Eleanor Roosevelt wisely said; “Learn from the mistakes of others. You can’t live long enough to make them all yourself”; and in business learning from ones’ own mistakes could amount to considerable outlay. Expert BEE consultants, EconoBEE have used their vast experience to compile a list of the top five mistakes that businesses make when interpreting the enterprise development element on the BEE scorecard in order to save you the time, and money, of making them yourself.
1. The targets for Enterprise Development spend are 3% of Net Profit After Tax (Generic companies) and 2% of Net Profit After Tax (Qualifying Small Enterprises). Companies may misinterpret the targets as a percentage of annual turnover.
2. Enterprise Development Beneficiaries are classified by the BEE Codes into two categories – Category A and Category B. Spend incurred with Category A beneficiaries is multiplied by a benefit factor of 1.25, whereas spend with Category B beneficiaries is not. A common mistake is that:
- companies may forget to multiply the Category A spend by the benefit factor, or
- they may multiply spend incurred with Category B beneficiaries by the benefit factor.
3. In recognizing shorter payment periods as Enterprise Development spend, companies should consider amounts paid for invoices within 10 days. Some companies may mistakenly qualify 30-day invoice payments as Enterprise Development spend.
4. The amount recognized under shorter payment periods would be a percentage of the invoice based on the number of days taken to pay. The actual formula used is
(15 minus number of days from date of invoice)/15.
Companies may erroneously use the number of days taken to pay expressed directly as a percentage. (e.g. expressing 15days – 8days = 7days as 7%).
5. Enterprise Development means helping black businesses, with more than 50% black-ownership or (any other enterprises) with more than 25% and a BEE status of between Level 1 and 6. A common mistake is considering Exempt Micro Enterprises (EMEs) or Qualifying Small Enterprises (QSEs) with no black ownership as their Enterprise Development beneficiaries.
Keep a look out for more of the reliable and quality advice offered by EconoBEE as they breakdown the top mistakes made by companies interpreting each of the elements of the BEE scorecard. Alternatively, visit their website at http://www.econobee.co.za/ or contact one of their professional consultants at 011 483 1190