GoFi8ure features on Top Reviews NZ website

GoFi8ure features on Top Reviews NZ website

GoFi8ure are excited to be featured on the Top Reviews NZ website as #7 in their Best Accountants in Wellington review. What an honor and privilege it is to be listed – thanks so much for the nomination. You can visit our review here.

GoFi8ure – your go to accounting specialists. #youdidn’tgointobusinesstotackleyourtaxbutwedid

 

Goodwill: What’s it worth?

Goodwill: What’s it worth?

Goodwill is one of your business assets – but you can’t measure it and it’s very tricky to put a price on it. When you sell your business, goodwill is the intangibles in your business that add value beyond the physical assets and guaranteed income stream.

Goodwill includes:

  • Your brand’s great reputation
  • Your loyal customer base
  • Your positive customer relationships
  • Your happy employees who want to stay
  • Proprietary data and intellectual property
  • The great systems that make your business run smoothly

Goodwill can have an impact on the value of your business

Most small and medium-sized businesses in New Zealand are sold based on their assets and earnings, and goodwill isn’t much of a factor in the valuation. But some types of businesses do have significant value in their intangible assets, particularly in the tech sector.

Discovering the value of your business’s goodwill usually comes down to the negotiating process with a potential buyer. You’ll need to agree on what the business is worth, and that means agreeing on the price of those intangible assets.

Tax on goodwill

Usually you’ll only need to think about goodwill if you’re buying or selling a business. Goodwill is non-taxable for the vendor in a business sale and non-deductible to the purchaser (although there are exceptions; you can read more about tax on business asset sales here).

Goodwill cannot be depreciated like a physical asset. However, some types of intangible property, like patents or trademarks, can be depreciated, so talk to us if you think this might apply.

What is your business’s goodwill worth?

We can help you work out the value of your business in today’s market – get in touch and we can figure out how much money you could walk away with if you sold in today’s market.

Managing ‘the books’ 2020-style

Managing ‘the books’ 2020-style

Lisa Martin, Executive Director of GoFi8ure, discusses all things accounting and bookkeeping, and shares some best practice management advice with business owners.

It’s 2020. A new decade has dawned. What better time to reflect on how far business accounting and bookkeeping has come since the turn of the century.

Who can remember a world without cloud accounting platforms? Imagine a world of printed bank statements and invoices, manual reconciliations, and no sign of digital bank feeds or automated accounting tools?

It’s all a distant memory for GoFi8ure’s Executive Director Lisa Martin (pictured) too. She has witnessed first-hand the rise of automation over her business accounting career – making life easier and providing more time for business owners.

She notes that there is still ongoing uncertainty for business owners to grapple with – such as retaining clients, hiring staff, ensuring that revenue targets are constantly met. Like a swan gliding serenely across a lake, there’s always plenty happening just beneath the surface.

Read the rest of the article here!

A word about good planning

A word about good planning

2021 delivers a raft of new finance and tax issues for business owners to get to grips with. Gofi8ure’s Lisa Martin provides some clarity and advice to help you stay on top of your business finances.

It’s no secret we’d all rather forget 2020. The pandemic not only had a significant impact on the viability and finances of New Zealand’s businesses, but many business owners also struggled to get their head around various new tax and compliance requirements.

2021 presents another unique set of potential money and tax-related stumbling blocks, and GoFi8ure’s Lisa Martin believes the key to dealing with them lies in mastering the four functions of management – namely planning, leadership, organisation and control.

Most people bring core skills or expertise to a business, Martin explains. “But as a business owner they’re naturally wearing 12 other hats, and often planning just doesn’t come naturally.” Leadership isn’t necessarily a natural asset either; Covid has tested everyone’s organisational agility to the max; and, as for ‘control’ – this is where a business owner must understand the control mechanisms of his/ her business and stress-test absolutely everything.

Keep reading the article here!

Sick leave changes

Sick leave changes

When: From 24 July 2021

What: The number of sick leave days employees are entitled to will increase from five to 10. Employees will get the extra five days when they reach their next entitlement date – either after being employed in a job for six months or on their sick leave entitlement anniversary (12 months after they were last entitled to sick leave).

Employees who already get 10 or more sick days a year will not be affected by this change.

Why: To ensure that employees have enough time to recover from sickness or injury, making the workplace healthier and more productive.

What you need to do:  After an employee has been working for you for six months, or when an employee reaches their next entitlement date after 24 July 2021, they will be entitled to an extra five days paid sick leave a year.

