflect the impact
of the July destruction of businesses and
By Shahied Daniels, employment.
Chief Executive at SAIPA.
RELIEF
PROGRAMS
The business community appreciates the relief
programs offered by government; however, the
implementation and management of these
programs remain poor. The prevalence of fraud
4 Professional Accountant Back to top
Chief Executive message
PUBLISHING INFORMATION
and corruption means that very little of the relief Professional Accountant is the official journal
falls on fertile ground. of the South African Institute of Professional
It is here that our profession and strong civil Accountants (SAIPA)
society organisations have once again risen to the
challenge. We are picking up the pieces. We are Editorial Board and Contributors
standing together. We are making things happen. Faith Ngwenya
We are rebuilding again. Executive: Technical and Standards Services
SAIPA has concluded a series of webinars Prof Rashied Small
aimed at offering practical advice to companies Executive: Centre of Future Excellence
who were facing loss of business and related Ettiene Retief
challenges in the aftermath of the political unrest Chairman of the National Tax and SARS
in the two provinces. Committee
Professional Accountants (SA) cannot isolate Div de Villiers
themselves from the current business environment Senior Business Rescue Practitioner
and civil society challenges. Rochelle Bates
They need to evolve as business advisors to Marketing and Communications Manager
assist and support clients. Practitioners need to Noma Mpfona
analyse the financial data and understand the PR & Brand Comms Officer
stories behind the numbers, as they reveal much Idéle Prinsloo
about the business and the risks it faces. Editorial and Project Coordinator:
saipa@thatpoint.co.za
NEW Design & Layout Marelise Scholtz
SKILLS
Production At That Point
Advertising Sales
SAIPA has already established the Centre Email: connect@saipa.co.za
for Future Excellence (CoFE) where we are
redesigning our Competency Framework to be SAIPA National Office SAIPA House,
appropriate for the rapid changing environment. Howick Close, Waterfall Park,
We are preparing the reskilling and upskilling Vorna Valley, Midrand
of our members based on the challenges and PO Box 2407,
changes facing their clients and the business Halfway House, 1685
environment. Tel: 011 207 7840
The result, in many instances, have been growth www.saipa.co.za
in the advisory side of their practices, overtaking
the compliance side. © This publication is protected in terms of
The Professional Accountant (SA) has insight the Copyright Act 98 of 1978 © Copyright. All
into the business and acts as the risk detector. copyright for material appearing in this magazine
They alert their clients to the things that are belongs to SAIPA. No part of this magazine
lurking around the corner, enabling the business may be reproduced without written consent
to act timeously. It is critical to mitigate risks of the publisher. The views expressed by the
associated with political instability, pandemics and contributors do not necessarily reflect those of
cybercrimes. SAIPA, Professional Accountant or the producers.
Small businesses are increasingly targeted The content published is not intended to and
by hackers who gain control of any personal does not constitute professional advice. The
information in their database and withhold it until accuracy, completeness, adequacy or currency
a ransom is paid. of the content is not warranted or guaranteed
It is our responsibility as a professional body and any use of or reference to the substance of
to lead our members to where they ought to be. the published content remains at your own risk.
The pace of change can be overwhelming, but it Members are advised to seek professional counsel
should not catch us off guard. SAIPA wants to be from the relevant expert where required. All views
part of our member’s journey to face the unknown and opinions contained herein are not necessarily
better equipped. those of the Institute and do not necessarily reflect
its official policy or position.
5 Professional Accountant Back to top
6 Professional Accountant Back to top
Business insurance
When disaster strikes, the
underinsured
pay the highest premiums
The recent spate of looting across KwaZulu-Natal and Gauteng
highlighted the need for businesses to be prepared for anything.
Afterwards, many found that they were not adequately insured to
cover their losses and had to shut down their operations as a result.
U
nfortunately, advisors who push their clients
insurance to increase their cover but as
companies usually business advisors who help
sell insurance not them understand insurance and
based on the value it its effectiveness as a business
offers to the organisation, but on continuity mechanism.
how competitive their premiums
are. Likewise, because insurance Understand risk
is often a grudge purchase that management
yields no immediate benefits, Before considering insurance,
By Ettiene Retief, businesses tend to shop for companies need to understand
reduced premiums as well. the risks their business faces and
Chairman of the
It is time for accountants which of those threats need to be
National Tax and SARS to step in, not as financial covered.
Committee at SAIPA.
7 Professional Accountant Back to top
Business insurance
During the risk management the value of remaining stock
phase, they should list everything and intact assets and deduct
that could conceivably impact that sum from the covered
their ability to carry on trading. amount. Thus, if the store owner
Each risk must also be rated, expected the full cover to be
firstly, by the likelihood of its paid out, they may be surprised
occurrence and, secondly, by that with R400,000 in remaining
its impact on the business. This stock and assets, they only
will present four general risk receive a pay-out of R600,000.
possibilities.
The first two, low-probability/
During the risk Further, if the store’s goods
are only insured against theft,
low-impact and high-probability/ management the owner could find their
phase, they
low-impact events, could be pay-out reduced by the value of
ignored as they have little effect remaining stock that is damaged
on business continuity and the
cost of preventing them far
should list and cannot be sold.
