I’ve noticed that many business owners do nothing about their profitability. They plough on day after day or week after week trying to make ends meet. They’re either too busy — blissfully unaware they’re leaving thousands of dollars on the table — or they just throw the problem into the too-hard basket (which is probably overflowing by now!). But that’s a mistake, because with a little effort and enthusiasm, and, yes, dogged persistence, you can do something about your profitability.
For the past few years many businesses have “put off” investing in their accounting system in favour of improving other areas such as sales and production efficiency, i.e. areas that ultimately have an impact on their bottom line. Good old Kiwi ingenuity has seen many businesses “tack on” and “patch up” their system to enable them to keep operating without having to go through the expense of an upgrade.
At a basic level upgrades are released to make our lives easier, improve the customer experience or both. So why would you continually turn your back on them?
Without realising it, businesses have increased their administration tasks and become reliant on this “additional work” to function on a day to day basis. Many companies extract their data into Excel to calculate and/or manipulate the figures into a usable form. In some cases this has been simply to undertake essential functions such as allowing for GST at 15% and accounting for foreign currency transactions.
Believe it or not these types of inefficiencies are not only holding you back, they also add up to a hefty dollar amount.
While some businesses still have a hangover from the recession, low interest rates and a more positive business outlook appear to be encouraging others to review their systems and invest in this area. Businesses have also come to realise that their choice is no longer restricted to choosing between an off the shelf accounting package (that may not totally meet their needs) or an expensive custom built accounting system. Systems have evolved over the past five years and can now be tailored to meet a business’ specific needs and it won’t break the bank.
Today business functions are intertwined and reliant on similar information. Most businesses whether big or small realise the efficiencies that can be achieved from a consistent data source. A good operating system should, where possible, integrate data to avoid duplication, inconsistencies and to minimise input errors.
So what are the signs that your business is ready for an upgrade? Here are a few key questions to get the ball rolling:
How easy is it for you to generate your financial reports today?
Are your monthly reports always pushing your reporting deadlines? Are you reliant on a team to combine/manipulate data to enable your reports to be produced? While you may think you are saving money on the upgrade and/or system review, you need to consider the extra resources that you devote to the accounting and finance function.
How much double/triple handing of data is there?
Does your month end process involve pulling data from one system and re-entering it into another? Do you rely on Excel spreadsheets for job-costing/work in progress calculations? You need to consider how much time you or your team is wasting that could be better utilised elsewhere in the business.
Has your business recently gone through an expansion phase?
This may be a growing customer base, expanding into new markets and/or projects or simply an increase in your staff numbers. A small business can get by with a more basic accounting system. However, as your customer base/number of locations and/or projects and employee base grows, there is a greater need for access and sharing of key data.
How do you assess sales, finances, and other business functions to evaluate your performance?
If you rely on information pulled from all different sources your data is bound to be plagued by errors caused by manual entry. Tying up your resources and timeliness is also likely to be an issue.
Is your financial data difficult to audit or unreliable?
You may rely on a few key team members simply because they are the only ones who know how the system works. This leaves you exposed if they go on extended leave or leave the business completely. There may also be the risk of incomplete records or discrepancies as it is unlikely their work has been reviewed before.
It is important to remember that a new and improved accounting system is not much use on its own. You need to ensure that your accounting team has the right level of experience for the role, and that you provide them with training as required.
You may recognise the above signs or have your own growing pains that simply need to be dealt with. If you have identified the symptoms, you can contact us to discuss your options.
Working out your income for Working for Families Tax Credits (WFFTC) purposes has always been complicated, so much so that many big firms of accountants refuse to get involved in calculating their clients’ WFFTC entitlement.
Well as from the 2012 Tax Return season getting their clients’ income correct for WFFTC purposes is going to get even more complicated as:
This last point is particularly grey and many accountants think totally impractical.
Having worked in tax for 30 years I suppose I shouldn’t be surprised but making tax this complicated is just downright crazy. The more you make tax law difficult to comply with, the less chance you have of taxpayers being able to follow the rules and the whole system falling into disrepute, especially given the IRD’s woeful lack of resources available to be able to police the system.
If you need help with your WFFTC, contact Nick on 0800 ASK NICK or email nick@abac.co.nz.
Posted in Accounting, Tax
Tagged IRD, New Zealand Accounting, NZ Tax, NZ Taxes, WFFTT, Working For Families Tax Credits
I was recently appointed to look after a family business who used a large, long-established firm of Chartered Accountants in Hastings to look after their accounts and tax affairs for many years. This firm charged many thousands of dollars in fees and my fixed fees were about 50% of theirs.
As I worked on their accounts and tax I noticed there were a few things the previous accountants had not taken care of:
The result of all this? One very happy family, a case of wine coming my way plus me left shaking my head in wonder as to what else is out there in their client base and that of many of the other larger firms of accountants out there as this scenario is not uncommon…
If you want someone who really does care to look after your accounts and tax contact 0800 ASK NICK or email nick@abac.co.nz. You won’t be disappointed!
As someone who has spent many hours preparing budgets, the anonymous quote “a budget is just a method of worrying before you spend money, as well as afterward” is one I wish I had thought of! Whether you agree with this or not probably depends upon your disposable income. If there is a slim margin between your incomings and outgoings, knowing how much you have to spend for the week or month to come will make a huge difference to the amount you waste on discretionary items (i.e. the things you don’t really need)!
Here are some tips on business budgeting:
Get more budgeting hints and tips in this article:
Budgets – Why you Need One + Step by Step Procedures
Budgeting is reasonably straightforward once you get some practice, so if you need a hand to start on your budgeting contact me by email or call 0800 ASK NICK.
Dee – link here to budgeting article on the website please
Posted in Accounting, Business, Finance
Tagged Accounting, Accounting Software, Budgeting, Budgeting Hints & Tips, Budgets, Budgets Hints and Tips, Business, Business Accounting, Business Budgeting, Business Expenditures, Business Planning, Disposable Income, Income, Incomings, New Zealand, New Zealand Accounting, NZ Business, Outgoings, Profit Margin, Semi-Variable Costs, Variable Costs
Find out more about Nick, the accountant with a difference.
