Empower Your Business

Accounting is Just the Beginning

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The 10 Commandments of Staff and Recruitment

Many small business owners struggle with employing staff, even to the point where they remain one-man bands to avoid taking on any employees. This, of course, means that they miss out on the opportunity to build wealth by selling their business, which surely must be one of the great things about going into business!

Getting things right with staff is just like other areas of business; it’s about planning in advance, being organised, getting the paperwork right and being consistent and fair. Here are some pointers:

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How to win with income tax

Hastings accountants A+BAC

It’s a sad fact that tax is a big part of being in business. Not only do you have to pay over a large chunk of your money to the IRD in various taxes, but like it or not, you also have to act as tax collector, as well as working unpaid for other Government agencies, whether it’s collecting court fines or child support.

Unfortunately some businesses owners and self-employed people never seem to be able to cope or get to grips with income tax, and it just becomes an insurmountable, frightening problem that leads to financial ruin for many.

Accept it

If you want to succeed in business the first key to success is acceptance. Do whatever you need to do — go and lie down, have a triple-shot coffee, or relax with a glass or two of your favourite glass of wine and let it embrace you. It’s just inevitable — you cannot run a successful business without suffering income tax, and that’s that!

Plan for it

Having accepted you need to pay, the next thing to do is to plan for income tax. Find out when you have to pay and how much. That means getting a good accountant and having your accounts and tax returns prepared early.  Ask the accountant to let you know about future tax instalments. Knowing what you have to pay and when is absolutely vital so you can either allocate some money or start saving for the inevitable.
Read the full article on how to win with income tax

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Working Overseas and Tax

clouds_beach_blackwhiteTax may be the last thing you’re thinking about when you make the big move over the Tasman or maybe further afield to the UK but that could be a costly mistake.

Just about everyone you meet or speak to thinks they can kiss the New Zealand IRD goodbye when they climb the stairs to their airplane but alas, the IRD are not that easy to get rid of and may stow away in your suitcase! If you don’t take the right advice and take appropriate action you might be in for a very nasty surprise when you get back to NZ. Have a read about an unfortunate individual who had a rental property in New Zealand whilst overseas he had never lived in. How does that place the many Kiwi’s that rent out their family home in this situation? The review of the case is from tax experts Tax and More Limited from Wellington. Their newsletters are always excellent.

http://www.newzealandtaxadvice.co.nz/files/TaxAssessment-February-14.pdf

If you’re going overseas to work save yourself some stress (and maybe money) by taking advice from an expert!

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Don’t Be Blasé About Tax Debt

T&C's are perceived as some of the most boring part of businessWhen it comes to paying bills, we often tend to be blasé and put our financial responsibilities into the too hard basket.  Ignoring debt is the easy option at the time but eventually things catch up with you.  When it comes to paying tax, it is even more important to stay on top of your obligations to avoid potential tax debt.

So what happens if I do get behind?  You should try to avoid getting to this point, but it is likely the IRD will contact you if you miss your payments.

In most scenarios, tax debt will result in the following charges:

  • late filing penalties and interest
  • late payment penalties
  • non-payment penalties

If you do receive a letter from the IRD, it pays to act quickly.  There may be a variety of payback options available to you. If you want to know more, let Nick know and he can work with you to get back in the black.

Tax due in April and again in May…  A bridge too far?

Many taxpayers get a terminal tax bill due 7 April 2015.  Then IRD insist you pay again on 7 May 2015 for provisional tax.  This could well be a bridge too far’ and your Cashflow just can’t take it.

We at the A + BAC have found a very easy and risk free funding option which is only for provisional tax and the IRD have approved it.  It is called Tax Finance.

By using Tax Finance (see Table below), you decide when you want to pay your tax (maximum delay of 10 months for 7 May).  The tax intermediary arranges your payment into their tax pool which is a special account with the IRD.  All you have to do is pay the interest cost upfront. Then there’s nothing to pay until your selected maturity date.  You can even use this as a form of instalment such as arranging tax finance for 6 months and then paying 1/6th to Guardian Trust tax pool each month.  You won’t get any late payment penalties or IRD interest.

Tax finance for 7 May 2015
The finance rates are subject to change
3 Months 6 Months 10 Months
Provisional Tax Amount $5,000 $5,000 $5,000
Provisional Tax Due Date 7 May 2014 7 May 2014 7 May 2014
Maturity Payment Date 22 Aug 2014 22 Nov 2014 24 Mar 2014
You pay only $120 $198 $315
Payment of interest due by 3 May 20145
Provisional Tax Amount $10,000 $10,000 $10,000
Provisional Tax Due Date 7 May 2014 7 May 2014 7 May 2014
Maturity Payment Date 22 Aug 2014 22 Nov 2014 24 Mar 2014
You pay only $240 $396 $630
Payment of interest due by 3 May 2015

nick@abac.co.nz or on 0800 ASK NICK are the best ways to contact Nick to see how Tax Pooling can help you.