In addition, a pay-out that was
outweighs the benefits. everything meant to rebuild the business
that could
However, high-impact/high- may need to be used to pay
probability incidents should employee wages, creditors and
undoubtedly be prevented and
the means to do so must be
conceivably other running costs that were not
considered or covered.
developed without delay. These impact their Yet, many organisations
ability to carry
are typically the main focus of forego the seemingly high cost of
risk management and business business disruption insurance.
continuity functions within an
organisation. on trading. Business
Further, high-impact/low- continuity
probability events are more In conclusion, businesses should
problematic, as the probability implemented succession plan. never insure against loss, but
of them happening approaches Even high-impact/high- rather in favour of continuity of
zero, the need to protect against probability risks may enjoy a trade.
them diminishes. But as it simple solution that eliminates This is not to say that
increases, organisations must the need for insurance. In most they should pay the highest
make prudent judgements about cases, though, insurance is the premiums for maximum cover.
how to respond. easiest, most cost-effective or Any investment must consider
only response. their risk management plan,
To insure or It’s at this point that many the severity of the risks under
not to insure organisations make the mistake consideration, and if better
Having identified their high- of shopping around for the alternatives exist.
risk factors, the next question a cheapest premiums and fall into Accountants are not financial
business must ask is whether or the trap of being underinsured. advisors, and it is not their place
not insurance is the best solution to urge their customers to buy
for dealing with these. The risk of more insurance. However, as
For example, key person underinsurance trusted business advisors, they can
insurance covers a company Being underinsured is a risk in its help their clients understand the
against the loss of an important own right and one that should be risks they face, which ones most
person due to death or disability actively avoided. Yet, the market’s endanger their company’s survival,
and provides financial security love affair with low premiums and where insurance can aid their
during the search for their makes it easy to overlook the recovery from an adverse event.
replacement. A key person reduced security that might As financial accountants,
might be a CEO, member of the be revealed only after calamity they are also best equipped
management team, or scarce strikes. to determine the real cost of
specialist that business continuity As a conservative example, a disruption – especially hidden
depends on. store owner may be insured for costs – and how much insurance
However, this cover could R1 million and suffers looting. is needed for the enterprise to
be avoided through a well- The insurance assessor will tally bounce back to full health.
8 Professional Accountant Back to top
ACCOUNTING
SAIPA
Y O U R W E A LT H
2021
THE ACCOUNTANCY
REVOLUTION:
INFONOMICS &
SUSTAINABILITY
2 & 3 NOVEMBER 2021
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9 Professional Accountant Back to top
WHAT MAKES Identify Fraudsters
fraudsters DIFFERENT FROM
REAL ACCOUNTANTS
By Faith Ngwenya,
Technical and
Standards Executive
at SAIPA.
10 Professional Accountant Back to topIdentify Fraudsters
T
he news headlines make it glaringly THE FRAUD
TRIANGLE
obvious that crime does not pay.
Developed by Donald R. Cressey based on
“Chartered Accountant his research in the 1950s, the Fraud Triangle
arrested for ‘fraudulent’ highlights three elements that must be
R884 000 TERS payment” present to trigger fraudulent activity. They are
perceived pressure, perceived opportunity, and
“Accountant arrested after rationalisation.
1
R1.5m stolen from Barberton mine”
The first element, perceived pressure,
“Financial manager is related to the offender’s personal
arrested for allegedly shortcomings. For example, they may have
defrauding employer of R17m” a desire to live a lifestyle far above their
means, get into debt to fund it, and then find
“OR Tambo municipal themselves unable to keep up with repayments.
accountant pleads guilty to Their unwillingness to sacrifice this lifestyle even
stealing more than R9m” at the risk of defaulting will undoubtedly create in
them financial and emotional pressure.
2
In the last case, the accused was sentenced to 15
years in prison. This gives rise to the second element,
Without a doubt, the few accountants who perceived opportunity. Desperate
break the law will eventually be detected and to source extra funding, the person
punished. But if crime really does not pay, why do may begin to seek weaknesses and
a small number of them still take a chance every loopholes in their client’s or employer’s
year? financial management processes. Opportunity
Are they missing something the rest of us take requires that the right conditions exist to commit
for granted? Research carried out over the last fraud but also that the person possesses the
century suggests that they do. technical expertise to exploit them.
11 Professional Accountant Back to topIdentify Fraudsters
being a hustler; demonstrating a strong desire
to beat the system; excessive gambling; financial
pressure from family, friends or peers; or their
performance not being recognised.
This is in contrast to the majority of
accountants, whose training should endow
them with the competencies to be financially
However, by the prudent, ethically committed, and professionally
time a fraudster is
and personally content. They usually pride
themselves on achieving higher lifestyle and
found out, they may career goals through determination, dedication
and sheer hard work.
have been active for In 2004, David Wolfe and Dana Hermanson
a decade or more,
described the type of person who was equipped
to commit fraud. They are someone in the
which is true of the organisation who holds a position that exposes
them to more opportunities than others; has
media headlines I the intelligence to take advantage of systemic
weaknesses; is so egotistical as to believe they will
opened with. How not be caught; has a persuasive personality that
much of their ill- convinces others to collude with them; is a talented
liar; is able to deal well with stress.
gotten gains will be
ever recovered? THE PSYCHOLOGICAL
ASPECT OF
3
The third element is rationalisation, ACCOUNTANCY
which Cressey found must take place We tend to fixate on checks-and-balances, process
prior to fraud being carried out, not controls, proper procedure and forensic accounting
afterwards. For example, the offender to expose and punish fraud. These need to be in
might justify their misconduct by place and cannot be abandoned.
committing to pay the amount back. Thus, they are However, by the time a fraudster is found out,
not stealing but borrowing, even though the funds they may have been active for a decade or more,
are never returned. which is true of the media headlines I opened with.
