Newsletter Winter 2008 Are storm clouds on the horizon?
IF YOU see black clouds on the business horizon, now is the time to prepare for a storm. Hopefully, it will never come, but there is no better time than now to prepare for the possibility. Borrowing
A major cause of financial distress is too much
borrowing. Calculate the percentage of your borrowed money to the true or slightly reduced worth of what you own. Be like the punter on the sharemarket and knock something off the calculated value of your assets, just in case. If bad times come and revenue falls, consider how you would be placed. Control
To steer your business through rough seas, it
helps to know where you are going. Some costs vary with sales. An accountant’s biggest variable cost is wages, but many tradesmen with a small business, for example, will find it is mostly materials. You can monitor your business by adding up your sales, deducting your variable costs and arriving at, what we term, gross profit.
sales falls. We call this the gross profit percentage.
You will find most of the costs of running your
Monitor your gross profit percentage regularly
business are pretty well out of your control.
and set yourself realistic targets, so you can
Examples include rent, telephone costs, insurance
discipline yourself not to give too much away.
and so on. We call these the fixed costs of the
This article has been written not because we are
If the fixed costs of your business are going to be
pessimists, but to alert you to the power of
$20,000 per year, add what you need to take out of
accountancy. We have many measures of business
the business for living costs, then you’ll know how
performance and we can help you to keep control
much gross profit you will have to make.
of your business and its profitability. Implement
You can also calculate the cost of the materials
your systems and get used to using them – and if
you use as a percentage of your sales. If you are
the storm never breaks you will still be better off.
running a shop you will need to take account of the
Remember, when politicians talk of a technical
change in your stock level. In difficult times you
recession, there is a fair chance the outcome will be
will be under pressure to cut your profit margin in
more than merely “technical”. When the 1918 flu
an attempt to increase sales. This means the epidemic was rampant, the authorities deliberately
amount of gross profit expressed as a percentage of
Low gear preferred for economic speed bumps
ARE YOU someone who believes the good exercise. If the ratio of borrowed money to the economic times are coming to an end?
money you have invested is high, we say the
If so, have a look at the ratio of the money you
have borrowed to the total value of your business.
High gearing is fine for good times, but can be a
If business deteriorates you will have to maintain
disaster when things are not so brilliant. Should
you be looking at changing gears? In bad times
If you own several rental properties, do the same
Σ Summing it up with practical business advice
Deposit can help cash flow
AS A builder, plumber, electrician or any other
skilled trades person who buys large amounts of
Why should I take the risk of your business
material, are you in the habit of asking your clients
You can check out my credit worthiness.
Hopefully, the answer is “yes”, because a deposit
Here is a list of references. Please feel free to
can help your cashflow. In our experience most
trades people get deposits ranging up to 50 percent.
I do not wish to pay you directly, but I would
If your business is in any trouble, be careful about
be happy to lodge the money in your solicitor’s
accepting a deposit and then using some of it for
trust account on the basis it would be paid to
your personal costs. If your business fails, you will
you when I have confirmed the job is complete.
be liable for the debts to your customers.
If you are getting some building done and, for
If you are a limited liability company, you have
example, your kitchen joinery supplier wants a
protection only if you had first checked, before
deposit, try getting the bill charged through the
accepting any deposit (each time), to make sure your
builder’s account. This often works as the
business was technically solvent. If you do not keep
documentation to show the company was solvent at the time you received a deposit, the directors of the
Try a token deposit as a compromise, with the
company can be personally liable for the debt to the
balance of the deposit payable when goods are
customer, regardless of limited liability.
If you are wearing the hat of a customer, avoid
giving a deposit. Some suggested points to raise with
If you pay a deposit and the supplier goes broke,
you rank as an ordinary creditor and might never see
2008 Budget—Key Tax Announcements
The government is introducing a $10.6 billion programme of tax cuts
from 1 October 2008, with further changes scheduled to take effect from 1 April 2010 and 1 April 2011. sign your GST Current rates From 1 October 2008 THE new GST 103H form does not provide for signing on the front. This is because the back of the form has parts two and three, which for some clients will not be applicable. Be careful to sign the back of the form even if parts two and three do not apply to you. An unsigned form can be From 1 April 2010 From 1 April 2011 treated as not having been received and leave you exposed to future risks. Sometimes mistakes are made and perpetuated. T he I n l a n d R e v e n u e Department is entitled to recover unpaid tax, in these circumstances, for a little over Who will benefit? four years.
All workers will pay less tax as a result of the changes. In particular, the
Anything beyond that time cannot be recovered as long as
People on low incomes, mainly part-time workers, and those you have been honest with the earning around the minimum wage.
People on the average wage, and families getting additional support from the Working for Families changes.
