Keeping on top of overdue accounts

Keeping on top of overdue accounts 

How long do your customers take to pay you?

A Xero Small Business Insights report showed that late payments to small businesses are improving. But overall, payments often still arrive after due date.

Keeping on top of overdue accounts is vital for cashflow. There are some easy things you can put in place today to reduce the payment time-frame in your business.

Send your invoices straight away – give your customer the ability to pay you promptly.

Include all the details your customers need, in order to make the payment – such as a customer purchase order to make their administration easier. Make sure you include your payment due date.
Consider a prompt payment discount – even if it is a small percentage, it can be a motivating factor.

Follow up straight away – if your invoice is overdue, send a friendly reminder straight away. You can set this up in your cloud accounting software, so it’s automatic. The longer you leave your follow up reminder, the easier it is for your invoice to drop down the priority list.

Make sure you are talking to the right person – if you creditor is a business, find out who is responsible for accounts and build a relationship with them.

Pick up the phone – If the invoice is overdue, a friendly chat may have more impact than another email in the inbox. After your phone call, follow up with an email to confirm what you agreed.
Be ready with a solution – to clear the debt, can you start with part payment? Does the next order get part paid up front?

Reducing the average time-frame on payments for your business will help with your overall business health. Start with a straight forward system, clear credit terms and good communication with creditors.

Send us a message to find out how we can help you manage your debtors.

Changes to NZ GST rules for low-value imported goods

Changes to NZ GST rules for low-value imported goods 

In an increasingly disrupted world, the laws surrounding consumer processes sometimes need to play catch up. The government proposes changes to GST rules for overseas businesses selling low-value goods to consumers in New Zealand.

In an increasingly disrupted world, the laws surrounding consumer processes sometimes need to play catch up.

From 1 December 2019, overseas businesses selling low-value goods to consumers in New Zealand may need to register for, collect and return NZ Goods and Services Tax (GST) of 15% on goods valued at or below $1,000.

Low-value goods are those valued at NZ$1,000 or less (excluding GST). Examples include books, clothing, cosmetics, shoes, sporting equipment and electronic items. New Zealand Customs Service will continue to tax goods sold for more than NZ$1,000 at the border as they come into New Zealand.

With the significant growth of online shopping in the everyday lives of New Zealanders, this proposal by the Inland Revenue seeks to level the playing field so that offshore firms cannot undercut our domestic retail sector.

This is good news for retail businesses in NZ. The Inland Revenue will have greater transparency of the transactions between New Zealand customers and offshore suppliers.

Businesses must register for GST if their total sales, including services, digital products and low-value goods, to consumers in New Zealand exceed or are likely to exceed NZ$60,000 in any 12-month period from 1 December 2019.

The rules apply to overseas businesses selling low-value goods directly to New Zealand consumers, as well as online marketplaces and re-deliverers.

From early September 2019, overseas businesses will be able to register.

You can find out more in the IRD policy update

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.

Transforming Businesses and Optimising Accounting Processes with Cloud-based Solutions

Transforming Businesses and Optimising Accounting Processes with Cloud-based Solutions 

Preparing business plans and reconciling accounts regularly are imperative in any business’ accounting process. However, as a business owner, the accounting to-do list is hard to manage without the help of experts.

Entrepreneurs need to keep up with the changing times, and be open to using new tools that help with operating one’s tax and accounting operations. With the emergence of cloud accounting, businesses need to adapt, as time is becoming more and more of a valuable resource, and consumer behaviour and client expectations shift every day. Businesses need adequate tools and proper training to use these tools in order to keep up and remain competitive within their industry.

GoFi8ure values these emerging technologies, maximising their worth to help level up clients accounting systems and processes. The accounting services company offers Xero training, accounting, and cloud integration that can transform businesses and the way they tackle their accounting tasks. As cloud integration specialists, GoFi8ure eases companies’ load when it comes to administrative and time-consuming tasks.

GoFi8ure wants business owners to leave their requirements to the experts, to arrange all of their accounting requirements, tax obligations, and more – providing them with first-rate accounting solutions. GoFi8ure’s in-house tax experts and tax accountants help business owner employ effective strategies that will benefit businesses. One of GoFi8ure’s area of expertise is helping business owners file their business and personal tax returns accurately and on time. GoFi8ure is a proud member of the Accountants and Tax Agents Institute of New Zealand and a recognised Tax Agent with Inland Revenue.