Cressey noted that all three elements must be How much of their ill-gotten gains will be ever
present for fraud to occur. This is similar to the fire recovered?
triangle where the removal of heat, oxygen or fuel It is important that we, as a professional
will extinguish the flames. So too, by removing one community, build awareness of the characteristics
of the triggers, fraud can be prevented. However, described above and develop a mental
the only option available to companies is to remove “dashboard” of warning signs from them.
the opportunity leg through good controls and With the proper research and by using
careful checks and balances. technology, such as artificial intelligence, we may
be able to design early warning systems that deter
CHARACTERISTICS OF
and stop fraud before it ever happens.
It is also advisable that we focus more on the
THE FRAUDSTER
personal psychology of accountants and equip
them with new tools, like the mental fortitude
In the 1980s, Dr Steve Albrecht’s research resulted to resist social pressure or methods to achieve
in a list of ten common characteristics of fraudsters. contentment not based on material gain.
These are: a pattern of living beyond their Taking action on these often-ignored elements
means, an overwhelming desire for personal gain; can help the professional community to stop
accumulating unsustainable levels of debt; working reeling from accountancy scandals and regain
closely with customers; feeling unfairly compensated; control of our reputation.
12 Professional Accountant Back to topBusiness planning
MANAGING
BUSINESS FEAR
THROUGH PLANNING
Dr André du Preez, Professional
Business Advisor (SA).
Having been exposed to many lockdowns and
possible quarantines with very little interaction
with neither employees nor customers, we
as business advisors, became quite familiar
with the terms despair, isolation, depression
and fear. This could be either because of the
direct impact of the pandemic on us or being
indirectly impacted through our customers.
Change was predicted. This move towards
inevitable the new work environment and
Change is and was inevitable as we practices was caused by the
can all testify. It is clear that “Today sudden effects of the first lockdown
is not the same as yesterday and period. With the change came
tomorrow may not be the same a sudden burst of uncertainty,
as today”. Businesses moved to a additional cost, and a possible lack
more technologically advanced of knowledge or experience that
environment much faster than created additional fear.
13 Professional Accountant Back to topBusiness planning
Impact of successfully. strengthen strategic objectives
the pandemic Should businesses be at a more affordable price.
According to Zachary Sikora uncertain about what strategy With the current
(PsyD), Medical Director to explore, now may be the best downturn in business, it
and Clinical Psychologist at time to choose, implement may be a good time to
Northwestern Medicine, USA: and perfect an approach that investigate, communicate
“Fear is our survival response.” will most likely secure business with and/or establish strategic
Some people, like roller- not only for now but also in the partnerships with other
coaster fans and horror movie future. organisations with the best
enthusiasts, thrive on fear while Much emphasis must be on synergy.
others actively avoid it. expediting the new opportunities
No matter how we face fear, brought about by the changed Maintain
pandemics are very intimidating environment. employee dignity
events. We already witnessed COVID-19 had a very negative
a trail of devastation on our Maintain visibility impact on many employees
economy, leaving behind one Many businesses experienced a who lost their jobs or had their
of the most severe economic great loss in revenue, leading to a pay cut. Businesses now have
downturns of recent history. possible reduction in marketing to carefully reconsider their
However, it also exposed many activities. resource requirements and plan
of us to far greater business However, marketing is especially around the timing
opportunities than anticipated. still very important to ensure of re-employment as well as
visibility not only in the market, the possible new competency
Remedy but also to provide evidence to requirements they may need for
for fear our customers and prospects the future.
As most businesses are currently that we are still around and our Businesses may find
under severe pressure within the products or services continue themselves in a position where
bruised economy, many have to to meet their needs and the employees they retrenched
come up with new calculated requirements. are not available when they need
planning attempts and prepare These financial constraints them most.
for a more defined future that could prevent a company from While skilled employees are
will lead to outcomes more implementing its marketing invaluable for any organisation,
predictable than the current strategy effectively. However, it businesses must carefully plan
outcomes. is critical to continue, even with the re-introduction strategy of
This planning can be done, reduced activities, rather than no these employees to ensure they
riding on the back of the new activities at all. do not lose them or damage their
opportunities. Businesses do not This deviation from the dignity.
have many options regarding strategy can be rectified as the
planning: they can either choose economy improves. Conclusion
to do nothing or proactively plan It may be easier said than done
for the future. Establish business to not fear the future. As business
partnerships owners or business advisors, we
Selecting a As many businesses have to should make those key business
strategic approach rethink their overall business decisions today that will positively
With so many new strategic strategies due to the lack of impact tomorrow with great
approaches available, businesses finances, establishing strategic rewards.
must select a strategic approach business partnerships may be We cannot guarantee the
that will provide a competitive a viable growth proposition. outcome of all our decisions with
edge that consistently leads to This action could especially so many uncertainties around
achieving its predetermined provide smaller businesses with us but we can approach the
goals in this new environment. the opportunity to access new future with more certainty if we
This is critical for any business difficult-to-capture markets, do careful, systematic, timely
that wants to compete create economies of scale and planning.
14 Professional Accountant Back to topCloudTax
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15 Professional Accountant
www.casewareafrica.co.za
Back to topPost-Covid
RETURNING TO THE OFFICE:
Positive
cultural
changes
resulting
from the
Covid-19
pandemic
For the past 18 months,
articles about the Covid-19
pandemic have been
ubiquitous. While the
virus decimated many
companies and affected
many households, it
also provided a positive
impetus for those that
were ready, and those
that were able to adapt
swiftly to the changes.
