Why Billing is the New Black

Here’s a fun factoid for you… billing your customers for the work you’ve done gets you paid!  AND, when you get paid, you can pay your bills!  And eat!

One of the most important things about running an SME is to get your invoices out- as quickly after the job is done as possible. Simply put, people won’t pay you if you don’t bill them. Invoice fast and often.

I know, I’m hearing you say that it’s the last thing you feel like doing after spending all your time on the job; you’re just too busy and it becomes a chore for the end of the month or a wet day.  But that sort of business practice is what gets you a gigantic debtors list and believe me, chasing that up is a far worse chore! Read More »

Getting to know new clients

When we take new clients on it’s really important that we get to know them and understand them and their business. To repeat what I said in our last blog: “We like nothing better than when our clients achieve the lifestyle they want to from their business.”.

We know that not everyone desires building a large empire that they can sell off for megabucks. Many of our clients just love being their own boss and in charge of their own destiny. But all business owners also want their business to be the best that it can be. This is where we can help.

It’s also important that new clients understand what we can do to help them. We’re not here to just do Annual accounts and tax. We understand running a business and the challenges it brings. Not only have we run our own business for many years, we constantly talk to other business owners about their business challenges.

So, when we first meet potential new clients we like to have what we call a Proactive Accounting Meeting.

Read on to find out more about a PAM, and call us if you have any questions or would like to arrange a time for us to come and meet with you. Read More »

Why systems and processes save lives

Do you feel you are juggling all the parts of the business you own all at the same time?  You are trying to handle it all and be everything to everybody.  You neglect to take time out for yourself; there is little or no time for family and friends; and there is little or no time for a holiday

Think about your role in the business objectively and ask, “How can I improve my business without working harder?”  How could you do more but in less time?  Ask yourself, “Without me, what would happen to this business?”  What could you do with that business so you have time for family and friends and that trip you have always dreamed about?

Let’s take another moment to consider why you went into this business in the first place.  Probably to give you the ability to earn more income, to take time off when you would like, or because you did not want to work for someone else.  Are you actually achieving the goals that you set out to achieve when you went into this business? Have you considered your role in the business as a job?

Starting with the end in mind and working backwards will net you some good answers to work with.  Imagine what the end goal really looks like, then work backwards to identify the steps it took to get there.  This is where planning for the business comes to the forefront.

Breaking the cycle we are currently operating in through the use of systematisation is key.  Systems that would allow for someone to undertake your role if you were not there.

Read More »

Succession planning for dummies

Why is advance succession planning so important?

An ageing population combined with the dynamic of younger generations who seem less motivated to acquire a business tests long held assumptions that our businesses will be our future superannuation.

SMEs need to focus on extracting the capital value of their business and with an increasing number of those businesses expected to come onto the market in the next few years we can expect the polarisation between the good and the bad to grow.

Good businesses will continue to sell and command a high price, whereas poor performing businesses will at best come under greater price pressure and at worst be unsaleable.

The ideal timetable for an effective succession plan is three to five years from initial plan through to final succession. In a perfect world we’d recommend a minimum of two years to prepare and in a sense groom the business for sale.

Read More »

Business Advisory Services

One thing all four of us Directors agreed on when we merged was that we all love working with our clients to help them with their businesses. We like nothing better than when our clients achieve the lifestyle they want to from their business.  So we’ve been working on defining and streamlining our business advisory services to make sure our services are in the best interests of our clients’, managed consistently and using up to date business practices.  It’s all things we are very experienced at doing, just defined and managed in a better way.

Over the coming months we will feature the services in these blogs to introduce and explain them.

The best place for us to start working with you is with a Complimentary Client Review for existing clients or a Proactive Accounting Meeting for new people. This is where we find out from you what your aspirations for your business are and what’s going on in it at the moment.

Read on to find out more about a CCR, and call us if you have any questions or would like to arrange a time for us to come and meet with you.

Read More »

TrustTALK – July 2016

As a member of NZ CA Limited we receive a quarterly newsletter from them all about Trust’s called TrustTALK.

The latest issue talks about the importance of having a will and touches on the topic of having a power of attorney.

Click the link here to receive your copy NZCA Issue 7 BW Miller Dean.

If you are interested in past issues you can find them on the NZ CA Limited website here.

The Profit & Loss Equation


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.


The Christmas period and paying your staff

We’re heading into the silly season again. It’s referred to as that for a reason. In NZ with our annual close down of business we seem to go flat out to squash a months of work into 3 weeks in December. Unless you’re in retail and selling things people want for Christmas, these are never usually profitable months.

For those of us that are employers it’s a particularly expensive time of year. There’s 6 statutory days between Christmas and Waitangi day. That’s 6 days you pay staff not to turn up and do any work. Or, if you’ve got a business that’s open on those days you have to pay more and give them a day in lieu. Then when people return it always seems to take a few weeks for everyone to rev up into full productivity again.

