Taxes get simpler for your small business

Thousands of kiwi businesses are going to find paying taxes is more straightforward after a reform of SME provisional tax payments. The highlights for all our clients who own small- and medium-sized businesses:

1.       No more estimations. This is great news because it means greater accuracy – the new provisional tax option uses software to calculate your payments throughout the year.

2.       You’ll probably pay less use of money interest. Choose the new system and it won’t apply. Stay under the old ‘uplift’ method and if your annual liability is under $60,000, you won’t be subject to use of money interest either. If your liability is over $60,000, use of money interest will only apply on the last instalment of your tax. (Use of money interest will still apply to overdue payments.)

3.       Contractors can choose their own withholding tax rates. These can range from 10% to 25%, but from April next year it will be easier for contractors to choose the rate that works best for them.

4.       IR debts will accumulate more slowly. The previous 1% per month penalties on income tax, GST and some other payments will be scrapped. This is great news and will hopefully make businesses more likely to make repayments. As the Prime Minister said, “Building up a very large debt to Inland Revenue is often an ineffective way top get individuals and businesses to resolve their tax situation.”

5.       Companies can now pay tax as an agent for shareholder-employees. This makes life a bit simpler for small business shareholders.

6.       Overall, your cost of tax compliance should be lower. Around 97% of New Zealand businesses are small business and the IR’s research shows that “tax compliance costs are relatively high for small businesses.”

An estimated 110,000 businesses could take up the new pay-as-you-go option and you’ll need to be using Xero, MYOB or a similar sytem to take advantage of it. If you’re not already on Xero, we’ll try to get you switched over so you’re up and running for the April 2018 when the new system gets underway. PM John Key estimates that 30% to 40% of New Zealand businesses are using cloud-based accounting software now but expects to see that rise to 85% or 90% by 2026.

You can read more about the changes in the IR’s document Making Tax Simpler or give us a call and we can talk to you about what the changes will mean for your business.

By Elle Le

Long-term loans can lift your business

Self-funding your small business? It’s how most of New Zealand’s 460,000 small businesses get started – and many keep running this way for many years. But if you’re putting your personal money into your business, you’re automatically limiting its growth and leaving it with minimal reserves. This makes it harder to recover from setbacks and harder to expand. The number one reason for small local businesses to borrow money? Because the owner doesn’t have enough income and cashflow through the business.

This is where a long-term can help you expand your business and lift it to a larger size, capacity and profitability. Small business owners are often nervous about debt, particularly when cashflow may be unpredictable – as it has been for so many businesses over the past eight years. The good news is that 89% of small businesses (six to 19 employees) and 95% of medium-sized businesses (20 to 49 employees) can access debt finance on acceptable terms.

What are the advantages of using long-term debt to grow your small business?

1.     You can invest in the assets you need, when you need them. This could mean equipment, vehicles or other assets that can drive the growth of your company – with the right balance of debt and equity this type of borrowing can maintain your business’s strong financial position.

2.     You can smooth out the ups and downs of seasonality and cashflow. Fixed repayments on a long-term loan mean you know what you need to pay: no lump sums and no nasty surprises. If you use the debt to invest in effective business drivers, your overall cashflow could improve significantly.

3.     Build your business’s credit. When you use your own credit cards or store cards to purchase new computers or pay invoices, you’re enhancing your own credit rating but leaving your business without a credit record. By borrowing in the business’s name and paying back the debt, you’re creating a track record that makes it easier to borrow again when the need arises.

Obviously, as with any debt, it’s important that you have the ability to service the repayments. Give us a call if you would like to talk about lending – we can help you calculate what repayments your business could comfortably make. We can also show you how to make your business more attractive to lenders; with business banking in a boom period and the official cash rate at an all-time low, there’s never been a better time to apply.

By Hazel Jia

 

Fraud: protecting your customers and your business

Every small New Zealand enterprise that trades online is inadvertently in the fraud-prevention business. Whether it’s an online transaction using a stolen credit card, viruses hitchhiking on your emails or a hacked database, fraud is often costly and annoying. It can also destroy your customers’ faith in your systems and cause you to lose business.

Many years ago SME had a new server installed and the company which did the installation left it without a password overnight. The next morning the entire system was shut down because spammers had hacked the server and were using it to send out millions of emails all over the globe. It’s easy to think fraudsters won’t target your business, but small businesses are often more attractive because they don’t always have the right fraud-prevention measures in place.

Here are some tips for preventing fraud occurring in your company:

·       Keep your firewalls and antivirus software up to date on all your devices. If you have your desktop computer thoroughly protected but your linked tablet is wide open, you’re still running a risk.

·       Use reputable and well-protected cloud-based software that has a clear policy for protecting your data and your clients’ data.

·       Help your staff members choose strong passwords and change them regularly – not ‘123456’ or ‘password’ or ‘qwerty’ or any of the other most popular passwords.