By Dr Gavin Isaacs, Agile and flexible organisations embraced the
instantaneous shifts brought about by the national
Chief Operations
pandemic. This is mostly attributed to the resilience
Executive at SAIPA.
and self-efficacy of employees and leaders; two vital
components of one’s Psychological Capital. Agility
and resilience skills also help employees deal more
T
effectively and positively with constant change.
he pandemic ushered in a new Both agility and resilience are traits that can
normal, but it should not be be learnt. Employee and organisational resilience
considered anomalous and it would be have been acknowledged as a vital competitive
counterproductive to revert to our ‘old’ advantage and considered a valuable contributor to
ways of operating. companies’ success. Organisations with high levels
16 Professional Accountant Back to topPost-Covid
of agility have workforces that are innovative, flexible who are parents too – faced significant
and fast to adapt to change. challenges caused by the closing of schools
Research conducted by Leask and Ruggunan and day-care facilities during lockdowns. This
(2021), found that governments, in South Africa new way of work allowed employees to attend
and many parts of the world, mostly ignored the to their personal situations as well as ensuring
psychological and sociological consequences of occupational output.
national lockdowns, but remained cognisant of
EFFECTIVE TIME
the economic impact it may have. Organisations
too, mostly based their Covid-19 responses on their
MANAGEMENT
economic survival and implemented restructuring
and staff wage reductions as a recourse. Both led to
significant job losses. Even at the best of times, time management remain
a challenge for most employees, but more so when
POSITIVE
working from home in the absence of the usual
parameters of the office environment. Ensure that
OUTCOMES
you manage your time effectively, in the following
ways:
It is to be acknowledged that the pandemic placed
additional stresses on employees, but it did have l Plan your day, and your work week – keep a
positive outcomes too. It reminded organisations of schedule;
the value of employees, and the role they play in the l Where both husband and wife work from home,
organisation. Deliberate efforts to ensure the physical, it is essential that house duties be shared equally
and especially mental, well-being of employees were – schedule personal tasks;
identified and intensely implemented. l Identify a dedicated workspace;
Employee resilience is valued by organisations l Maintain your routine, and dress as if you are
and a key ingredient to enable organisations to re- going to work
organise for survival. Large organisations that have l Take scheduled breaks
dedicated HR and wellness programmes, are able l Set boundaries and maintain office hours, as far
to offer more support to their employees, which as possible;
improves their resilience. This contrasts with SMMEs, l Be transparent with your manager
which do not always consist of the dedicated l Be kind to yourself
resources or know-how to support the mental and
emotional well-being of their employees. And given Research has shown that employees in the formal
the centrality and significance placed on the SME sector who were required to work from home, had
sector for South Africa’s economic growth, this is to amend work-related processes, juggle family
indeed an area of great concern. It is for this reason demands, and navigate multiple roles across work
that SAIPA implemented a Business Support Series and personal lives. Although the idea of WFH
(webinars), to ensure that the necessary support is seems very attractive, it remains a daunting task.
made available to its members. In most cases, it has been shown that employees
experienced an increase in workload, while fewer
ALTERNATIVE
reported a decrease in workload. A significant
number of employees reported a decrease in salary,
WORK MODELS
with a lack of resources while working from home,
also presenting a challenge to most employees. This
In support of its employees’ health and curbing placed significant strain on the mental well-being of
the spread of the virus, many companies allowed employees.
employees to work from home (WFH). Alternative
work arrangements had so much impact that staff Organisations are comprised of employees,
nowadays turn down job offers if it does not include organised in a system to deliver common goals.
alternative work models as a benefit. Companies Human capital, contrary to popular belief, cannot
realised the value too and are now including it when easily be replaced. Employees not only possess
advertising vacancies. The importance and need institutional knowledge and memory, but they also
for work-life balance, or more accurately - work-life foster the values of which the company’s culture
synergies, triggered the implementation of hybrid is composed, and its success is built. It is therefore
working models. This made sense, since employees, essential to value, protect and support employees.
17 Professional Accountant Back to topBusiness recovery
Business
RecoveryWHAT YOU NEED TO KNOW
Div de Villiers, Senior A great leader once said
Business Rescue that what counts is not what
Practitioner & SAIPA
Professional Business
happened to you, but how you
Advisor (SA). deal with it. Business distress is
not a shame. What counts is how
you deal with it and recover. This
article explores the basic process
(who, what, why, when and
where) of business recovery.
18 Professional Accountant Back to topBusiness recovery
B
usiness distress is experienced when a
business struggles to sustain continuous
and timely delivery of products and
services to its market.
WHY DO BUSINESSES GET DISTRESSED?
Business distress can be due to a range of factors:
Man-
made Natural Market failure
disasters disasters
Sabotage Cyber
Financial distress
/ unrest attacks
Systems Utility
HR disruption
failure failure
Practically, business distress could be triggered by fire (with unfortunate loss of life in some cases)
any one, or a combination, of the following: was a major distress to the Ford brand and local
l Community wide distress – such as the present Ford business.