This means everything else remains consistent but there are slight variations to what you need to do.

You must:

  • Allow for employees to accumulate up to 20 days of sick leave. This means employees can carry over 10 days of unused sick leave into the next year.
  • Ensure that payroll systems have been updated to reflect the increase in sick leave.
  • Update employment agreements to align with employee’s new sick leave entitlements where necessary. The new minimum entitlements will apply whether or not an employment agreement is updated, but updating the agreement is best practice.
  • Be aware of the changes and communicate with employees.
  • Allow employees to use sick leave to care for a sick or injured spouse, partner, dependent child or any other dependent individual.
  • Pay a sick employee what they’d get if they’d worked a normal day, including bonuses, overtime, etc.

You can:

  • Let employees who’ve worked for you for less than six months take sick leave in advance.
  • Choose to let employees carry over extra sick leave, beyond the 20 day requirement from year to year.
  • Offer more than 10 days sick leave a year.

This also applies to casual workers if, after six months, they have worked

  • an average of at least 10 hours a week and
  • at least one hour a week or 40 hours a month.­­

Minimum sick leave increase(external link) — Employment New Zealand

Sick leave entitlements(external link) — Employment New Zealand

Investment property changes

Investment property changes

When: 27 March 2021

What: For properties acquired on or after 27 March 2021:

  • Legislation has passed that extends the bright-line test from five years to 10 years on residential property.
  • The Government intends for the bright-line test to remain at five years for new builds and will be consulting on what a new build is soon.
  • Legislation has passed that introduced a ‘change of use’ rule. If the sale of your property is subject to the bright-line test, and you don’t use the property as your main home for 12 months or more, you will be required to pay income tax on a proportion of the profit made through the property increasing in value.
  • If you sell a property within 10 years of acquiring it (or five years for a new build) and it was your main home for the entire time you owned it, you will not pay tax under the bright-line test on any gain in value.
  • Any gain in property value that is considered taxable income (including under any of the bright-line tests) will also affect any other obligations or entitlements you have based on taxable income, such as student loan repayments, child support payments, and Working for Families.

For properties acquired before 27 March 2021:

  • The previous bright-line test for five years will continue to apply for properties acquired before 27 March 2021.
  • The Government has proposed that interest on loans for investment properties acquired before 27 March 2021 can still be claimed as an expense, but the amount will reduce each year until it’s completely phased out by the 2025-2026 tax year. A consultation will be held about this.

Fact sheet: Proposed changes to bright-line test(external link) — Inland Revenue

Why: These changes have been put forward with the aim of increasing housing supply and housing affordability

Investment property: law changes and tips for maximising returns

What’s the difference between financial accounting and management accounting?

What’s the difference between financial accounting and management accounting?

You’re running a business, so you know the legal requirements around producing accounts and submitting tax returns. But do you truly know WHY you’ve engaged an accountant? And do you understand the value that a good accountant and business adviser can add to your company?

As a business owner, managing director or CEO, there are three main areas of the accounting proposition that you’re probably most interested in:

  1. Compliance work – this is the bookkeeping, financial accounting and tax work that’s legally required for you to be compliant with the law. On the whole, this compliance work looks backwards at your numbers from the past (your ‘actuals’), showing you where you have been, rather than where you are going.
  2. Financial performance work – this is the work that aims to improve the financial health of your business. It includes the cashflow, cost management and funding work that helps you to strengthen your balance sheet, manage your working capital and become a more stable financial proposition. The work is based on your historic actuals but also has an element of forward-looking forecasting and projections.
  3. High-value advisory work – this is the forward-focused, high-level strategic advice that helps you look to the future and plan out your business. This can include helping you to define your personal and business goals, create a 5-year business plan, manage your company strategy and focus on growth, value and an eventual exit strategy etc.

How does a management accountant differ from a financial accountant?

To make a success of your business, and to get the best value from your accountant, you need an adviser who can deliver in all of these three areas. But not all accountants are the same. As we’ll see, it’s important to understand the difference between a financial accountant and a management accountant

At the most basic level, these are the key differences:

  • Financial accountant – in general, a financial accountant focuses on the basic compliance work, with a small amount of financial performance work thrown into the mix. They make sure your bookkeeping is done and dusted, will file your tax returns and use your historic numbers to produce statutory accounts. They’re ‘bean counters’, making sure you have a clear record of all the beans you’ve produced.
  • Management accountant – a management accountant, however, looks forwards rather than backwards and has a greater focus on the future. They will usually provide the compliance work too, but will delve deeper into the financial performance and high-level advisory work. Rather than just ‘counting the beans’ they help you choose the right beans, decide how to plant them and make sure you nurture and grow these beans to bring in a better (and more profitable) harvest.

