Simulation case studies

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Disclaimer: The following examples are based on research on the industry workings of what and how our advisory service can be implemented to assist different businesses. They are presented for illustrative purposes only and do not refer to any real existing company or situation.

CASE STUDY 01 – EASY DOES IT (PTY) LTD

BACKGROUND OPERATIONS

The company is based in Johannesburg and operates in the textile, clothing and fashion retail space. Clothing items are made to order or custom-made for clients, although at times when cashflows permits, a limited production is made and sold via online and other channels. Marketing activities also include advertising on social media and showcasing at trade shows and pop-up shops.

After three years of operating informally and with growing demand for their clothes, the founders would like to put processes in place to ensure efficient customer service. They are considering all available opportunities including applying for funding. The founders are also in early talks with one of the local clothing retailers to design a clothing line for production. The company has been formally registered and operates as a separate, legal entity with the founders being directors of the company.

The company currently employs three people ona temporary basis depending on seasonal demands. With an order book comprising of orders from individuals around South Africa and, recently, neighbouring countries like Lesotho, Swaziland, Namibia and Zimbabwe, it is also necessary to develop an export strategy and processes to ensure efficiency in servicing all clients. Some of the challenges experienced are record keeping for the business, late payments from clients, poor quality material from suppliers, storage space for unused material, and slow-moving stock.

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PROPOSED SOLUTION

  • Compliance and Other Opportunities: Review business activities against compliance with requirements of the applicable laws like BBBEE Act, Companies Act and related Regulations, Income Tax and VAT Act, Labour laws, Labour regulations and any other law applicable because of the business model of the company. Review other specific trading licences, agreements and any other applicable document for compliance. Advise on an actionplan to comply and the impact of non-compliance. Compile a checklist of applicable laws and regulations. Match company size with applicable existing tax benefits and other opportunities available for the specific industry and company size.
  • Financial Management: Review and analyse current financial information or records. Identify strength and weaknesses. Review and assess current working capital policies and procedures. Advise on efficient ways of diligent bookkeeping and bring about improvements on debtors, creditors and inventory policies. Review and assist in improving cash management, develop a budget, and report on cash flow and management.
  • Business processes: Design a basic workable entity structure based on minimumrequired and active business functions, including defining roles and responsibilities and reporting lines for all the processes from receiving customer orders to dealing with customer service. Review adequacy of product distribution channels to other markets and advise on required compliance for exports.

CASE STUDY 02  –FINGERS AND TOES (PTY)

BACKGROUND OPERATIONS

Founded 10 years ago, the company has been operating as manufactures of atchaar, a popular food condiment in South Africa. The manufacturing factory process is based in Limpopo province of South Africa and product is distributed via wholesalers, retailers and direct sales to restaurants and other hospitality establishments. The distribution function has been outsourced to a few small logistics businesses and this has helped the company to focus on the core business of manufacturing. The company is owned by three brothers and has a staff complementof 30. When needarises, temporary staff are employed for a specific period.

Some of management’splans and goals are to increase production capacity nationally due to a growing demand for the product while streamliningits processes and maintaining the quality and taste of the product. There has also been an interest inthe product from the international market and management would like to evaluate the viability of this venture if it were to tap into this market.

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PROPOSED SOLUTION

Based on company plans and strategic long-term objectives, the following solutions may beapplicable:

  • Compliance, tax and other opportunities: Review and assess compliance with general and specific laws and regulations based on business model. Discuss and advise on action plan regarding certification in terms of ISO compliance standards since there is a possibility of exporting the product in future. Assess the company size and advise on matching with relevant tax benefits applicable. Advise on available support from other institutions applicable to exporting companies. Advise and assist on actions to get BBBEE compliant. Research new or upcoming laws that may impact company strategic goals.
  • Financial management: Review, analyse and report on current financial and non- financial company performance. Assist in the project of evaluation of increasing the production capacity and exporting to the international Advise on the adequacyof performance monitoring and management reporting for decision making.
  • Business Processes: Review current processes, both manual and automated and advise on gaps and additional or new processes that can be implemented, Assess and advise on the effectivenessof automated and outsourced processes.

CASE STUDY 03 – CAPITAL INVESTMENTS (PTY) LTD

BACKGROUND OPERATIONS

The company runs two main services – capital raising services and software development. The capital-raising service is rendered to businesses regardless of size. It acts as a link between independent investors looking for different investment types and businesses that require capital. A commission is earned for each successful deal between investor and business. There is no fixed percentage charged for each deal made with no consistency and structure of pricing. Some of the investors have suggested transferring lump sums to the company bank account and for investing and transferring to clients as and when it sees fit while paying interest earned to the investor periodically.

The second service in the ICT sector develops software for use internally as well as for sale and rental to third parties. The company has three full-timeemployees including the founder and additional interns assisting in the operations. Business functions have not been fully defined and developed into standalone functions within the company, so they are heavily reliant on the owner to oversee all activities. There has been an interest from an investor who proposes an equity share in this venture as

tech companies are currently the big deal in the investment sphere. The long-term plan is to develop software to operate order and delivery, agent and queue management services through independent companies as the operations begin to scale up for each company.  Management requires that we advise on procedures to formalise the company and operate within the applicable laws. They are interested specifically in the following:

  • tax structuring of the business affairs
  • a system to be used for financial administration specifically customer billing and financial reporting
  • human resource management processes and legislation applicable to the business
  • BBBEE requirements, compliance and applicability to the business.
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PROPOSED SOLUTION

The following solutions may be developed:

  • Advise that a separate company be registered for one of the services for proper reporting and monitoring of performance. Furtherrecommend an efficient structure for the software development company to be owned withinvestors if all services are to be provided as stated above.
  • Compliance: Assist to get BBBEE compliant for each business. Advise on laws and regulations governing the financial services and ICT industry. Advise on tax implications and available incentives applicable to each industry of the businesses.
  • Business processes: Design processes to assist in complying with laws and regulations applicable to operations. Design processes involved in serving different stakeholders. Research and assist in evaluationof an appropriate accounting system. Design processes for reporting for both internal and external purposes.
  • Financial Management: Advise and assist on pricing policy and client invoicing for investor deals relating to capital raising services. Assist in the development of a debtors’ collection procedure.