Covid-19 pandemic or the political unrest of July l Systems distress – the cyberattack on Transnet
2021. in July 2021 disrupted logistics supply chains for
l Market distress – a “KODAK” or a “NOKIA” a significant number of businesses in KZN and
moment. KODAK and NOKIA were once market Gauteng for weeks.
leaders in their respective industries but due to
their inability to timeously respond to changing The Companies Act 71 of 2008 (the Act) provides a
markets and technological opportunities, they guideline on business distress:
lost market share and were surpassed by new l Section 4: the Solvency and Liquidity (S&L) Test
entrants into the market. directs that a business is distressed and should
l Strategy distress – an “APPLE moment”. Steve enter liquidation when it is unable to pay all its
Jobs co-founded Apple in 1976, and Apple debts as they become due and payable within
became a market leader, but by 1997 Apple had the immediately ensuing 12-month period AND
lost focus. It was bleeding cash and on the verge the value of its Liabilities are greater than its
of insolvency. Steve Jobs had to be called back Assets.
to Apple as interim CEO to refocus the business. l Section 128: the Financial Distress Test directs
He reduced the number of Apple products that a business is financially distressed when it is
by 70% (to just four) and reduced operational unlikely to pay all its debts as they become due
expenses by 30%. Today, Apple is a market and payable within the immediately ensuing
leader. 6-month period OR it is likely to become
l Product distress – a Ford KUGA moment. The insolvent (liabilities exceed assets) within the
news reports of a few Ford Kuga cars catching immediately ensuing 6-month period.
19 Professional Accountant Back to topBusiness recovery
WHAT IS BUSINESS RECOVERY?
Business recovery is the ongoing process of The key elements of business recovery are that
identifying business risks due to distress OR during it is an ongoing process of identifying business
emergencies/disasters and directing business risks and directing business activities towards
activities towards ensuring continuous operation ensuring continuous operation and product/
and product/service delivery. service delivery.
There are four steps in the business recovery process:
1 Know your business very well;
2 Map out a destination for your business;
3 Develop and implement a recovery plan; and
4 Set up contingency plans.
1 Know your business very well
Business recovery gets tricky if you (as business owner) or you (as accountant and advisor) do not
continually scan and monitor key business risks, including:
a. Financial risks: A handy framework to use is the DuPont Analysis of which the following is one
version, which is in a small business context. In the graphic below, follow the trail from right to left
to see the impact of excessive (and unproductive) stockholding on a business.
As Professional Accountants and business advisors we are to take a bird’s eye view on any business and also
consider non-financial and strategic risks.
b. Non-financial risks: Below is a
handy framework for scanning
and monitoring non-financial risk
monthly (within a small business
context), which also reflects
movement over time.
20 Professional Accountant Back to topBusiness recovery
c. Strategic risks: It is a good idea to periodically
reflect on the strategic health of the business.
Here, “Pavlov’s onion rings” are most helpful:
Core business
( most value-adding &
income generating)
Non-core
(less value-adding &
less income generating) Nice to have
(least value-adding &
consumes cash)
In addition, it is also a good idea to periodically
consider the aforementioned risks against the three
core strategic thrusts of the business:
l value platform;
l profit drivers; and
l cost drivers.
This can be clarified using an example of a typical
suburban guest house:
Profit
drivers
Number Guest: Cost of:
of beds -Occupancy % -Payroll
-CoS per guest -Utilities
Cost -Cost-to-income -Consumables
drivers ratio
Value
platform
In summary, the better you know the business – its financial, non-financial and strategic risks – the better your
position to timeously recover from business distress.
21 Professional Accountant Back to topBusiness recovery
2 Map out a destination for your business
A handy framework is Alexander Osterwalder’s business model canvas, which requires of us
to rethink the following nine the building blocks:
3 Develop and implement a recovery plan
Once we have mapped out the desired destination, we can develop a recovery
plan. The following template is helpful:
Once again, we start with a risk assessment in respect of, for example:
l CLIENTS: How vulnerable are we to key clients withdrawing their business or falling in distress?
l BUSINESS SYSTEMS: How vulnerable are we to key business systems, such as our POS or stock
management system, collapsing?
l ASSETS AND RESOURCES: How vulnerable are our key assets and resources?
l SERVICES: How vulnerable are we to utility failures or disruptions to our logistics supply chain?
l STAFF: How vulnerable are we to labour unrest?
l SUPPLIERS: How vulnerable are we to “bullying” by our key suppliers?
l SITES: How vulnerable are our branch offices/service delivery sites?
22 Professional Accountant Back to topBusiness recovery
Below is an example of developing a recovery plan for one risk element under the category “Assets
and resources” (debtors being an asset). The risk is losing 20% of debtors – one client who comprise
20% of my debtors’ book.
CAUTION:
Doing business recovery plans for all seven abovementioned business elements may be overwhelming.
My advice is:
l Start immediately;
l Identify your number 1 biggest risk (the one with the shortest fuse and the biggest BANG), and do its
recovery plan;
l Next month, add the number 2 risk to the recovery plan;
l Add the number 3 risk to the recovery plan before the end of month 3;
l And so on.
4 Set up contingency plans
Here, you have to engage in a
continuous cycle of:
l
l
Identification of recovery strategies;
Documenting such in the format of a recovery
l Risk identification and analysis; plan; and
l Impact assessment of the key risks; l Periodically test and review.
The process
can be
conceptualised Testing & ID
as follows: Review risks
Assess
Document Impact
recovery plan
Following a step-by-step
approach can help you
from business distress to
ID recovery business recovery and,
strategies finally, business success.