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Reviewing Your Business Progress

When was the last time you checked performance against your business plan?

The business plan needs to be under continual review to make sure you are successfully implementing each planned stage. It won’t be any use to you unless you use it.

By writing a business plan you’ve taken the time to plan in detail what your business goals and objectives are – it’s a living, working document, not something to be filed away and then dusted off for review in a couple of years’ time.

This concentrated thinking, discussion and debate is the key to the formulation of a workable and achievable business plan. And as long as actual performance is monitored against it, the plan should significantly assist in the long-term survival of the business.

Ideally you should review performance on a regular monthly basis, or at the very least on a quarterly basis. Ask the fundamental questions:

  • Where are we?
  • Are we heading in the right direction?
  • Will we achieve the goals and objectives of our business plan?
  • Should we review pricing structures?
  • What has been the effect of the consumer price index increase?
  • What has been the effect of price rises in our particular business?
  • Should we raise our prices?
  • Should the gross profit percentage be higher?
  • Have we got empathy with customers?

On an annual basis you need to compare actual financial performance to the budgets and cash flow forecast. Ask:

  • How did we perform?
  • What went wrong?
  • Have we learnt from the mistakes?
  • Did we exceed budget expectations anywhere? Why?
  • Can we capitalise on these improvements?

A valuable assessment is to compare your business figures to industry statistics (ask your accountant about obtaining this information).

You’ll also want to know: What is the general business climate in your area? Is it conducive to your type of business? Should you be expanding, drawing back or diversifying? What is the status of your investment in stock?

Don’t forget that the business review should also include an appraisal of what has been happening within your team. You need to look at:

  • Recruitment
  • Training and development
  • Meetings
  • Employment agreements
  • Wage/salary reviews

Use your business plan as a day-by-day, week-by-week, month-by-month reference point to compare where your business is against what you planned it to be. If there are any deviations, immediately investigate them and try to take corrective action.

If you need help with reviewing your progress contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

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How to self audit your business every quarter

Blog

You may think that auditing is something only accountants should care about and only big businesses need to worry about. But in fact, self-auditing is an effective way to safeguard the future of your business and maintaining or improving your profitability.

According to a recent survey, more than half of New Zealand businesses continue to be the victim of fraud, both petty and major. A local — not large — business here in Hawkes Bay was recently defrauded of $660,000. Imagine the difference that would have made to their profit!

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Buying a Business

Consentrating

Over the last six months there has been a marked increase in the number of business sale transactions taking place, as the overall business landscape and confidence continues to improve.

The problem is that for the buyer, buying a business is a very risky thing to do and before signing a Sale and Purchase Agreement the buyer needs to do due diligence, irrespective of the size or complexity of the business involved.

So what is due diligence and what’s involved?

Essentially due diligence is about doing your homework – opening the hood and having a thorough look at all aspects of a business. Due diligence assesses key risks and confirms your understanding of a target business is correct. Investigating and evaluating a business is a critical process in any business purchase. It should be a non-negotiable item on your purchase checklist.

A due diligence process typically involves three parts:

1. Financial

2. Legal

3. Commercial

Factoring in your investment for due diligence is essential – you need to consider the cost to you in both time and money if you get the purchase wrong.

The scope of the work undertaken will depend on various factors including size of the transaction, complexity, overall investment, the purchasers experience in the industry and whether you need external expertise. The scope of the assignment and what work is being undertaken by which advisor is important to understand. Make sure thorough checklists are used to ensure all critical areas are addressed.

Some important aspects to consider:

  • Confidentiality – an important consideration for both parties to ensure this is preserved throughout the process.
  • Level of information available – how much information is available and how much is enough to ask for so that the vendor is not put off by the deal.
  • Quality of information available – how accurate is the information? It should be validated to various sources.
  • Time frame to complete your due diligence
  • What are your motivations for acquiring the business? Are you looking for access to new markets, new technology and products, new customers?
  • Requirement for financial modelling – how will the new business be structured? How much debt will it have? What are the cash requirements of your new business?
  • Who are the key people in the business? Who is critical to the business in terms of relationships and profitability?
  • What are the key risks of the business – legal, financial, commercial – including having a thorough understanding of the marketplace the business operates in.
  • Understand how the business makes its profit. From which customers? Using which staff? At what time during the year?
  • What hours does the current owner work? Are they excessive and if so, are you willing to do the same?
  • What are the key trends of the business? Where is the business in its life cycle?
  • Are you looking to merge the acquired business into an existing business? If so what are the steps involved? What value will be created if you do?