A quick reminder on the statutory day pay obligations:  If someone would normally work on the day the holiday falls you have to pay them for it. If your business is open on the statutory day and your employee works on that day you have to pay them time and a half and give them a day in lieu. This year Boxing day, January 2nd and Waitangi day all fall on a Saturday. So these are all carried over to the Monday – Yes Waitangi Day is now Mondayised and is a statutory day on Feb 8th. If you want help working out any of your holiday pay obligations give Nicole a call, she’s our head bookkeeper and comes across all of these situations.

For some employers, you pay all the staff their annual leave as you close down at Christmas. Then there’s the GST and provisional tax payments due in January to fund as well – so a tough time of year for business cash flow.

Do any of these come as a cash shock to you and your business? If the answer is yes, perhaps your new year’s resolution should be to talk to us about helping prepare a budget and cash flow forecast for next year so you can enjoy that well-earned break.

The other side of this is we all get a chance to spend time with family and put our feet up, rest and recover for the new year. I always come back invigorated and keen to get into a new year.

How to get the best from your Xero

Last month I talked about using your management accounts to tell the story of what’s happening in your business. And how important it is that those management accounts are timely and accurate.

And it’s that accuracy that’s also vital to help us in preparing your year-end Financial Statements. The more we have to change in your accounts the more time it takes us and the bigger the cost to you.

More and more of our clients process their own accounts. And systems like Xero do make this seem super easy. They make out it’s quick, simple and what’s more – fun. But at our end, we’re finding it’s a mixed bag as to the accuracy of the accounts we are given. And banks are often saying the same thing. Read More »

Interpreting your accounts – Part 2

In my last blog I talked about the benefit of understanding your accounts and having them prepared regularly.

Now I am going to explain this in more detail.

Following are two of the most common misunderstandings of business. Reviewing your management accounts regularly can help your business by understanding these two areas.

1. Profit is not Cash

It’s not uncommon for us to be going over annual accounts with a client, telling them the profit and they say “I don’t believe we made that profit – if we did, where is it? It’s certainly not in the bank.” Read More »

Understanding the story your accounts are telling you

Your Accounts tell the story of what’s happening in your business. They are the financial results of events that occurred and decisions you made. By knowing what that story is saying you can react to events more quickly and make better decisions.

The Profit and Loss Statement or Statement of Financial Performance is a summary of trading for a period of time, usually a year. It shows the sales that you made, and deducts off them the cost of those sales and your overheads to work out if you made a surplus from those sales.

The sales in your accounts are recognised at the time the sale is made; when you invoice it – not when you’ve got the cash in the bank for them. The costs offset against those sales are also recognised when they are incurred, not when you pay for them. This is the essence of accrual accounting.

The Balance Sheet or Statement of Financial Position is like taking a financial photograph on a certain day. It lists what you own – your assets and what you owe – your liabilities. The difference is the equity in the business.

We have an e-book on our website that explains in more detail what each part of the accounts mean.

The benefit of regular accurate management accounts

But really, how useful are the end of year accounts we prepare for you? Obviously they have to be done to correctly calculate the amount of tax you owe, and comply with the Companies Act, but in terms of helping you make useful business decisions they are often just too late. They are a summary of financial events up to the last balance date. If another six months have passed you can’t exactly react quickly to address any problems.

This is why having regular accurate management accounts prepared is vital for any business.

Very often a business owner gets the books done, just because they need to be done for the GST return to be filed. But they should be so much more than that. By reviewing those accounts and watching a few Key Performance Indicators you can understand what’s going on now and make decisions about what to do about it now.

And better yet – knowing how the business is going on a regular basis helps you plan for the future.

What story are your accounts telling you about your business? Do you review your accounts to find out? Do you even have regular accurate accounts prepared? We can help you with all of this. It’s what we love doing.

Property Investment

In my last blog I talked about the pros and cons of residential rental property as an investment. If you have the desire to invest in property but don’t want the hassles of tenants there are other types of property investment.

Commercial property is similar but aimed at the business market. Generally it’s a bigger investment as they’re more expensive buildings but the basic concept is the same. One of the advantages is that you can lock tenants in for a longer lease, and it’s usual to have a time to review the rent set in the lease. The tenants want the surety of both the time frame and the cost. However, it can take longer to find a tenant, especially if there’s plenty of property in the market or a down turn in the economy.

Commercial property is valued on the rental return, more so than residential property. Hence where a rent may be agreed, but an incentive offered to get a tenant in, rather than reducing the rent.

You also have to be clear who owns what, has the landlord provided the fit out, or has the tenant. Are you just charging rent, or do you get to pass on rates and insurance costs. Read More »

Running a great business

I spent a few days last month getting together with a group of colleagues who meet twice a year to work “on” our business’s. We’ve been getting together for 5 years now so we know each other very well. As one of them said “Its a bit like getting undressed together!”

Many Chartered Accountants call themselves “Accountants and business advisors”. To be honest, many of them have never really run a business themselves, or they have run a pretty sloppy one so I’m not really sure quite how they can advise their clients on how to.

I’ve been an owner of BW for over 20 years, and have many clients running small and medium businesses so I’ve gathered a bit of knowledge over the years.

Here are a few simple tips to running your business from me:
Read More »

Investment Properties – How does the 1st October law change affect you?

