Keeping Your Eye on the Ball

Keeping Your Eye on the Ball

Times have been incredibly tough for New Zealand’s small and medium businesses – there’s no doubt about it. GoFi8ure’s Lisa Martin was genuinely surprised in the weeks leading up to March 31st by the number of owners contacting her team to express their desire to close their business on that date.

They simply had nothing left in the tank. “No reserves, no energy, no money,” she recalls.

Unfortunately, flicking the switch on your business overnight is simply not possible, she points out, citing everything from payroll and contractors to supply chain issues.

Read the rest of this awesome NZBusiness Magazine article by clicking here.

 

Business tips: Writing a mission statement

Business tips: Writing a mission statement

You’ve had your initial business idea and written a plan. But do you know WHY you’re creating this business, or HOW you’ll deliver your end product/service? What will the company’s underlying purpose be and how will your core values drive the business?

To get these crucial elements ironed out, it’s a good idea to write a ‘mission statement’ for your startup – a short summary of the aims and values of your business.

WHAT does your business do?

The first thing to pin down is what the business actually does – i.e. at the most basic level, what is the output of your new business idea, and what is its purpose.

Defining this ‘WHAT’ element might sound simple, but describing it in a clear and concise way will help you to begin the process of completing your mission statement. A bicycle manufacturer might define their WHAT as ‘making quality bikes at great prices, for adults and kids to enjoy’. Whereas a creative agency might define their WHAT as ‘delivering creative solutions to our business clients’ design problems’.

HOW does your company do what it does?

Next, have a think about HOW you achieve what you do. How do you deliver your product or service to customers, what operations are involved and what makes your way different?

The bicycle manufacturer might have a big focus on making hand-made bikes, so their HOW could be ‘We make our bikes by hand, and to order, using our 25 years’ experience in the industry to deliver the best possible quality’. While the creative agency might say ‘We use the latest design approaches, coupled with cutting-edge design software, to bring our clients’ design to life’. Both of these statements explain the underlying operational processes in the business, and how each business delivers its product/service to the end customer.

WHY does your company do what it does?

Most businesses are great at defining the WHAT and HOW elements of their business model. ‘I make Product A using Process B’. But it can be a lot harder to define WHY you’re doing this.

Ultimately, the WHY is the most important element of your mission statement. In essence, you’re describing what drives you to do what you do. What are your big aspirations for the business, and what do you want to achieve? For the bicycle manufacturer, the WHY statement may be ‘We want to encourage our community to get on their bikes, become more sustainable and stay healthy’. And the agency may define their WHY as ‘We want to build innovation into everything we do, bringing fresh ideas to our clients’ design’.

What are the core values driving your enterprise?

Your personal values as a founder might not sound like a crucial element to think about. But any new startup is a reflection of the ideas, ambition, drive and values of its founders.

The ways in which you behave, the vision you provide for your team and the ways in which you interact with your first customers will all underline the foundation values of your new business. Think about what drives you. Is it profit and money? Or do you want to change the world in positive ways? Or provide employment and opportunities for your local community?

Bring it all together into your mission statement

If you’ve answered those four questions, then you have everything you need to create a comprehensive and useful mission statement for the business.

For example, for the bicycle manufacturer, it may look like this:

Happy Spokes Bicycles Ltd:

  • What we do: We make quality, sustainable bikes at great prices, building a range of city bikes for adults and kids aged 9 to 90 to enjoy.
  • How we do it: We make our bikes by hand, and to order, using sustainable processes and our 25 years’ experience in the industry to deliver the best possible quality.
  • Why we do it: We believe that cycling is the future. We want to encourage our community to get on their bikes, become more sustainable and stay healthy.
  • Our core values: Our 5 core value pillars are:
    • Sustainability – we strive to limit our impact on the planet and environment
    • Health – we aim to make our customers healthier and fitter
    • Craftsmanship – we believe in keeping hand-made production alive and well
    • Value – we want our bikes to be affordable to all
    • Fun – we aim to make Happy Spokes a fun community to be part of.

With your mission statement written, and a business plan under your belt, you have the best possible foundations on which to build your business enterprise.

Your mission statement can set the foundations for your company’s future.

Talk to us about your startup plans.

6 things you should know before filing your EOY tax – post COVID-19

6 things you should know before filing your EOY tax – post COVID-19

Ticking items off your end-of-year tax checklist this month?

Make sure you don’t forget income received from COVID-19 business support. And consider whether further tax relief measures could be appropriate.

