Important note for all Directors

Following on from my blog last year and comments in our recent newsletter the new Health and Safety requirements come into place on the 4th of April 2016. You have probably seen various articles, including the one about Peter Jackson, regarding mass resignations of Directors in light of the new Health and Safety Requirements for Directors.

It is easy to read the headlines and pass it off as scaremongering, although in this case there is some substance to this and all Directors (as well as anyone else involved in business) should be considering their responsibilities under the new laws.


What are new Directors responsibilities?

All directors now have a responsibility to take reasonable steps to keep up to date knowledge of work health and safety matters and have an understanding of the business and its risks, ensuring it has appropriate resources and processes to eliminate or minimise risks.

This has always been the case for those involved in the running of the business but now extends to all Directors including those with no day to day involvement.


Do you need to resign as a Director?

As per the Peter Jackson article, in a lot of cases, if you don’t have regular hands on involvement in the running of the company it can be difficult to ensure that you maintain an up to date understanding of the business risks involved and the processes that are in place.

As a director you can be held liable if duties are not met by the company.


What happens if responsibilities are not met?

The Bill increases the penalties and creates three offence tiers relating to breaches of the health and safety duties:

  • Reckless Conduct – fines up to $3 million (or $600,000 and/or up to five years’ imprisonment for individuals)
  • Failure to comply with a Duty (that could cause death or serious injury) – fines up to $1.5 million (or $300,000 for individuals)
  • Failure to comply with a Duty – fines up to $500,000 (or $100,000 for individuals)


Worksafe
will still be required to work with you and help deal with risks, and has a number of codes and guides on their website to assist employers in managing specific risks.

At this time it is essential that you either get involved in the Health and Safety processes or consider your position as a Director and whether you are in a position to ensure the company is meeting the requirements.

Give Peta or I a call if you wish to further discuss your options.



The Profit & Loss Equation

Picture1

We all know that for any business to make an income it has to make Sales.

Many business owners closely monitor the sales, compare them to previous months, previous years and, if they can get hold of the information, other businesses.

But this isn’t the only thing to monitor. You have to make sure that out of those sales proceeds you can pay all of the costs of the business and have some left over for the business to make a profit.

And as the above picture shows the amount left over can end up being only a small percentage of the sale value.

Firstly you deduct Direct costs, the costs that if you didn’t sell that product or service you wouldn’t have to pay. This leaves your Gross profit. This is a much better value to monitor closely.

And you need to do so product by product, or service by service.

You may have an overall Gross Profit but it’s hiding the fact that you sell product A at a good margin, but product B at a loss. Reducing your overall gross profit. And it may even be that Product B is a higher dollar amount so you concentrate on pushing these sales, but there is very little point in selling something for less than it cost you to get to the point of sale.

The only time a business can justify this if it’s doing it intentionally as a loss leader. A marketing ploy to get customers to come in and buy other things as well.

Then, the total Gross Profit must be enough to cover all your overheads. The costs that would continue even if you didn’t sell those particular products or services e.g. your occupation costs.

Anything left after that is your profit.

You can also turn this around the other way, from the profit you want to make, or even break-even point, you can add your overheads and margins and calculate how much sales you need to make to achieve this.