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Happy New Year

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Happy New Year !
By Greg Verhoef
1 st of April is an Accounting New Year for many. So why not celebrate your achievements,
put the past year behind and create some New Year Business Resolutions for the year
ahead.
This year with my business I’m going to……..
 Work hard, engage the team and make sure everyone is having fun.
 Kick the tyres of our business plan and make sure it’s still fit for purpose
 Develop a new product or service and create a marketing strategy to take it to
market.
 Review our marketing plan
 Get more help with my business, put together an advisory board to help make good
business decisions.
 Review our business strategy
 Check our processes and systems to see what can be automated, simplified or done
away with.
 Identify 6 new clients I’d like to win and set up some strategies to target them.
 Set some clear goals and expectations with the team and reward them if we achieve
great things.
 Set a budget for the year ahead and meet with the team to report against it
regularly.
 Get some help to deal with those difficult issues I’ve been putting off.
 Find some cool new Xero add on’s to help my business operate efficently
information
Keep your Accountant happy:
This is also a great time to put together a file for your accountant. The sort of stuff to help
prepare your Financials and Tax returns. Things like stock and cash on hand, checking your accounts payable/receivable and asset ledgers for write offs. Details of new assets, finance agreements, loan statements, interest, dividend and donation receipts.

If your accountant has been actively using and checking Xero, many of the items previously done as year-end adjustments may have been dealt with as they happened. By keeping your accounts and financials up to date throughout the year, there should be no surprises, plus you have better information to base your decisions on during the year.

 

Minimum Wage Increase:
Just a reminder minimum wage went up 75c to $16.50 from the 1 st April. See
http://www.employment.govt.nz for more details.

I’m always keen to meet new business owners if you’d like to grab a coffee just give me a call.

Taking AIM at Provisional Tax

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Taking AIM at provisional tax

By Greg Verhoef

From the 1st of April a new method for calculating provisional tax becomes available. The “Accounting Income Method” (AIM) is another proposal to simply business tax.

The existing regime of paying provisional tax based on the previous year’s profit, is based on the assumption profits steadily increase. In reality this is often not the case, taxable profits are far more volatile, markets change, overheads change, business structures are constantly changing not to mention the difficulty for start-ups or high growth businesses. I have spent many hours explaining the detail of the sometimes confusing provisional tax system, preparing estimates or arranging tax purchases to reduce interest and penalty charges for getting it wrong.

How AIM works: Provisional tax will be calculated every two months based on the profitability recorded in your accounting system. This has serval advantages; tax should more closely follow the business profits, in good periods tax will increase and in quite periods drop down, if a loss is made prior period provisional payments can be refunded quickly, 6 evenly spaced payments per year rather than 3 oddly timed lumpy payments should make cash flow management easier.

In Practice: Once your GST return is completed, your tax agent will be able prepare an AIM statement that calculates the year to date profit. The AIM statement allows for the tax agent to make adjustments for items not included in the system or usually made at year end. At year end the tax agent will still prepare a final set of Financial Statements and a tax return to wash up any items not picked up during the year. The IRD’s view is that you just need to take reasonable care as you go through the year.

Eligibility: The business turnover must to be less than $5m plus you and your tax agent must both use AIM-Capable software such as Xero. Unfortunately at this stage AIM is not available for partnerships, trusts, Maori authority, super funds and portfolio investment entities.

My Practice Philosophy: The AIM method fits well with the way I like to work with clients. I already use Xero with all my clients and currently check and file their GST returns. Not just to make sure they are correct but also to ‘keep my head in the game’. While preparing the AIM statements will require time the benefits of regular tax payments that align with the business performance should make paying the right amount of tax on time easier. And that’s got to be a good thing.

Why so many small businesses?

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Why so many small businesses?

By Greg Verhoef

I attended a presentation recently where some insights were shared on kiwi businesses. The results we interesting with about 1.5 million micro business, 100,000 slightly larger SME’s and 22,000 large businesses. Almost 97% of entities had 20 or fewer employees.

While this is great to see the Kiwi Spirit of budding entrepreneurs ‘out there doing it’ it did make me wonder why it is so hard to make the transition from small to mid-sized or larger. Is having so many small businesses efficient for our economy? How many of them are just making ends meet or worse sucking the owners into the dark hole of debt?