Nearly 300,000 taxpayers who, from 1 April 2011, are projected to no longer face the highest tax rate of 39%.
Beneficiaries who are in part-time work and Superannuitants. Stress relief for the work-at-home consultant Check your KiwiSaver
A CLIENT came to see us because he was stressed. We suggested he
visit a doctor, but we also listened to his tale and offered some
He is a consultant working from home. We asked him to analyse his
time, so he wrote down what he did the previous day. It looked
- 11 am to 11.30 am moving car and looking for a park
managers, when they receive them, and make sure all the
- 4 pm to 5 pm miscellaneous non chargeable
Consultants are usually well paid. He was one of them.
• A central city park might be expensive but would be cheaper than
wasted consultancy time looking for a park.
• Charge clients you visit a share of your travel costs.
• Scrutinise the hour 4 pm to 5 pm. It can be easily wasted. Make it
His wife also works from home and would be happy to help in any
contribution) rate for a year applies only if the whole pay
• Collect the mail from the Post Office box and post mail.
• Open the mail, and keep out cheques for banking and bills to pay.
• Filter telephone calls, reducing many interruptions when he works
percent rate will apply for the employer contributions
If he did not have a wife who had some spare time, he should still
pass this type of work to someone else to do. He could:
• Compile a list of work to pass on to his wife and have a meeting
• Use a dictating machine for noting jobs he can delegate and to save
First home buyers
When you work from home, you must manage your time. Set a
monthly income target based on an acceptable number of hours of
KiwiSaver incentives, both
work. For example, if you value your time at $100 per hour and expect
to produce 130 hours work per month, then you should usually invoice
at least $13,000 each month. Ultimately, it is not the hours you work
By reducing the non-chargeable work, you will have more spare time
per annum with a maximum of $5000 per person. Contractor employee Learn the art of saying ‘no’
What happens if a contractor is subsequently ruled to be
FOR most of us in business, there never seems to be enough time in
the day. We are often asked to serve on committees or help in some
other way and are reluctant to say “no”. Sometimes the invitation is
made by an organisation with an inferred reward of being offered
some business. These rewards rarely materialise. Perhaps we need to
break the “yes” habit and say “no” more often. Be more selective
Source deduction payment means FBT as an employee ANYONE who receives source deduction payments is an employee for Fringe Benefit Tax purposes. This can possibly include self- employed people from whom your firm is deducting withholding tax.
Providing a vehicle to contractors can be the same, for FBT
purposes, as it would be if they were employees.
When the employee is also an owner of the company, it is wise to
have a directors’ minute agreeing to prohibit the private use of a vehicle, in addition to the standard letter from the firm to the
employee as recommended by the IRD. Get the minute signed by the
1st Instalment of 2009 Provisional Tax
The quarterly check to see the employee is not using the motor
(December balance date)
vehicle is an idea generated by the IRD. It is not backed by case law. Nevertheless, you should document enough evidence to show you have confirmed the employee is following the instructions. You could check on petrol consumption, for example.
Employee contribution Deadline for
You can have a vehicle partly owned by an employee and partly
Fringe Benefit Tax return
Based on a quarterly adjustment of 5 percent of vehicle cost, if the
employee has paid for a third of the vehicle, the fringe benefit liability
is reduced by one-third of 2.5 percent of the cost of the vehicle. So a vehicle costing $12,000 is subject to FBT for the quarter on only two-
3rd instalment 2008
thirds of 2.5 percent of the cost of the vehicle (to account for the
employee contribution), plus 2.5 percent of the cost of the vehicle. (June balance date) August 28
DO YOU measure your responses from Yellow Page ads? How many of
1st instalment 2009
those responses turn into sales? Yellow Page advertising is expensive. Some people advertise, get responses and never follow up. They have
more business than they can handle! So why do they pay for advertising?
(March balance date)
Examine your return on your Yellow Page advertising. Keep records. If your advertising works, that’s fine. If it doesn’t, save your money. An opportunity to A plumber gets caught out be a specialist? IF YOU find a difficult task and – no card, no business
no one likes doing it, you have an opportunity. Learn to do
All information in this newsletter is, to the best of the author’s knowledge, true and accurate. No liability is
assumed by the author or the publisher for any losses suffered by any person relying directly or indirectly
Kuutamossa tavataan, ylpeä Titania Me kävelimme portin kautta kukkatunneliin. Minä hengitin syvään ja huokasin nauttien metsän voimakkaista, miellyttävistä tuoksuista. Rinnallani oleva Ash ei näyttänyt yhtä ilahtuneelta. Hän oli jäykkä ja kireä. Ei kai häntä voinut siitä syyttää, olihan hän keskellä vihollisen maaperää, kesähaltijoiden ympäröimänä ja kykenemätt