  1. Rules to keep cash flowing – If money is a bit tight as the financial year draws to a close, here are four tax measures focused on providing and enabling cashflow:
    • If your cashflow has been significantly impacted by the economic effects of COVID-19, you may be able to apply for relief from use of money interest and penalties, or enter into an instalment arrangement for payments due to Inland Revenue. Inland Revenue’s ability to remit use of money interest in such circumstances applies to tax payments due up until 24 March 2022.
    • Keeping an eye on tax losses, as the Government introduced a same or similar business test that allows tax losses to be carried forward. This may become useful if you’re wanting to raise capital for your business in the future.
    • Consider the Small Business Cashflow (Loan) Scheme being offered by the Government through Inland Revenue where certain conditions are met. This provides loans for businesses with 50 or fewer full-time staff of up to $10,000 plus $1,800 per full-time employee (therefore dependent on the number of employees) with an interest rate of 3%, with no interest applying if the loan is repaid within 2 years.
  2. Asset threshold lowering – Put aside time to review your asset expenditure. Identify any assets (valued up to $1,000) that you need and buy them before the end of the tax year. It’s also a good time to ensure records are up to date on any commercial buildings as depreciation for tax purposes is available on commercial buildings for the year ended 31 March 2022.
  3. Earn over $180,000 a year? – If you’re one of the 75,000 Kiwis impacted by the 39% marginal tax rate, review your business and investment structure with us. The marginal tax rate applies to all employment income over $180,000 a year. It includes extra pay earned in the course of employment, such as bonuses, back pay, redundancy, and retirement payments. It is timely also to review dividend payments.
  4. Keeping subsidy records crucial – While COVID-19 related wage subsidies and resurgence support payments are non-taxable, keep accurate records of any subsidy or payment you received and which staff member it was paid to or business expense it was applied to, to ensure non-taxable treatment applies and also in case the Ministry of Social Development asks to review your records down the track.
  5. R&D loss tax credit – Start-up companies are able to cash-out their tax losses arising from eligible research and development (R&D) expenditure, and avoid carrying the losses through to the next income year. The credit can only be for:
    • eligible R&D business expenditure
    • up to 28% of your tax losses from R&D activity
    • companies that are tax residents in New Zealand
    • dates on or after 1 April 2015. The rules around R&D expenditure are detailed and eligible R&D expenditure will require approval from Inland Revenue. So, if you’re looking to claim under these rules, you will need to start looking at this sooner rather than later, and keeping records of such expenditure as it occurs.
  6. Staff reimbursements and allowances – Make sure you have a good record of any reimbursements and allowances paid to employees for expenditures. Remember:
    • For telecommunications devices and plans, staff reimbursements are tax exempt up to $5 per week. If reimbursement is above this amount, the exempt amount is 25% if the device or plan is used partly, 75% if used mainly, or 100% if used exclusively for employment purposes.
    • WFH payments claimed from 1 October 2021 allow an additional $15 per week, per employee, to be exempt income for other WFH expenditure.
    • Tax-exempt payments for use of furniture or equipment when WFH can reimburse the depreciation of the item. The payment will typically be for the cost of the asset and the payment will still be deductible to the employer. Note the low-value asset threshold of $1,000 will apply here.

8 Golden money rules for business owners

8 Golden money rules for business owners

It’s fair to say that the Covid pandemic has hampered many business owners’ ability to manage their finances. The GoFi8ure team of accountants and bookkeeping professionals have seen the outcomes of: not sticking to budgets, failing to plan, delaying bill payments to manage cashflow, not saving money in general, buying what you want rather than what you need, impulse buying, borrowing money, as well as getting into debt and taking out short-term payday loans with killer interest rates. So here are some golden rules to help keep you on the straight and narrow path to success.
Hear from Lisa Martin, Executive Director of GoFi8ure, discussing the 8 Golden money rules for business owners in NZBusiness Magazine. It’s an interesting read – click on the link here.

Keeping your business cash liquid – the difference between cashflow and profit

The foundational goal of any business is to make a profit. As a business owner, that’s one of your key financial aims – to make enough sales, at a big enough margin, to generate profit from your enterprise. But how does profit differ from cashflow? And why is cash king?

How do profit and cashflow differ?

To really understand the difference between generating profit and managing cashflow, we need to look at what both these terms mean. You might think that delving into the accounts is a job for your adviser, but being in control of your profit and cashflow is an invaluable business skill.

