Dividends and paying yourself as a Director

Dividends and paying yourself as a Director

Want to achieve the best results from your earnings as a Director?
 
As the Director in a limited company, dividend payments are the usual way for you to take money out of the company – and see a financial return on your investment into the company.
 
Dividends are payments made to the company’s shareholders when the business has made a profit. What is not re-invested into the company can be paid out as dividend payments to your Shareholders, of which you are one. But what’s the most effective way to do this?

Dividends as a part of good wealth management

As a company Director, the company’s finances aren’t your only concern – you also have to make sure you’re managing your own personal finances in the best way possible.

Good wealth management is essential as a Director, and that means taking an informed, long-term look at the ways in which you are paid, the financial vehicles you are using and the tax planning you are carrying out across the year.

To make your personal finances work effectively:

  • Split your finances into business and personal wealth – it’s vital to create a clear divide between business cash (money in your limited company’s bank account) and your own personal cash (money in your personal current account and investments). Any profit you create is not ‘your money’ until it’s paid to you by the business.
  • Ensure you’re being tax efficient – Once a dividend is paid to you – and that money is now yours – you’ll be liable to pay income tax on that income. The rates of income tax in most territories will be higher than the rate of corporation tax. So it’s usually a good idea to keep your profits in the business for as long as possible, minimising the amount of income you’ll have to pay when you file your annual personal tax return.
  • Pay your dividends at the right time – the timing of WHEN you pay a dividend is important. If you pay a large dividend at the end of the tax year, it may take you over your tax allowance for the year. And if your total dividend income is too big, you could end up paying more higher-rate tax than you need to.
  • Look at other ways to be paid – dividends are not your only option when it comes to getting paid as a director. You could put yourself on the payroll and take a small ‘living wage’. Or you could have your profits paid out as pension contributions into a personal pension scheme. So it’s sensible to consider all the tax-efficient alternatives.

Planning your directors’ pay

If you want to get the most from directors’ pay, come and talk to us. As your trusted business advisor, we will work with you to maximise your earnings. This includes helping you forecast your earnings and profits, planning out your dividend payments from the company and setting up your finances so you are being as tax efficient as possible.

Get strategy at the heart of your successful business

Get strategy at the heart of your successful business

Putting strategy at the heart of your business activity should not only give your business greater direction and focus but lead to stimulating, profitable fee opportunities too.

Businesses that have clear objectives or goals, robust accountability and a shared sense of purpose should always outperform those that just show up and go through the motions.

Strategy lies at the heart of most successful businesses. To achieve this you need to resource and execute with purpose. Few businesses have a strategic plan or a robust planning process. Changing this situation should be a top priority! Here are two top tips for business owners.

1. Process Creates the Plan

Getting strategy at the heart of your success will require you to carve out some time, get a process started, and shake things up. There’s no better time to review and tweak your business model, future-proof compelling services, and to get your strategic building blocks in place.

Just as every good strategy has key elements, every good plan needs a step-by-step process. In fact, the process is often just as important as the plan itself. A strategic planning retreat with your core team is a great way to start the process – find a spot offsite to get the creative juices flowing such as a beach, a park, or vineyard, and set an agenda.

2. Key elements of an effective strategy

The key elements in a good strategy normally incorporate:

  • Vision – this is a statement that identifies what a company would like to achieve or accomplish.
  • Values – these are the fundamental beliefs upon which your business and its behaviour are based. They are the guiding principles that your business uses to manage its internal affairs as well as its relationship with customers.
  • Objectives – short term, long term. These should be SMART (specific, measurable, achievable, realistic and timebound)
  • KPIs – stands for Key Performance Indicators. These are measurable values that demonstrate how effectively a company is achieving key business objectives.
  • Actions – what needs to be done to meet the objectives? Make this simple and clear.
  • Owners – delegating tasks to specific owners to ensure follow through and accountability.
  • Deadlines – when your actions will be complete to ensure you make progress.

It doesn’t need to be much more complicated than that, but do invest the time and effort in doing this right. A proactive, value-add strategic model will need fresh thinking, debate, research, and open conversations. Enjoy and embrace the process and you should end up with a good outcome.

Great planning requires a guide, facilitator, and/or professional expertise to be as robust as possible. We can help your business and guide you through the steps.

Putting strategy at the heart of your business activity should not only give your business greater direction and focus but lead to stimulating, profitable opportunities too. It’s time to get started!