How does a management accountant deliver more value?

Looking to the future is a far more productive way of managing your finances than just counting what’s in the bank. A management accountant will empower you to understand your business, and will give you the tools and the knowledge to make good, well-considered decisions.

This additional help can be invaluable. With an experienced management accountant working alongside you, your financial thinking can be completely revolutionised.

For example, you will:

  • Stop looking backwards – your focus will be all about looking forwards to what you can change, not just recording your past transactions (the things you can’t now change, even if you wanted to).
  • Know your numbers inside out – you’ll have a far better understanding of your regular finances, thanks to the detail included in your regular monthly management accounts.
  • Get in control of your cashflow – you’ll be able to drill down into your cash inflows and outflows and, by doing so, improve the liquid capital and cashflow in the business.
  • Streamline your financial processes – you’ll refine and improve your internal accounting procedures, so you’re more efficient and more productive.
  • Refine your pricing strategy – by reviewing your pricing model, you’ll be able to enhance your margins, boost revenue and make the whole company more profitable.
  • Stop unnecessary expenditure – you’ll analyse your overheads, expenses and cost base to reduce the money that’s leaking out of the business.
  • Bring more money and investment into the business – with more robust accounts and projections, you’ll have better access to funding and to private investment.
  • Get a firm grip on your business data – with meaningful metrics being tracked and monitored through your cloud accounting platform, you’ll greatly enhance your business intelligence and the evidence behind your decision-making.
  • Improve the quality of your advice – you’ll have an adviser on hand at all times, giving you access to your management accountant’s knowledge, experience and advice.

Talk to us about the benefits of management accounting for your business

If you’re ambitious and keen to grow, switching to the benefits of management accounting could have a huge impact on your future destiny.

A financial accountant looks backwards, while a management accountant looks forwards. And it’s this key difference in focus, ability and oversight that makes partnering with a firm of management accountants so rewarding.

Get in touch to talk about switching to management accounting.

 

P is for purpose, not profit

P is for purpose, not profit

Why does your business exist?

Your purpose is three to seven words explaining why your business exists for your customers; it should be about them, not you. It is a small statement with immense power – your reason for being.

EXAMPLES:
Tesla: To accelerate the world’s transition to sustainable energy.
Netflix: To entertain the world.
Zoom: To make video communications frictionless and secure.

These may be big company examples, but a clear purpose statement is just as important for small and medium sized business.

A well-defined purpose statement is an antidote to narcissistic by-lines of the past… because we know that consumers are wired to take a self-interest and therefore will engage your business if your ‘why’ resonates with them. Thereafter, your purpose will drive the alignment of values and loyalty.

If you don’t focus on purpose, you’re likely to focus on profit.

Guess what? Your customers aren’t interested in you making a profit. They’re too worried about their own profit. They are more than happy for you to make a profit – provided you meet their needs first.

The correlation between a business’s ability to serve a higher purpose and stronger financial performance has been proven. So, defining your purpose is a smart business strategy.

It comes down to engagement with your team and your customers.

Numerous studies have told us that a strong sense of purpose drives team satisfaction, which will help to improve customer loyalty.

Articulating your business’s purpose to your team allows them to see that they’re contributing to something bigger than themselves. Linking your purpose to their tasks and responsibilities allows them to see their connection to the outcome; how their role is contributing to the overall vision of the business and how they’re impacting your customers’ lives.

If we focus on meeting (and exceeding) customer needs, better profitability will be a by-product.

Getting clear on your purpose will transform your marketing. Being able to clearly articulate why you exist for your customers will tie them to your brand and make them more inclined to refer you to others. When that new customer does their due diligence, i.e. they stalk your website and social media, it’s more likely they’ll develop an emotional connection to your business and buy from you.

Your purpose must first be defined by the leaders.

Only when your purpose is crystal clear can you articulate it to your team and then your customers and target audience.

Having a clear purpose is also about sustainability. There is mounting evidence that in these times of change and disruption, having a clear purpose will improve a business’s ability to transform and adapt.

So, what’s your purpose? Need help defining it? We can help.

“People don’t buy what you do, they buy why you do it.” – Simon Sinek

Why employee onboarding is so important

Why employee onboarding is so important

Even before you start recruiting for a position, you should be prepared to make a new employee’s introduction to the business as smooth and comprehensive as possible.