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24 Professional Accountant Back to top
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Disruptions
Ready for the
New Normal of
DISRUPTION? By Leana van der Merwe, Accounting
and Assurance Specialist at SAIPA.
T
he recent wave of
looting across Gauteng
and KwaZulu-Natal
severely impacted
many businesses in
South Africa. Yet, Covid-19 and
national lockdowns remain the
greatest economic disruption in
recent history.
Are Professional Accountants
equipped to operate effectively
in this environment and can
they provide continued service because of mobile computing,
excellence to their clients in the better local Internet access, Cloud
midst of social upheaval? computing and other emerging
Not surprisingly, a disruptor technologies that make up the
that has been around a lot longer digital revolution.
is helping to make life liveable However, it doesn’t come
and business sustainable. I’m without its problems. Work-from-
talking about the rise of digital home (WFH) employees often feel
technologies, a trend that once overworked and unappreciated
struck fear into the hearts of while facing the compounded
dyed-in-the-wool brick and pressures of home life, business
mortar businesspeople. demands and reduced income.
The situation calls for
new leadership models and
The Home
management skills that focus on
team development and guidance,
Office
especially in the realms of
emotional well-being and mental
While working from home was health support.
once frowned on as a productivity
killer, in 2021 it is not even seen
Business
as a necessary evil for combating
the pandemic. Instead, it has
Continuity
proved to be a godsend to
many companies who would
have otherwise lost all business Although many companies swiftly
continuity. converted to a WFH model, others
And it has only thrived have not fared well because they
25 Professional Accountant Back to topDisruptions
and hundreds of new online Others dislike video calls,
businesses appeared within the preferring good old face-to-
past year. There’s no doubt that face meetings. Yet, those who
this disruption is a breeding embrace that medium have
ground for innovation and cut out wasted travel time
presents lucrative opportunities completely and are able to fit
to entrepreneurs who are quick two or three extra meetings in
to respond. per day. This means they can
use their limited time to help
more businesses than before.
using new
were not able to pivot when The latter see it as their
faced with abrupt change. responsibility to learn technology,
Tech
Almost universally, use it to improve their efficiency,
organisations with even a limited and advise their clients to do the
business continuity plan were Professional Accountants same.
quicker to bounce back. Having in South Africa are mostly
planned for such an eventuality, prepared to handle disruption.
Becoming
they ensured employees could However, many still resist digital
connect to the Internet from transformation, preferring to stick
“Techno-
home and provided them to traditional practices.
with devices or laptops where
positive”
necessary.
They immediately revised
their habit of printing documents As progressive professionals,
and switched to electronic Professional Accountants are
formats, embracing email, chat expected to pursue lifelong
and video meetings as their new learning through continuous
mode of communication and professional development and
management. self-improvement.
Many converted real-world
training events and conferences
to webinars, almost overnight. For example, some
These virtual channels helped Professional Accountants whose
preserve communication with clients typically hand them a
employees, customers, suppliers shoebox filled with receipts,
and other stakeholders. invoices and other documents
Their successes demonstrate for manual entry, were no longer
the vital need for strong risk able to do so when lockdown
management and business started.
continuity in organisations Yet, several modern Cloud
even during periods of seeming accounting systems make
economic stability. it effortless to scan these Those who actively master
These same businesses documents with one’s phone technology and teach their
didn’t stop there. Less than a and upload them seamlessly. clients to do the same are the
year ago, only high-end stores Some are even equipped with ones who will soon be at the top
offered online shopping. Now, AI that can read the images of their industry.
almost every major retailer has and translate them directly into As for the rest, I encourage
developed the means to take transactions, like sales orders, you to become “technopositive”
orders over the web and deliver bank deposits or supplier because, in five years from now,
directly to their consumer’s door. invoices. the demand for technology-savvy
In some cases, goods are received This feature alone would accountants will be the next new
in as little as sixty minutes. make the accountant’s life much normal.
Many other existing easier, increase their productivity If you fail to digitally transform
organisations have moved significantly and improve their your practice, you will be left
rapidly to an online model service excellence measurably. behind.
26 Professional Accountant Back to topBusiness advisors
A CHECKLIST FOR
BUSINESS
ADVISORS
The Covid-19 pandemic has By Lesego Mokwena,
caused many businesses to go Professional Business
Advisor (SA).
into “standby mode”, but we
as professional accountants
and business advisors can help
impacted businesses follow a
A
positive trajectory to get back n effective approach to monitoring
is to set up a system whereby you
into “flight mode”. To do this and review all aspects of the business on
ensure the continued growth a monthly basis. Such a system will
and health of a business, we flag potential problems before they
become a serious threat. Below is a checklist to
need to carefully monitor every assist you and your clients in getting off the ground
part of the business. and into flight mode.
27 Professional Accountant Back to topBusiness advisors
MARKET DEVELOPMENTS
ENGAGEMENT IN YOUR
Keep customers up to date with what INDUSTRY
is happening in the business by using Keep yourself informed of any
online customer relations management (CRM) or new developments in your industry. Subscribe to
marketing automation systems (MAS) tools. You can respected newsletters, trade publications and blogs.
also send monthly newsletters, surveys or personal Set aside some time each month to read these and
emails. Use the means most appropriate to the take notes on the ideas or developments that are
business and number of customers to maintain useful to you.
regular contact. Combine this with thinking time to jot down
Check how often the business’ website is being your ideas, observations and plans for the business’
viewed and use relevant analytics tools, such as growth and development.