GoFi8ure prides themselves with having the ability to cater to small and medium-sized businesses giving them the support that they need. From GST reconciliation to payroll, tax returns, and tax compliance, GoGi8ure can develop a suitable financial solution to fit a client’s needs.

To learn more visit The GoFi8ure website at https://gofi8ure.co.nz/

Should you register for GST? Questions on GST? We can help

Should you register for GST? Questions on GST? We can help 

Questions on GST for your small business? If your turnover was more than $60,000 over the past 12 months, or you expect it to be in the next 12, you must register for GST.

In New Zealand, goods and services tax (GST) is added to the price of most products and services. If your business is GST registered, you collect GST from customers (by adding 15% to your sale price) and you pay this to the government, less any GST that your business has paid on goods or services purchased.

Not sure whether to register your small business?

If your turnover (sales) was more than $60,000 over the past 12 months, or if you expect your turnover in the next 12 months to be more than $60,000, you must register for GST. When you reach this threshold, you need to register within 21 days.

But if your turnover is under that $60,000 threshold, you can choose whether to register or not.

The exception to this is if your prices include GST, such as taxi drivers. In this case you are required to be registered. If you are part of a company like this, check with them on pricing.

There are a few things to consider when making the decision to register. Get in touch with us if you are unsure whether or not you should register and we’ll help you to understand the pros and cons.

GST registered businesses need to choose how to claim and pay

When you register a business for GST, you have to choose how you’re going to claim and return GST on your sales and purchases. This means how you’re going to report (and pay) your GST transactions to the IRD.

There are three options:

  • Payments Basis – Under the payments (or cash) basis, you file GST based on when payment is made or received. This is the most common system in NZ. It is a good way for small businesses to manage cash-flow because you only pay GST when you have received payment. You also claim GST only for expenses you have actually paid for. You can use this system if your annual turnover is less than $2 million.
  • Invoice basis – The invoice (or accrual) basis is different to payments basis because you file GST based on the dates that customer invoices (or sales receipts) and supplier bills (or receipts) are issued. So you pay GST on an invoice you have issued regardless of whether you have received a payment. And you claim GST for supplier invoices (bills) dated in the GST period but not paid yet. Businesses with a turnover of more than $2 million have to return on Invoice basis.
  • Hybrid basis – The hybrid basis is a combination of the two methods above. GST on sales and income is filed based on invoice basis, and GST on expenses is filed based on payments basis when payment is actually made. This option is less commonly used. Talk to us if you think that this method might apply to your business.

Filing frequency

Finally, you will also choose how often you file your GST return. Larger businesses with a turnover of more than $24 million are required to file monthly. But smaller businesses can choose to file monthly, 2-monthly or 6-monthly. The most common filing method is 2-monthly.

Frequent filing can help stay you on top of GST obligations and give a clear picture of your business progress.

For more questions on tax and advice on how to structure your business, get in touch.

Could your business benefit from Financial Awareness Coaching?

Could your business benefit from Financial Awareness Coaching?

6 ways to measure the health of your business

6 ways to measure the health of your business

When you are running a business, it is easy to get caught up in the day-to-day activity and lose sight of the big picture. Taking stock of the health of your business is important. Knowing where you are allows for more effective planning, early warning about any issues, and the chance to better chart a course for success.

There are some quick ratios that will help you in order to gauge the health of your business. We can help you to assess your business health and show you how to calculate these vital checks. Click here to book your business Warrant of Finance. 

Liquidity Ratios

Liquidity ratios are about how quickly you can turn your business assets into cash – which helps you assess whether you’ll be able to pay the bills.

High ratios are better, as this means you’ve got more assets than liabilities.

Current ratio

Current ratio = Total current assets / Total current liabilities

As a general guideline, 2:1 is a good current ratio, but this does depend on the kind of industry you’re in, and the nature of the assets and liabilities.

Quick ratio

Quick ratio = (Current assets – stock on hand) / Current liabilities

This measure excludes your existing stock, which you may not be able to quickly turn into cash, and is seen as a more realistic quick snapshot of your position.

Solvency ratios

Solvency ratios look at sources other than cash flow to see whether your business will be able to settle debts.

Leverage ratio

Leverage ratio = Total liabilities / Equity

This is a measure of whether your business is reliant on debt financing or equity to fund your assets. A higher ratio can make it harder to borrow money.

