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You have evaluated your skill sets and your business activities of the last few years. You know you can implement your expertise efficiently through one of thousands of available tender opportunities in South Africa. Each province tend to have a website you could go to for tender perusal. Websites such as this one for Gauteng and this one for Cape Town. Great. But what happens next? Don’t fall victim to common errors in judgement! This is why Tender Support Services are important.

As an accountant I have seen the same awful scenarios play out dozens of times with new tender recipients. If the same tender recipients knew what to expect before they entered the tender procurement process and made use of a tender support service or a tender consultant, they could have saved themselves a lot of heart ache, tax liability issues and administrative nightmares. The tender application process is usually a time consuming, but simple enough exercise. Most tender documentation spells out exactly what would be required to constitute a full and final application.

The problems usually arise after the tender has been allocated. Trading and service delivery has commenced and a few months down the line the administrative potholes rear its ugly head. Far too often those errors in judgement creates problems so large in scale that it becomes almost insurmountable. Having a strong tender support service they could have relied on would have been worth its weight in gold.

Tender Support

Allow me to list some of the most commonly occurring mistakes I see tender recipients make.

  1. Not realizing how quickly your company can become VAT liable

This is a big one. I have seen this happen dozens of times. Most local government tenders are not small. They can easily net the recipient of the tender over R1 million in revenue every single month. This means that you would have been liable to register for VAT in the first month already. Somehow, some tender owners let this slip until its too late. Remember, charging VAT on revenue does not cost you anything in the long run. The government pays the VAT and you pay it over to SARS.  You can only gain from doing this sooner rather than later. Why? Because you get to claim the VAT on business related expenses which you otherwise could not. Being VAT Registered is NOT a detriment to your company.

Tender support services can be the proverbial angel on your shoulder that would be required to navigate this problem.

  • Not appointing an accountant with relevant experience to take care of their financial responsibilities

I have personally seen tender recipients and their staff get trapped by their own bad advice they circulate internally.  As detrimental as this is to good governance in your business…it is actually quite a normal by-product of inadequate governance. All it takes is one piece of advice you heard through the grapevine. Possibly from a cousin of your manager’s father’s uncle and suddenly your company is managed based on incorrect information.

There is so much that goes into the successful tender application. You have gone through scrutiny, due diligence checks, financial probes, costing analyses…the list goes on. And then you stumble over the last hurdle…appointing an outside accountant that provides the short and long term tender support service. Someone that can keep an eye on all of your financial obligations. Someone to keep your tax clearance status green (to keep the tender payments coming in). Someone to make sure your monthly obligations are met with time to spare. Get someone like this and lean on them when you have to. That’s what they are there for.

  • Neglecting vital infrastructure during the planning period

Most tenders involve extreme labor throughput. What does this mean? Simply… most tenders require that the tender recipient have a labor force in place to make sure that the requirements are met. Without it the institution receiving the service can’t be expected to settle an invoice for services rendered.

Managing the workforce is not as simple as hiring people and telling them when and where to be on duty.  Those people require contracts (or the CCMA will become one of your long-term headaches), they require payslips and they require tax certificates for services rendered. 

I have seen clients neglect this aspect of their costing prior to the tender application being handed in. And what resulted was an inability to allocate cash resources to their human resources requirements. What follows are one bad decision piled onto another. Measures adopted to try and fix the issue by fumbling through it on the surface. Perhaps placing an employee behind a desk and a laptop with an extravagant excel spreadsheet.

You need solutions up front and have it properly set up before the first brick is being laid. Or before the first pavement is swept, or the first tire is supplied to the City of Cape Town.  Anything less than this will cost you so much more in the long run. Save yourself the sleepless nights to try and keep your company tax clear for the purposes of keeping the revenue flowing. Do not make this mistake. Tender support services would be able to spot and address these issues before it occurs.

  • Being irresponsible with VAT submissions

What do I mean with this? Bluntly put…manipulating VAT returns to ensure a lower payable amount to SARS because of cash flow problems. If it happens once, it will happen again. It’s human nature. NEVER give in to this bad idea. Why (as if there needs to be a “why”) ?