Onboarding (also known as induction) is a broad, structured process to provide a new team member with all the tools, information, and insight they need to quickly become an effective contributor, while at the same time integrating them with the company and its culture.

Sure, you could set the person up with tools they need, give them the company handbook, and tell them to get cracking on some initial tasks, but don’t expect great results.

Onboarding is an investment in the long-term development of your people and your business. So let’s look at the main reasons you should have a thorough onboarding process for all new employees:

  • Gets them up to speed faster – a structured approach fully prepares an employee for their position and provides support as they grow into it, which minimises disruption to the business.
  • Higher employee engagement – successful onboarding gets the employment relationship off to a solid start, boosting confidence, job satisfaction, and ongoing engagement.
  • Better staff retention – Research has proven that employees who complete a structured onboarding process are far more likely to stay with the company, which saves time and money in the long run.
  • Teaches about company goals and culture – successfully establishing a new employee while showing them how they contribute to the business’ wider goals helps connect them to the company and the existing team.
  • Supports good hiring decisions and recovery from poor ones – induction is a crucial time for new workers to decide if the job matches their expectations and it also quickly shows employers if the person is right for the position.
  • Sets a base for further learning and development – initial job training lays a good foundation for ongoing growth and helps the business find out about a new person’s aspirations, so you can design a development plan to build their skills.
  • Better customer satisfaction – research shows that positive employee experience leads to better customer experience, which improves overall business profitability.

This article provides more reasons why every organisation should take onboarding seriously.

Property and Tax update 2021

Property and Tax update 2021

On 23 March 2021, changes to tax rules for investment properties took investors by surprise. There has been widespread commentary with more to come as the detail unfolds.

In overview:

  • The bright-line test has been extended from 5 to 10 years for properties purchased on or after 27 March 2021
  • The current exemption for the main home changes for properties acquired on or after 27 March 2021, making them subject to a ‘change of use’ rule
  • From 1 October 2021 property owners will not be able to claim interest on residential investment property acquired on or after 27 March 2021, and interest deductions on borrowings for residential investment property acquired before 27 March 2021 will be phased out over the next four income years.

Bright-line extension

Different rules apply for different scenarios:

  • For properties purchased from 27 March 2021, the bright-line test period is 10 years.
  • If you already own a rental, and, the old rules apply:
    • a 5-year bright-line test if you purchased the property on or after 29 March 2018, or
    • a 2-year bright-line if you purchased the property from 1 October 2015.
  • If it’s a new build, the proposal is that it will be subject to a 5 year bright-line test.
  • If you’re in the middle of buying a residential rental property, it’s more complex. Generally, if you entered into a binding contract to purchase a property before 27 March, you are within the old rules and the 5-year bright-line test applies. However, depending on variables around when the offer is accepted or the exchange and timing of counter offers, the 10-year bright-line test may apply. Talk to us if you’re in doubt.

‘Change of use’ and the main home exemption

Under the current rules, if the property has been used as the person’s main home for over half of the relevant bright-line period, there is a complete exemption from tax under the bright-line test. Under the proposed changes, properties acquired on or after 27 March 2021 will be subject to a ‘change of use’ rule. If a property switches from being the owner’s main home for more than 12 months, then a proportion of the sale profits of a property sold during the bright line period will be taxed, based on the ratio of time that the property was and wasn’t used as the main home. The existing main home exemption rules continue to apply for residential property acquired on or after 29 March 2018 and before 27 March 2021.

Interest deductibility

The rules are graduated depending on when the property is acquired:

  • for residential property acquired on or after 27 March 2021, taxpayers won’t be able to claim deductions for interest from 1 October 2021
  • for properties acquired before 27 March 2021, interest on loans can still be claimed as an expense. From 1 October 2021 – 31 March 2023, the amount claimable will be reduced to 75%, reducing by 25% each following income year, until it is phased out completely from 1 April 2025.

The Government is also consulting on whether an exemption for new builds acquired as residential investment property should apply. Property developers and builders who build properties to sell will still be able to claim their interest expenses.

Short-stay Accommodation

Residential properties used to provide short-stay accommodation, where the owner does not live in the property, will be subject to the bright-line test and cannot be excluded as business premises.

Our Recommendation

Some of the proposals are subject to consultation. If you have the opportunity to comment, please make it clear how the changes affect you. If you own a residential rental or one used for short-stay accommodation, or if you are considering buying a second property, please contact us, to discuss the tax implications.