A thorough due diligence process, undertaken by experienced advisors, gives you the information you need to make an informed new business purchase decision. While undertaking a due diligence process will not guarantee a successful business transaction every time, it does remove the emotion from the equation which can only improve your odds.

If you would like a copy of our excellent Buying a Business Checklist email me on nick@abac.co.nz.

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It’s Easy to Buy a Business but not so Easy to Sell One

businessacquisition02

I still meet far too many business owners who bought an existing business and paid far too much for the business. Carried away by hope and enthusiasm, they typically don’t investigate the business properly beforehand and fail to seek proper and honest professional advice.

After a while they often find themselves struggling in a very competitive environment without sufficient sales to support their financing costs or ever-increasing overheads and more often than not, lacking business experience or finance skills, gradually lose heart and enthusiasm to the point where after a while, they just spiral into decline or try and sell on in turn to a new hopeful, always optimistic business buyer.

Now this doesn’t have to be the case,

  1. For a start, getting a good honest, accountant to look at the business before it’s bought will sieve out the worst businesses for sale. Don’t take things at face value and never rely on any accounts or figures prepared especially for selling the business.
  2. Negotiate some vendor assistance. I’ve seen people buy businesses with no experience in that line of business and get just a 30 minute hand-over. Come on now, be realistic!
  3. Next, prepare some projections as to whether the business will support you and your level of costs. What is the break-even point and is there any leeway between that and existing turnover?
  4. Then, way before you go into business, make sure you get some experience in that line of business. If necessary, work for someone else first and learn the ropes.
  5. Get to grips with marketing. Read some books, look at what others who are successful are doing and maybe do some training in or get some coaching in marketing. Prepare a marketing plan, a practical plan not all theory. Nowadays, being in business means doing a lot of marketing.
  6. And then finally, do some research on, take advice on and get some decent financial systems in place. It’s essential that you can keep track of your performance and know what’s going on in your business.

Then, and only then, if it all stacks up, and you are fully prepared and ready to go, should you proceed and buy the business. Once you’ve moved in, borrowed the money from the bank and personally guaranteed the lease it’ll be too late to back out!

If you’re thinking of buying a business contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

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Key Business Skills – Not Understanding or Getting to Grips with Marketing

businessacquisition03

Other than mastering the complexities and tricks of the trade of your own trade or profession, there are really only two key business skills you need to master to get on in business, one being an understanding of finance/financial systems and the other, getting to grips with marketing.

Marketing is certainly not advertising, as many business owners think, and it goes way beyond the dictionary definition. In a way everything you do in your business (assuming that you do it right) is a contribution towards marketing and your whole business ethos and culture must be designed and orientated with marketing right at the forefront. It is not something that you can delegate, and no matter how busy you are, you must find sufficient time to invest in marketing activities for the sake of the future of your business.

 Right from the start you must come up with the answers to three key marketing questions:

1.     Why should a customer use you and not a competitor?

2.     Who is your ideal customer?

3.     How do they find you?

These questions are absolutely pivotal to the very success of your business, and if you work through these and find cost-effective answers your sales funnel (see https://empoweryourbusiness.co.nz/2011/11/10/keeping-your-sales-funnel-topped-up/) will always be overflowing!

Effective marketing involves a large number of activities, some background e.g. website, leaflet, FAQ, testimonials, or case studies, and some specific campaigns e.g. joint-venture, ideal customer, or referral strategies. Some will work, others will not, but bit by bit, if you put enough effort into it, it will pay off. Your marketing will also be a lot more successful if you build in some simple systems e.g. a referral system might be:

1.     A new customer or client is always asked where they heard about the business and recorded on a register of referrals or similar.

2.     Recognition is then given to the referrer, whether a thank you card, or ‘phone call or a letter prepared from a template.

3.     If appropriate, a reward is then given to the referrer, whether a small gift, lunch or a return referral.

It doesn’t matter how long established your business is or how many customers or clients you have, customers die, move away, lose interest or just stop buying, so if you can’t sell yourself or your business you have a real problem. Many marketing activities are free or very low-cost, so get out there and get going, before your competitors do!

If you need a hand with your marketing contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

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Having trouble getting paid by customers? – Try these 8 tips

debt_collection

A lot of business owners struggle with getting their customers to pay, and, as a result, get into cash flow difficulties themselves. Here are 8 practical tips that may help.

1. Clear expectations

Make your payment expectations clear on all your invoices and your Terms of Trade, which ALL customers should sign. Set the scene from the onset, making it clear that prompt payment is a condition of doing business with you.

2. Resolve quickly

Deal with queries or disputes as quickly as possible to get any excuses from your customers out of the way. The longer you leave matters in limbo, the longer it will be before you get paid.

See full article HERE