SARS have measures in place to check your numbers. By inflating your purchases numbers to minimize VAT payments to SARS you are effectively forcing your accountant into one of two scenarios:  Either he or she create fake purchase invoices to match the claims you’ve made (thus committing fraud, punishable by SERIOUS jailtime for both of you), or they keep the figures true to what they were and when your financials are compiled the figures does not resemble the same figures you’ve been feeding SARS for months. This leads to SARS audits, penalties, interest charges and tax clearance statuses that cannot be cleared.

So not only do you lose your tender, but you lose the ability to apply for other tenders, your company goes bankrupt, you lose assets and SARS hounds you for years because of unpaid VAT and income tax debt.

  • Indiscriminate spending

There are a lot of business owners out there that has made a sustained living for multiple years from procured tenders. There are also new tender recipients right now that will never see another tender allocated to them because of fund mismanagement.

Some of those tender recipients come from a past where their financial means were limited and simply making it through each month, ensuring that rent is paid and that there’s food to eat, was an immense struggle.

It is in our human nature to get overwhelmed when you look at the bank account after you receive your first tender payment and be gobsmacked when you see a cool million rand just sitting there. Who took that person aside at the start and told him or her: “That’s not your money…”?

As frustrating it is to hear something like that it is an inconvenient truth that must be spoken and fully understood. Tender support services are instrumental in making sure that priorities are identified and taken care of.

Salaries needs to be paid, rent needs to be settled, overheads need to be covered or the lights and phones goes out. Running costs needs to be provided for and stock and consumable levels needs to be replenished. All of this must happen before you can even THINK of taking a cent from the money.

Did you forget that VAT needs to be paid every two months? Did you forget that payroll taxes need to be paid by the 7th of each month?

Unless you had someone in your corner that planned your cash flow for a few months in advance you may very well fall into the same trap. Again…this is why Tender Support Services are important.

What can you do to make sure you don’t fall victim to any of the above mishaps, along with some others not even mentioned in this article?

The answer is not as difficult as it may seem. All you need is a steady mental state and the assistance of someone that can provide a sustained tender support service.

As the owner / recipient of a tender its your time to shine. You finally get to focus on the logistics of your operation, exceptional service delivery and customer satisfaction. You CAN NOT, no matter how much you try to convince yourself otherwise, get yourself involved in your company finances for more time than it takes you to authorize a few online payments. A good tender support service will assist you in understanding your finances. They will also take the burden of dealing with the donkey work away.

You need someone in your corner that can keep an eye on cash flow. To remind you when major expense payments need to be made. Also when certain registrations with SARS needs to be conducted and SARS submission deadlines needs to be met. Tax clearance monitoring, provisional income tax submissions and co-ordination with HR and Payroll staff is crucial to ensure a fluid system that can produce numbers at the push of a button.

When your company requires prompt payment to ensure your employees are paid, you can’t afford delays of longer than one day at most…which is how long it takes (at most) to clear up tax clearance issues when they arise. Bigger issues can cause delays of weeks. And this can cause your overdraft limits to be exceeded, payments to be missed, staff to walk out and service delivery to plummet.

Your tender costing also needs to be expanded on and be exceptionally accurate. You need to know what expenses you will incur during the delivery of service, who would deliver the service to you, what the cost will be, what the payment terms are, etc. It also needs to be expanded upon. You need to know how each portion of an expense that makes up a larger cost to your company will affect your cash flow and when those costs will become payable.

Thus…you need help with your tender costing and cash flow management. Period. Tender Support Services are crucial to continued cash flow confidence.

Hopefully this article shed some light on some possible pitfalls to look out for. If you need someone to help you correct the direction your company might be heading, call us on 0784571188 and speak to James. We have helped many tender recipients steady their ships and get them sailing the right way again.

If you need someone to help you set up your tender ready operation with a company registration, tax clearances, BBBEE affidavits, cash flows, costing breakdowns and infrastructure setup…call James on 0784571188.

Alternatively you can click here to contact us or here to read more on the All In One Tender Services we provide.

We will gladly assist where we can.