GoFi8ure – Certified Spotlight Reporting Consultants

GoFi8ure – Certified Spotlight Reporting Consultants  

Did you know we have Certified Spotlight Reporting consultants ready to help you understand your numbers?

At GoFi8ure we are experts in Spotlight Reporting and creating dashboards and reporting that gives you the real insight into your business and provides you with the facts and information to make more informed business decisions.

Curious to know what Spotlight can really do for your business? It provides:

Powerful Reporting
Easily create powerful and visual reports. Reveal key drivers that impact performance.

Forecasting & Budgets
Our Forecasting tool is an ‘all-in-one’ budget creator, full three-way forecasting and scenario builder.

Visual Dashboards
Dashboard provides an instant snapshot of business performance – enabling you to focus on what really matters.

Multi Entity
For franchises, not for profits and industry specialists: Multi allows you to aggregate, rank and benchmark.

Find out more about how we can help your business by sending us an email –

External Solutions for Inside Opportunities

External Solutions for Inside Opportunities

Outsourcing is where a business contracts out a business process to a third party. Often though, outsourcing is simply thought of as a way to save costs – that is, outsourcing allows us to produce a good or service cheaper than we can produce it ourselves. However, that is not the ONLY value, or opportunity you can tap into, that outsourcing provides.

Outsourcing is not a new solution, but it is one that is either not used due to fear the job will not be done right, or is used with overseas suppliers as they charge $2 an hour. However, higher outsourcing costs are still far cheaper than employee costs (which we will discuss in more detail later) and, you pay for what you get. So, make sure you research local New Zealand outsourcing providers first who, yes, do charge more than overseas suppliers, but will provide a much superior result – and to a standard which meets New Zealand laws and regulations.

At GoFi8ure, instead of offering “outsourcing”, we offer “External Solutions for Inside Opportunities”. Why? Because it really highlights the services and value that we can add for a business from the outside in “external solutions”, AND we work alongside our clients “inside” their business to drive best results and open the door to many new “opportunities” for their business.

When you and your current employees are unable to manage the day-to-day business of your company, whilst still working on building the business satisfactorily, it may be time to consider finding an external solution for your accounting functions. So, let’s look at the real benefits an external solution can provide.

The right company can offer you:

Expertise at your side. External solution providers give you full-time knowledge on your team without having to pay for a full-time employee.  By putting your books into the hands of highly-skilled external providers, who understand the best practices and how to properly staff for certain tasks, your job becomes a whole lot easier – and more effective.

Focus on your business. Delegating your business’s accounting functions frees up valuable time that can be put into building and bettering the company.  Back-end office functions can be a heavy distraction from the day-to-day running of things, and having your bookkeeping in-house can lead to a conflict of interests.  Hence, the time-wasters and distractions need to go – out of sight, out of mind.

Reduce the risk of fraud. Most external providers have two sets of eyes reviewing each step, with different levels of staff working on one account. There are steps taken for one employee to review the others work to ensure there are no discrepancies or errors. This also means proper internal controls are set-up to ensure that the flow of information into the accounting system is accurate, timely, classified correctly, and entered into the right accounting period. It also provides a series of checks and balances that help reduce the risk of getting ripped-off.

Quality and efficiency. Efficiency plays a key role in making a great impression towards your clients. Efficiency should be so sharp that your clients should never hesitate to assign major projects to you, as they know the project will be completed to the highest level, but also with a short turn-around. Remember, when it comes to getting an external solution provider on board it is important to remember that quality is always a winner; without quality, good accounting work is never possible.

Save money. The bottom line is that by delegating your accounting operations to a company that lives and breathes those services, you save money, as you are only paying for what you need and the company will not take a week to do the work like an employee might, simply because they are on the payroll and do not want to have nothing to do by having finished the task too quickly! Also, by not using an employee for the job, you will save on paying full-time or part-time wages, as well as save on the lost productivity costs that come along with hiring employees onto the payroll.

And last but not least… Save time! If you are thinking it is time to get an external provider to help with your accounts, it is fair to say accounting probably is not your business’s strength. Any time spent working out the finances could be better spent working on improving your products or services, and whatever it is that YOU do best. Good business people know that time is an asset, and it can be a scarce one for somebody trying to run a successful business. So, it is worth investing your time in doing the things you do well.

Making consistent improvements to make your business better is a conscious choice. Not only must you balance your time, but you must also choose the right area of business – the one which will make the biggest impact – to spend this time working on. If you would like GoFi8ure to help your business run more efficiently, send us an email or call us on 0800 463 488.