Recommended Auditors and projected fees

[jinxster]

Hi All,

I hope this isnt long winded, but in as few words as possible. It may seem like a long story for a simplistic question for some, but I would like you to understand my whole story. In some ways may be inspiring those in the early stages of turning around a sinking ship but hopefully doesn't get seen as blowing my own trumpet, becuase there is more credit due to other people than myself on that issue.

I am currently a sole proprieter who has recently unofficially partnered with one of my clients as a result of them not paying their fees.

Ok in real world terms, I run a software development company who has since started a hosting and an internet access division (under the sole propreiter).

Since April 2009 one of my clients, a recruitment agency, began struggling to pay on time and for about 4 months after that I found myself saying, pay next month it is fine.... until one day I ended up at the owners house (for a job) and basically she put out the idea of a partnership. Being the adventurous risk taker I am, I requested the financials and was handed them the next day.

Reading the financials one could tell this company was, "a bietjie diep in die k*k". There were 2 loans from normal people (83k & 150k), an overdraft of 200k almost maxed and creditors of 86k of which only 25% or so were current. In the balance was also a goodwill figure of R245k.

The assets amount to R140k in the balance sheet but realistically would have a fair value of R70k (computer hardware being a large culprit).

So you ask... invest? Well this dumb South African decided to invest since if you look at the income statement and hookup reports, there were 2 things... expenses are very much controllable above about R15k. (Rent and telephone rental being unchangeable apart from closing shop) the rest seemed managable and the sales did render some fabulous months. (R200k - R250k), however that was using 4 consultants and 3 admin staff who took a large portion of that with themselves.

Basically what happened is, the consultants dried up sales (in spite of constantly high hookup / orders) and 4 months straight with R10k - R30k sales pretty much created a fast defict in a company that has a very well known name in the area.

And so, after calling a meeting with the 2 loan suppliers, it was decided we didnt need any more money to be on the spell by depositing any money, basically what was needed was performing staff. Task one was to get rid of the current staff since for the last 5 months many many many steps were taken by my new found team to get them to perform. We ended up retrenching 2 staff and the other 5 found their own way out. As it turned out in later discoveries that there was actually a syndicate to sabotage the owner and walk away with all the company secrets and client lists.

Anyhow after scaling down and getting in line with what the company could afford, basically myself and the lady who did my accounts on a monthly basis decided that living on the beach was a bit boring and decided to go and work in the jobs they were doing, only without getting paid unless we made profits and only must later down the line. There is an agreement of cooperation if no money was made we lose our time spent there. We couldnt buy into a deficit of R500k odd we never created.

The good news is, quite quickly we turned the company around and although there is some debt to overcome still, it looks as though the organisation has found a firm footing in the going concern again.

Basically I simply invoice the client (still sole prop) from my own sole prop for the 2 of our services. However, my accounts person has decided this recruiting industry is really what she likes to do and so, it seems like we will buy into the business as partners for a much longer than initially planned time span.

However, you must remember I am a software developer who wants to stay with that industry and the software package I created for this company works out very well and almost forms part of the secret formula of the company.

In any event, we have a registered dormant CC which we want to start using in the near future for the recruitment company. For my own software company though, the turnover has been low (R140k pa), but I think it is time I start another 2 divisions to that company, stock sales and training. For the software company I am thinking of a pty ltd. The reason I am thinking like this is in that I will need to make a change somewhere since even now it looks like a low turnover, but if I add on the new divisions and put up the projections, within a year or two I would surpassed a R1.5m turnover.

My own sole prop is not VAT reg but it will have to be and in structuring the company I will start the training first and then hand that over (i was planing via shares) to someone who will like to principal an IT training institute later on. However I dont want to tell people things like, our VAT no changed and our bank details changed. In my sole prop I have debit orders and stop orders and it can be cumbersome to change all the details. I tried it in 2004 and it made me some unwanted headaches. So what I register now I dont want to change in the next 2 years. I have lots of time still but not forever. In fact I dont want to change until I die but government and other forces beyond my control may dictate something else there.

I also have some ties overseas and would like to tap more into software development in the US since I see my bank is becoming PayPal friendly and noticing may US companies are tired of work from India but dont want to lose the lower cost.

What do you suggest for me, a cc or pty ltd? Basically my concerns for a PTY LTD is to find a reputable RA who doesnt cost an arm and a leg. Does anyone recommend anyone other than the "big four" and does anyone have a structure how the fees are calculated. Also bear in mind we are software developers we make reports, filing and archiving easy for traceability as can be.

[fixmytax]

Hi Jinxster

Auditing fees differ from auditing practise to practise (and also on the time spent by the Partner, Manager, Senior or Clerks).
I will stongly advise you not to go to the Big 4 as you will easily find a small or medium firm that can do the job just as well. You will probably also find that your turnover and projected fee is much too small to be considered by a Big 4 Audit Firm.

Reputable medium sized firms you may consider include the following :
- RSM Betty & Dickson
- Moores Rowland
- Also check www.saica.co.za for other Auditing Firms