·       Look for suspicious online transactions. These include outlying high-value orders, especially with rush delivery, as well as uncharacteristic behaviour from existing clients (someone who orders a $20 product twice a year suddenly orders $6,000 in your most expensive items). Also look for missing information, different shipping and billing addresses, and local credit cards but overseas customers. It usually only takes a quick email or phone call to verify the details and establish whether the order is legitimate.

·       Be careful about who has access to company accounts. Sadly, employee fraud is the most common and often the most malicious type of fraud. Do a background check on anyone who will be able to move money around within your business.

·       Have a written data handling process. This should set out who has access to information and at what level, how it is kept secure and how clients’ privacy is protected. Confidentiality agreements are vital for the people who are able to see this information.

This is the tip of the fraud-prevention iceberg, but hopefully it will give you something to think about. A small outlay up front to protect your business can prevent an expensive loss in the future.

By Shrina Kaya

16 ways to kickstart 2016

Get 2016 off to a rip-roaring start with these 16 tips for maximising your year:

1.     Forecast. Do a cashflow forecast to help you put targets in place for the year.

2.     Set milestones. Shorter-term goals will let you keep track of your targets more easily.

3.     Delegate. Ask yourself: “What tasks could I hand to someone else so I can be more efficient?”

4.     Go mobile. Around 40% of all New Zealand web traffic comes from smartphones and tablets; is your website mobile ready?

5.     Network. Find opportunities to meet fellow business owners and talk to them about what you do.

6.     Invest. At work or personally, make any surplus income work as hard as possible.

7.     Rank your clients. Treasure the A-listers and consider giving the D-listers the push.

8.     Talk to your team. Whether it’s staff members, contractors or even clients, the other people with an interest in your business can provide you with a valuable point of view when it comes to goal-setting and business development.

9.     Consult the cloud. Is there an app for that? You might be surprised at what you can manage via the cloud these days, whether it’s HR, payroll, trust management, quoting or something as simple as building an infographic about your business.

10.  Review. When was the last time you did an employee performance review? They can nip problems in the bud and drive productivity.

11.  Stay industry fresh. Is there a trade conference you can attend? Some TED talks relevant to your field? At the very least, subscribe to some online industry blogs.

12.  Review your pricing. Are you still charging the same prices as you were in January last year – or the year before that?

13.  Review your spending. Are you leaking money each month on unnecessary expenses? Are you failing to invest in the right advice?

14.  Chase receivables. Make 2016 the year of no arrears.

15.  Take the pressure off at home. Consider hiring someone else to mow the lawns, clean the house or complete those half-finished DIY projects. You’ll be more relaxed at home and more energised at work.

16.  Take a holiday. Most business owners find it hard to take a break. Book a holiday now and commit to taking some time off – you’ll come back rejuvenated and ready to be more productive.

By Sarah Fellingham.

 

 

Collect every debt in 2016

Outstanding payments can make or break your business, whether you’re a sole trader or a multi-million dollar international company.

Small business owners and sole traders can find themselves in a bind when it comes to chasing outstanding accounts. The business owner must pursue the money from the client, but also try to get repeat business – sometimes from the same individual. It can be challenging to walk that fine line between a happy customer and a positive bank balance.

Here are my top tips for collecting all your overdue accounts in 2016:

Make your credit terms clear

Have set credit terms and make them clear to your clients. Some of my clients are able to charge late payment fees on their invoices but that only works in certain industries. If you’re able to do this, ensure your clients understand this from the outset. You can’t charge a penalty without notifying the customer up front.

Find out your clients’ payment cycles

How soon you chase an invoice will depend on your business and your clients. Some of my clients chase their invoices the day they’re overdue. Others know their clients will pay on a certain date – it does help to find out your clients’ payment and billing cycles if you can. This prevents you from chasing an invoice that’s already scheduled to be paid.

But don’t leave an invoice for too long before starting to pursue it; debt collectors have told me many times that the longer you leave the debt, the harder it is to collect.

Automate your invoice reminders

You can set up a reminder system in Xero to automatically email your clients once an invoice hits a certain date overdue – 7, 14 or 21 days, or set your own reminder date. If you don’t use Xero, come up with a system and have a reminder email template ready to send. That way you make it as easy as possible for yourself even on the busiest days.

Keep track of your efforts

Once an invoice is more than 90 days overdue, you should be chasing it using more than just friendly email. Keep a spreadsheet or other record of all the emails you send, phone calls you make and even any visits in person. Make a note of what the client has promised and what has been delivered. This will be a great help if you have to hand the debt to a third party.

Be cautious about further business

Stop credit for persistent late payers and ask for part or full payment up front if they want to do business with you again. Good luck collecting your debts and let us know if we can help you with your cashflow projections for 2016. 

By Manisha Kesha.