Apart from obvious efficiencies and reduced duplication, there are other opportunities that come from having size and scale. With a wider team of staff, there will be idea’s to develop, opportunities to collaborate new products or develop specialties, take on larger projects and source the capital to invest in these opportunities.

Here are seven tips to help you break the small business mold.

Have a Plan The importance of having a goal and some steps in place to achieve it is paramount. If you don’t know where you’re going how will you get there? Don’t be afraid to change it up often.

Team Engagement Your team is your greatest asset, make sure you bring them along for the ride, engage them in the dream and make sure they understand the plan, seek their input and be prepared to share some of the winnings when they arrive.

Seek Opportunities Always be on the lookout for opportunities, to be creative, new ideas, different ways of doing things, collaborate with others, merging or amalgamating to gain scalability. It may be better to be a part owner in a big pie than a big owner in a savory.

Kaizen Adopt a long-term approach to consistently making small improvements to procedures and process across your business. Always be aiming to improve better outcomes and efficiencies.

Invest Profits and Time So you’re in business to make some money. The question is then how much do I take v’s reinvesting in wise opportunities for the future. Make a conscious decision about how much you take from the business and how much you leave in.

Delegation delegate, delegate, and delegate. Free your time to work on growing and developing your business not the nitty gritty day to day stuff.

Advisory Boards Larger business have clear split between governance and operations. Not really practical in a small business but a halfway step is having an advisory board of people with various skill sets or industry experience that can help guide and advise the business owners.

Another 4 Great Xero Features

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Another 4 Great Xero Features 

By Greg Verhoef Chartered Accountant 

In the last few months I’ve covered 9 Great Xero features, there are of course many more.  If you would like to see my thoughts on the others, check out the blog on my website –  gregvca.nz 

  1. Invoices online  The key of a cloud based accounting system is you can access it from anywhere.  You can create invoices from the office, when on the road or while having a coffee.  You can email the invoice direct to your client as a PDF document or a link.  The benefit of link is it can also contain online payment options and allow the customer to view other outstanding invoices.  The neat thing about this feature is it logs when the customer viewed the invoice.  You can see when the customer has viewed.  Maybe they haven’t taken the time to look or maybe you should follow up with the customer to make sure you’re going to get paid on time. 
  1. Xero to Xero Invoicing  Do you have a customer or supplier on Xero you do a lot of business with.  Rather having to type in all the bills you can swap Xero Keys.   This does NOT provide the other party with access to your Xero.  However when either party sends an invoice via Xero Network, it will turn up in the customers’ bills as a draft bill.  Approval is still required before being added into the accounts payable.  
  1. Payroll  Xero has a functional simple payroll.  It does all the payroll basics online including processing, holiday pay tracking, bank batch payment and preparation of IRD files for uploading.  It also posts the wages to the Profit and Loss when processed, can split expense reimbursements to the correct code,  has an employee porthole that allows for payslip viewing and holiday leave applications online. 
  1. Inventory – Xero allows for both tracked and untracked inventory.  Tracked inventory uses simple average costing to keep track of the quantity and value for stock on hand.  Costs of sales are allocated to the profit and loss when items are sold.  This is not a full feature stock control system but for simple applications it’s fine.  If stock is a major part of your business then check out the Xero marketplace. www.xero.com/nz/marketplace 

 

Happy to give a demo and see how Xero might fit for your business.  

4 More Great Xero Features

  1. Batch Payments – Duplication of tasks is a real pain, having to enter accounts for payment into an accounting package then again into your online banking takes time and creates opportunity for errors. Xero’s batch payments allow you to pick a group of bills to pay, create a batch payment and download those details to your online banking.  The nice thing is Xero knows you paid all those accounts with one go, so when the payment comes through the bank feed it should automatically match up in Xero.
  2. Expense Claims – When you’re out and about and end up paying for minor items either with cash or from personal funds, you can use the Xero phone app to snap a quick photo of the receipt, enter a few basic details and the expense is then recorded in the system. This can then be either reimbursement or recorded as owners funds introduced to the business.  Never miss claiming on those minor items again.
  3. Attaching Documents to transactions – Every transaction in Xero has the ability to attach a document or file. You can use the phone app to take an image, enter a few details and let it match up with the bank feed or scan documents and attach them to entries in Xero.  Helpful for anyone in the future looking at a transaction and needing further information.   There are Xero add-ons that extract data and import into Xero.  This can be either from bulk scanned invoices or invoices sent direct from suppliers.
  4. Tracking – In the past accountants used to set up complicated charts of accounts to try and identify performance of various parts of the business. Messy charts are no longer required as tracking allows all transactions to be tagged with up to two categories and 100 options for each category. Reports can then be run for any manor of options.  This is handy when you have two or more different operations in one business or want to track trading by regional locations.