Debt to assets

Debt to assets = Total liabilities / Total assets

This tells you what percentage of assets is being financed by liabilities.

Profitability ratios

Profitability ratios will let you know how efficient your business operations are. Where possible, it’s good to measure your business against others in your industry.

Gross margin ratio

Gross margin ratio = Gross profit / Total sales

This ratio tells you whether you can cover the necessary business overheads from your sales.

Net margin ratio

Net margin ratio = Net profit / Total sales

This measure tells you the percentage of sales dollars left after you’ve settled your expenses, except for your income taxes.

Checking in on your business health is a great habit to get into. Using these ratios helps you to understand your current business health and allows you to plan. Talk to us about how to calculate the factors in these ratios in order to keep your business on the right track.

Want to improve accountability and outcomes?

Want to improve accountability and outcomes?

Most business owners understand that the only way to ensure something gets done is to document what is expected, assign it to the right person, and set a due date. But what do you do if the task isn’t done? What are the consequences of this inaction?

Think back to your school days when you had homework… maybe you were super organised and got stuck in as soon as the work was assigned, or perhaps you completed it on the school bus the morning it was due. Either way, why did you get it done? Chances are there were clear consequences set by your teacher if you didn’t complete it – a few whacks with a stick or a lunchtime detention – that’s what we call accountability and consequence.

Unfortunately, many business owners forget these lessons from school. Sure, we set the tasks and actions, assign them to people and, if we’re really good, set a due date. From there, we so often forget to hold the person to account. Very rarely is there a consequence for the person responsible for the task. The consequence for the business owner, however, is ultimately a poorer performing business.

Here’s seven rules to tighten up your accountability:

  1. Ensure at the outset that everyone is clear about why the task is important.
  2. Assign the task to the right person and be available to give support.
  3. Be specific and crystal clear with all communication. Remember, they don’t know what they don’t know.
  4. Ask them to repeat back the instructions, to ensure the message was interpreted correctly.
  5. Set a realistic timeframe and provide delivery instructions and expectations.
  6. Agree on consequences for inaction.
  7. Have quick catch ups to check progress is on track.

Now, ask yourself… what actions can I take to improve accountability and outcomes for my team? What changes or improvements do I need to make to my planning processes and reporting systems? And most importantly, who is the best person to hold me to account as a business owner? Accountability goes both ways, especially if you want to be an authentic and effective leader.

‘Accountability is the glue that ties commitment to the result.’ – Bob Proctor

To find out how GoFi8ure can help you become more accountable and achieve outcomes that you WANT for your business – send us a message or call us on 0800 463 488.

New Year, New Accountant: Improve your Financial Year with GoFi8ure

New Year, New Accountant: Improve your Financial Year with GoFi8ure

With the New Year coming around, people are thinking about resolutions. ‘Getting the books in order’ might not be most people’s first thought, but it’s something many business owners should seriously consider. The beginning of the year is the perfect time to hire an accountant for mapping out the company’s finances for the upcoming year.  

Going into the new year, it’s best to think about creating a steady stream of finances and having someone to do proper tax return calculation for you – it can make the difference between a good year or a bad one.

Getting a new accountant has a number of benefits you may not be aware of, such as access to cutting-edge accounting apps and systems. Keeping your accounting updated is the best way to stay ahead of the curve, and an accountant well trained in handling cloud-based systems or new apps is a big asset.

The new year is also a new time to review expenses and refine cash flow. Hiring an accounting firm to do the books for the business allows for a thorough breakdown of where the company can improve—what expenses to forego, which paths to divert the cash flow to, and how to generally keep the business afloat by allocating resources to areas with the opportunity for more profit.

It’s the best time for taking your company to even greater heights. With solid bookkeeping, an updated forecast, and clear-cut goals, your company can achieve greater success than you ever thought possible.

Interested in improving your company’s financial year? Get the help of GoFi8ure’s expert accountants! Benefit from their sound advice and make the most out of your company’s profits! Visit https://gofi8ure.co.nz/ now for more information.

Staying Fit (financially) – NZ Plumbers Magazine featuring GoFi8ure

Regularly reviewing your company’s financial fitness will keep the business watertight, says Lisa Martin of GoFi8ure.

Funny isn’t it, that when we talk about financial fitness, many bosses start to glaze over. And yet the monetary side of things is the main reason businesses start up in the first place.

To read the GoFi8ure’s article which has been featured in the October/November 2017 NZ Plumbers magazine – click here to read it.