What SMMEs need to know about compliance SMME Compliance
Large multinational companies have been dominating the news for all the wrong reasons lately. Anne-Marie Pretorius, MD at consulting firm Bizmod says that many of these organisations’ issues can be attributed to weak processes and inadequate corporate governance and compliance policies.
“The scary thing is that if large companies, who can afford whole departments focusing on compliance, risk and governance, can fail, how vulnerable are smaller entities to these challenges?” states Pretorius. The advantage for smaller companies is that usually there is a closer monitoring and greater visibility on day-to-day business activities. However, many Small, Medium and Micro-sized Enterprises (SMMEs) neglect implementing a practice to analyse, plan and manage compliance in their business.
At a basic level compliance is to meet the legal obligations of the company and this can seem daunting to a small enterprise. Pretorius says that it is important that compliance does not become a hindrance to the agility of a smaller company. “Imposing too many checks-and-balances may unnecessarily encumber a business and its ability to affordably apply compliance.”
So the question is, how do SMME’s approach compliance in a pragmatic way which achieves the requirements while not stifling operations? Pretorius provides the following guidelines:
- Be clear on why compliance is important. Instead of framing it as a ‘grudge’ activity, approach it as a mechanism that can:
o Reduce risk to the business.
o Enhances processes and help to minimise unnecessary errors or inefficiencies.
o Add value to the organisation through transparency of practices and strong governance protocol.
o Mature the business and drive growth in areas that may be wanting.
o Without compliance you cannot reliably build and maintain trust.
o Compliance forces you to consider all your stakeholders – customers, employees, contractors, suppliers, vendors, etc.
o It decreases the risk of inadvertently damaging the company’s reputation. A good reputation is a considerable asset, especially for a small company.
- Understand the legislative landscape that applies to the industry that the company operates in. There are certain standard pieces of legislation, such as, the Companies Act, Consumer Protection Act, the PoPI Act, etc., that apply to all businesses operating in South Africa. Applying the following processes will assist in meeting legislative requirements:
o Ensure that you understand the basic requirements of all applicable legislation.
o Unpack the legislation so as to understand to which business operations these apply.
o Understand what changes, if any, are required from the business to comply.
o Setup an annual review and refresh cycle.
o Get a broad representation of employees involved, so that it is ‘owned’ by multiple parties.
o Join associations in your industry and subscribe to industry press and newsletters. Often these provide valuable insights and discuss legislations or regulations which are being planned.
o If possible assign budget towards purchasing some expertise, e.g. a Labour Lawyer
- Understand what SARS requires from your business. This includes PAYE payment cycles, whether VAT applies, provisional tax, etc. Non-compliance introduces greater risk and heavy penalties. This is a specific focus of compliance, as non-adherence introduces direct and punitive risk to a company.
- Stay informed. Ignorance is not an excuse. Large companies have the luxury of dedicated departments to stay abreast of various changes in the legal and business landscape. As a responsible owner, manager or employee this becomes your responsibility.
For more visit www.bizmod.co.za and Bizmod on LinkedIn