Google Analytics, to assess the level of engagement
each month. Check the views, where the traffic is
from, and whether views are converting into sales. ACTION
Utilise social media platforms and use their analytics PLANS
tools too. Spamming is not meaningful engagement, An action plan lists the steps to take to
so be careful not to tread over that line. achieve a specific goal. It clarifies the
resources required to reach a goal and formulates
SOCIAL MEDIA a timeline for the completion of tasks. It is not a
business plan or strategy, as it emphasises the need
MARKETING to set SMART goals with controls.
Use social media to promote the Make sure that an action plan is in place and
business and create a digital footprint.
Social media channels require regular updates to
keep customers engaged. Review your social media
strategy to ensure it is working and that people are
following your posts. If this is not the case, revise your
strategy.
Set aside time each month to review any
business leads received and ensure they have been
followed up upon.
Every social media platform has its pros and
cons so analyse your customer profile and utilise
the most effective social media strategy. The latest
Make sure that an
developments on social media platforms can affect action plan is in
return on investment severely.
For example, TikTok now allows businesses to place and refer back
advertise on the platform, which was not possible
three months ago.
to it every month
to check whether
DATA its targets are
PROTECTION being met and the
Regularly review data protection
in your business to ensure it meets business is where it
was planned to be.
the highest possible standards. Look out for
security problems or breaches and address these
immediately.
SAIPA’s POPI Handbook is a useful guide to the
Make adjustments
provisions and conditions of data protection as as required.”
required by the Protection of Personal Information
Act 43 of 2013.
28 Professional Accountant Back to topBusiness advisors
For a business to
succeed and grow,
access to adequate
cash resources (to
pay expenses, pay
staff, replenish stock,
etc.) is required.
Without this a
business will quickly
run into trouble.”
refer back to it every month to check whether its imperative to its success. Here are a number of key
targets are being met and the business is where it activities to check monthly:
was planned to be.
Make adjustments as required. l Cashflow projections;
l Debtor and creditor analysis;
HUMAN l Monthly sales figures/monthly sales tracker;
Tax returns, VAT and payroll; and
RESOURCES
l
l Monthly budget and comparison with previous
Staff are a crucial part of any business, year.
so complete monthly checks to
ensure all is in order with them. Take note of For a business to succeed and grow, access to
absenteeism and sick leave to see if any patterns adequate cash resources (to pay expenses, pay staff,
emerge and deal with problems early on, especially replenish stock, etc.) is required.
during the Covid-19 pandemic. Without this a business will quickly run into
Be aware of annual leave entitlements and trouble.
ensure that staff take staggered leave throughout As a professional accountant or business advisor,
the year. This will ensure that leave does not meet your client regularly to ensure that everyone
accumulate and that too large a number of staff do has the most up-to-date figures and knowledge
not take leave simultaneously. of the business. The same principle applies to
Plan ahead for fluctuations in staff requirements, stakeholders and partners – set time aside to review
such as recruiting extra staff for busy times. Set all engagements.
aside time for a monthly staff meeting to review What we track within a business can easily be
the past month and agree on action plans for the improved upon, and it is vital in today’s world where
coming month. real-time decision-making can make or break
companies.
FINANCIAL To conclude, in the words of renowned
motivational speaker Brian Tracy, “Winners make
REVIEW a habit of manufacturing their own positive
The financial health of a business is expectations in advance of the event.”
29 Professional Accountant Back to topGROWTH Growth in crisis
IN CRISIS
W
ith the
on-going
Covid-19
crisis, work life
has slowed to
a crawl in many parts of the world
By Sinazo Mpetsheni, SAIPA and remote work is now normal.
Trainee Accountant at EG Start-ups and small enterprises
Accounting in Kokstad. must make some important
30 Professional Accountant Back to topGrowth in crisis
a tough spot, some of your
decisions to ensure business customers are also focusing on
survival in the short term. To aid business survival.
in making such decisions, here As a company that
are a few tips that could prove understands these difficulties,
useful: being empathetic with them
during this time will earn you
1
their trust.
Focus on Train your agents and other
existing employees – from product
customers development teams to
With the chances of new sales marketing and sales teams – to
diminishing, this should be the be understanding of customer
highest priority on your to-do list concerns, knowing that they also
because your existing customers have tough decisions to make. In
are your lifeline. Making sure doing so, you prove that you are
that your customers are satisfied a company that takes customer
with your product or service and Making sure experience and satisfaction
that your
will continue to purchase them, seriously.
guarantees you a steady revenue
customers
4
stream.
It’s universally established that Learn from
it costs more to acquire a new are satisfied previous
crisises
with your
customer than retain an existing
one. In these uncertain economic It’s not yet certain how long this
conditions, you’d have to spend a
lot more on marketing and sales
product or situation will last, neither is it
clear how much of an impact it
to acquire a customer. service and will have on the economy.
But if there’s anyone from
will continue
2
whom we can learn about
Keep
employees to purchase business survival, it is companies
who have been in similar
motivated
While you might be tempted to
them, situations and still found ways
to add value to their customers’
view your human resources from guarantees lives.
you a steady
a cost perspective, right now, your In looking to the past, we may
employees could be your most see a way for the future.
valuable assets. When motivated,
their ideas and dedication can
revenue
lead to unique solutions that stream.”
might not occur to you. But more
importantly, if you keep your
employees assured and happy,
they’ll do a better job of keeping
your customers happy.
3
Be empathetic
with
customers
Many customers are living the
same scenarios you are.
