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.

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

 

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.