Let’s take a look at the differences:

  • What is profit? – Profit is the surplus that’s left from your income once you’ve paid your expenses, supplier bills and tax etc. It’s driven by creating a profit margin and generating value from your products and/or services.
  • What is cashflow? – Cashflow is the ongoing process of ensuring that the business has the available cash (or ‘liquid’ cash) needed to operate. This provides the money needed to trade, to pay suppliers, to cover wages or to buy raw materials etc.

Why is positive cashflow so important?

‘Cash is king!’ may be a cliche these days, but it’s a maxim which underpins any successful business model. Yes, it’s great to make a profit at year-end, but if you don’t look after your cashflow then the business may not survive as long as the end of the year.

What’s needed is good cashflow management to enhance your financial health. And without a careful eye on your cash numbers, things can quickly go awry.

A business can generate high revenues and big profits, but still be cashflow poor. In other words, it can have profits at the end of the period, but have very little liquid cash to fund it’s day-to-day operations over the course of the period.

Talk to us about improving your cashflow management

Good cashflow management is all about being in control of your cash inflows (income you’re generating) and your cash outflows (what you’re spending). To achieve ‘positive cashflow’ you need to proactively work to keep your inflows higher than your outflows.

As your adviser, we’ll help you set up detailed cashflow reporting and forecasting, so you can keep the business in that ideal positive cashflow position. And we’ll also look at key steps for keeping your revenues high, margins profitable and meeting your financial targets.

Get in touch to talk through your cashflow management.

5 apps to help you run your small business

5 apps to help you run your small business

Being a small business owner means being a jack of all trades – but these days, there are some apps to help you handle a few of the day-to-day tasks. Here are five of the best types of apps for small businesses:

Time tracking

Automatically track how much time you’re spending on each customer, including tasks, research, phone calls and emails. Time tracking apps use artificial intelligence to make it as effortless as possible to track your time. It can produce a timesheet automatically so you can manage your time more effectively.

One to try: Timely (by Memory AI)

Vehicle logging

When you’re driving around in order to meet up with customers or suppliers, it’s important to keep track of your mileage. Paper logbooks have long been superseded by vehicle logging apps, which are so easy to use and inexpensive. Create an electronic logbook that records your driving on your phone.

One to try: Logmate (NZTA approved)

Online payments

Making it easy for your customers to give you money is just an all-round excellent strategy. An app can provide you with a way to accept payments online and in person, from anywhere in the world. It can also manage subscriptions or even run off a terminal. Most will use a pay-as-you-go pricing system, so you only pay when customers use it.

One to try: Stripe

Stock tracking

For retailers, spend less time on stock tracking and more time on strategising with point-of-sale software. A POS platform allows customers to buy from your store, or online, and lets you manage inventory seamlessly. You’re collecting information as you go, giving you valuable insights into your business.

One to try: Vend

Accounting

If you’re not using accounting software already, you’re probably spending far too much time invoicing, chasing invoices and reconciling your accounts. Accounting software is cost-effective, scales up with your business and makes perfect sense when you’re trying to grow.

One to try: Xero

Talk to us – we are here to help

We have clients across a wide range of industries, using all types of technology – we might know the perfect app for you. Get in touch if you’re looking for fresh ideas!

New rules for Trust Compliance

New rules for Trust Compliance

With a new top tax rate of 39% now in place, other tax rules have also been tweaked to make sure they all align.

Trusts now have new rules on disclosures, in an effort to prevent people from using trusts to avoid paying additional tax.

Previously, trusts have not needed to file financial statements or details of non-taxable transactions. This has now changed. Inland Revenue will now be collecting more information so it can keep a closer eye on how trusts are being used.

Trusts now need to provide more financial information

From April 2021 onwards, all annual returns for trusts will need to include:

  • Financial statements
  • Details of settlements
  • Details of distributions, taxable or not
  • Any other information required, like loans and transfers involving associated persons or related parties.

Charitable and non-active trusts are exempt, since they don’t need to file a return.

You can read more about the new taxation bill here.

If this looks daunting, don’t worry, we can help you work out what information is required and how you can supply it. It is vital to make sure you comply with the rules so your trust isn’t declared a sham – if that happened you would lose any advantages that the trust provides.

Compliance costs are increasing

This is a large step up in terms of what trusts must provide in order to be compliant. It’s important that you start collating this information so you can supply it to Inland Revenue. This will probably be time-consuming and may have additional costs, particularly in this first year. Hopefully it will get easier as we all learn to navigate the new rules.

If you have doubts about how to comply, we can answer your questions. It might also be a good time to review your entities and make sure your trust is working for you.

Give us a call, drop us a note or text us – we’re here to help!

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.