So, while you might be in
31 Back to topRetrenchment
TO RETRENCH
OR NOT TO
RETRENCH?
Instead of talking about a low productive workplace, as employees want to
life after Covid, we must seem busy. Keeping this in mind, a better approach
would be to opt for short time and limited hours,
shift our focus to a life with which can allow you to retain most of your staff and
Covid. The reason being, all avoid huge retrenchment bills that put unnecessary
strain on your cash flow. You will also gain the good
facts considered, this virus is work ethic of your staff and management in these
continuously evolving and is trying times.
here to stay for some time. Let’s consider rental next.
Rental seems to be one of the costs that is most
Therefore, as Professional difficult to work around. The first consideration here
Accountants we need to adapt is leasing agreements and the penalties due should
and actively restructure our they be broken. A second consideration is the fact
that huge office space is no longer a necessity due
business models to survive (and to the opportunity technology affords us to work
thrive) through this pandemic. from home.
The business decision regarding how to cut costs
depends on your type of industry. That being said, I
By Kevin Moonsamy, would opt to pay a penalty, reduce office space, and
Professional Accountant save on further unnecessary rental, rather than lose
(SA). key personnel who cannot be replaced later when
the need arises.
When weighing up the above costs, of course,
T
other considerations also feature. These include
hese are difficult times, and the first item analysing the need for certain employees and
of concern on everyone’s mind is cost whether downsizing is the right choice. In other
saving or cost cutting. One of the major words, we must ask ourselves whether all current
costs, other than fixed costs, consists retrenchments are based solely on Covid-19 or had
of two main variable costs: the cost of they been coming, with the pandemic being the
human capital and rental. I have been noticing a final nail in the coffin.
lot of companies opt for the disposal of human I am aware this cannot be applicable to all
capital or section 189, which we all know too well as sectors, and many have valid reasons for their
retrenchment. decision to retrench. The intention, however, is
When disposing of human capital, the main to encourage key individuals and managements
question is “How will your company manage if to explore all options before disposing of human
you come back to full working capacity?” It must capital.
also be noted that employee loyalty and morale Today’s learners are tomorrow’s leaders. But
decrease during and after the process of seeing work remove them today, and tomorrow will never
colleagues be retrenched. Furthermore, it leads to come.
32 Professional Accountant Back to topMental health
Hidden Solutions for
MENTAL
HEALTH
The beauty of each problem is the hidden solution
T
he 5th of July 2021, a Former President Jacob
By Roberto cold Monday morning Zuma had been sent to prison
Coelho. across Mzansi, as 57 on contempt of court charges,
million people woke as a democracy younger than 30
up to a week that will years flexed its muscles. However,
live in infamy. these metaphorical muscles were
33 Professional Accountant Back to topMental health
not strong enough to prevent be available in the form of a
a nationwide “insurrection” or, hobby (here, the prescription is
removing the euphemism, an unique to each individual).
attempted coup. At the end of the day, most
The insurrection, which individuals seek to “switch
already has its own Wikipedia off” in front of the television.
entry, was the latest blow in However, well-known author,
a 15-round heavyweight fight entrepreneur and public
fought by ordinary South African speaker Richard Mulholland
citizens. The battle began many said, “We should not turn off, we
moons ago as South Africa should turn over.” Pursuing a
The difference faced a decelerating economy
accelerated by mass corruption.
hobby, relaxes and revitalises us,
while we learn important lessons.
between a This was followed by a global Mulholland also stated, “I don’t
hobby and pandemic causing lockdown
after lockdown, destroying small
think outside the box, I have just
had many boxes to think out of.”
watching businesses.
Events have forced us to the
The beauty of a hobby is that
we can learn lessons that apply
television physical and mental edge, and to different aspects of life – we
(for example)
overcoming these atrocities become more well-rounded
and bouncing forward seems problem-solvers, thinkers and
is active overwhelming. Yet, the beauty
of each problem is the hidden
humans.
A light bulb may flash for a
participation, solution. work problem while playing a
which can
The solution to the Covid-19 board game with your family or
health crisis comes in the form you may arrive at a solution to
stimulate of a small transparent vial
with a needle attached to the
a head-scratcher while lost in a
page-turner.
your brain to end. The goal: herd immunity. The difference between
release stress
Anyone and everyone (without a hobby and watching
contraindications) should be television (for example) is
(both from vaccinated.
It is both a humanitarian
active participation, which can
stimulate your brain to release
Covid-19 and and patriotic act. At the time of
writing, more than four billion
stress (both from Covid-19 and
our political future), allowing you
our political humans had been vaccinated to lead your team, family and life
future), worldwide and more than 10
million in South Africa, including
forward.
As we mentally prepare
allowing myself.
A local insurrection
for the next round of our
heavyweight fight, we can cast
you to lead together with a slow-acting, our minds to our latest off-site
your team,
unsympathetic South African adventure and apply the tactic.
government, however, requires Please note – This suggestion
family and life a much more complex solution.
The hope remains that President
is to encourage a more well-
rounded, balanced lifestyle. It is
forward.” Ramaphosa will overcome all not a solution to serious mental
ANC-related challenges and health problems.
implement the required reforms. If you or a family member is
As we protect ourselves suffering or may be suffering from
from physical harm with the a mental health disease, contact
vaccine, we must do the same a doctor or other professional
with mental fitness. Relief may immediately.
34 Professional Accountant Back to topYou can also read