 See my blog post on the 30th of August for my first 5 Xero Features

Happy to give a demo and see how Xero might fit for your business.

Tools of the Trade

I enjoy working with tradies and their businesses.  Maybe it’s their can do attitude, the way they put together creative solutions or maybe because Dad was an electronics technician and I wonder where I would be if I had followed a similar path.

As any good tradie will know, having the right tools for the job will make things go a whole lot smoother.  Here are some tools us accountants think of when working with trades to help make their business perform and profitable.

Job Tracking – Keeping track of your work is important, making sure you deliver a great service, meet client expectations, where all your jobs are at and who is going to get them finished.  With the rise of cloud systems there are a number of options out there that allow you and your team to be on the same page as to who is doing what by when.

Back costing – So as business advisors we really like this one and it takes a bit of work to get the system right but knowing how each of your jobs is contribution to your profit is a critical part of running a business.  Knowing which jobs went well and most importantly which ones didn’t go so great.  What were the key learning experiences from the not so good jobs so you don’t repeat the same next time.

Quoting and pricing – Get the pricing too high and you wont win the work, price too low and you may not make any money.  Feed back from back costing, number or wins/losses and charge out rate calculators help find the right point in the market.  The market is constantly moving so be prepared to change and review your pricing model frequently.

Charge out rate calculators – Knowing what each hour of labour is costing you is another KPI.  A combination of available hours, pay rates and overheads tally to end up with a real cost per hour worked.  As pay rates and overheads shift you should rework your calculations and consider the effect on your charge out rates when quoting or billing work.

Regular reporting – getting a once a year report from your accountant is about as useful as a flat battery pack. With systems like Xero and it’s various job tracking/costing add-on’s you can get good monthly figures in close to real time.  Combine this with regular catch up’s with your business advisor and your onto a winner.

Greg Verhoef – Chartered Accountant
021 242 8690

5 Great Xero Features

There are heaps of great Xero features.  I couldn’t fit them all into the space of this column so here are my first 5.

  1. Cloud Based – This was the game changer Xero introduced to the market. Placing the records in a cloud based server allows multiple parties to access the same information in real time.  This makes working with clients to fix minor accounting mishaps and checking their GST returns nice and easy.  While most of my clients can do their own GST a quick check over every couple of months keeps my ‘head in the game’.  We keep the records nice and straight for management reports and the yearend accounts.  This also puts me in a better position to offer advice, help my clients make better business decisions and head off difficult issues.
  2. Repeating Invoices – Invoices for regular services can be set to repeat when required. There are settings to send automatically or just draft awaiting your approval. Either way this is a great time saving feature and reduces the risk of forgetting to send out your invoices on time.
  3. Invoice Reminders – We all seem to have a few clients that forget to pay us on time or misplace the invoice. Xero’s invoice reminders let you automate a reminder to be sent either before the due date, after the date, or both, with multiple follow ups.  You can include a link to the original invoice and exclude reminders for minor amounts.
  4. Phone App Reconciling – Got a few minutes to kill. With a swipe to the left to scroll down or a swipe to the right to scroll up, it’s a little like tinder for business. OK to accept the match, Xero’s suggested coding or creating the correct new entry can all be done from the phone. Keeping the reconciliations up to date is a breeze and keeps your accounts receivable and payables current.
  5. Apps Marketplace – With over 500+ add on applications that integrate with Xero, there are plenty of opportunities to bolt on time saving or feature rich applications.   While you could build you own software to integrate with Xero, why reinvent the wheel when it is quite likely someone has already done it for you.

 Happy to give a demo and see how Xero might fit for your business.