You will all have seen the media reports about the Government introducing a ‘Not a Capital Gains Tax, Capital Gains Tax’ on Rental Properties.

John Key announced on Sunday that the Government planned a law change for October 1: that will make residential property bought and sold within two years subject to tax on any profit on sale, unless it was the family home, inherited, or needing to be sold because of a relationship split.

In reality how does this affect you? The answer is that for most people it doesn’t actually make much difference at all.

The law already says that if you buy a property with the intention of selling it for a gain – That gain is taxable. The situation though was that everyone says that isn’t their intention.

Now intention won’t come into it if you sell within 2 years, it’s taxable regardless of your reason for selling. I guess the reverse will also apply. If there’s a crash and you sell at a loss this may be claimable!

Extra funding has already been provided to Inland Revenue to enforce this.

This new law and the policy change requiring overseas buyers to have a New Zealand bank account and tax number, are extra tools to ensure those looking for a quick profit are taxed on any gain.

If you have any queries about your own situation give us a call.

Help us to help you

How you can help us to be more efficient with producing your end of year accounts and tax returns – so we can keep the costs down for you?

We understand that most people only have their accounts and tax returns done because they have to; it’s not a favourite expense of the business and you often don’t understand the time and cost it takes.

There’s a certain amount of work we just have to do in preparing your annual accounts and tax returns. I spelt some of it out in my last blog.

It is possible for you to help make this process more efficient, therefore quicker and cheaper.

We send you a checklist with a list of the information we require. Most of this is around compiling the working paper file to support your balances.

  • Make sure your bank reconciles to your accounting system. If you prepare a spread sheet cashbook and the totals don’t agree to the bank statement, we have to go through and find the difference. Even in straight forward systems like Xero there can be items that sit as unreconciled in the bank account. Check the bank reconciliation report. If you need help fixing these up, we’re happy to give you some training.
  • The same applies to any other operating systems you use. For example a stock system or fixed asset system. It needs to agree to your accounting system, or we have to find the difference.
  • Provide bank statements as at the balance date, for all bank accounts, credit cards and bank loans.
  • If you only keep cash records through the year we need to pick up all amounts owing to you and by you at the end of the year, provide us with a list.
  • Take a physical stocktake at balance date. If you have a computerised stock system, compare the totals. It’s the cost of that stock we’re after, not your selling price.
  • If you’ve had any unusual transactions bring them to our attention and provide supporting documentation.
  • Provide copies of all invoices requested. Generally this is around being able to prove the cost of an asset, or why an expense in repairs and maintenance or computer expenses is not a fixed asset. It also helps make sure we list the asset correctly on your asset list and claim as much depreciation as we can.
  • Provide details of any loans or hire purchases taken out during the year.

Read More »

A few things to remember as we head towards 31 March.

For most NZ businesses and people it’s the end of the financial year. Time to draw a line in the sand and total up how your business has gone for the last year, or how much income you have made and file another tax return. There are a few things to remember as we head to the 31st of March:

Stock takes need to be done –
For all businesses carrying more than $5,000 of stock we need to record the closing stock balance at 31 March, at its cost (or net realisable value).

You should do a physical count of all stock; if you keep a computerised stock system you should still do a physical count and compare it to your computerised records. Dispose of any obsolete stock so we don’t have to include it.

Write off any bad debtors
– in order not to have to include bad debtors in your accounts, and pay tax on them, you should write off any bad debts prior to 31 March. It doesn’t mean you have to stop chasing the debt, but you do have to write them off your normal debtor’s ledger.

Keep copies of all bank statements, loan statements and Interest & Dividend statements
that arrive in the coming weeks to give us poof of the balances at 31 March.

Are you likely to have tax to pay?
I’ve had a few clients contact me and ask this question, not only are they really busy but money’s sticking to the sides too. (Yeah finally!) So they’re thinking that a tax bill may be coming. And of course there may be the double whammy of having to pay tax on an increase in profits in the 2015 year and then the increase in provisional tax on the anticipated income for the 2016 year.

Also, remember that for a company, or a Trust or a high earning individual IRD charge interest on your tax. Clients hate paying the IRD interest. So even though the tax isn’t due yet it may be sensible to make some voluntary payments to keep the interest to a minimum.

Even if you choose to only pay when it’s due, it really pays to be aware that the bill is coming. Make it a financing decision, rather than a shock. There’s nothing worse than when a client gets a shock at their tax bill, or they’ve spent all the money! Give us a call if you think you’re business has been doing better than previous years, you’ve got cash in the bank or been able to buy expensive assets or repay debt. We can look at your management accounts and tell you what to expect, we don’t have to wait until your end of year accounts are done.

What is it we do for your end of year accounts? Why do you have to have them?

It’s coming up to the end of the financial year for most of our clients. That means we start another annual cycle of preparing the financial reports and tax returns for our clients.

You might wonder why you have to have this done.

It’s called compliance for a reason. There are laws that say you have to prepare annual accounts.

The Companies Act and the Financial Reporting Act 2013 state that a company has to provide its shareholders with an annual report every year. These need to be prepared in accordance with Generally Accepted Accounting Practice (GAAP) and include all the things that Clayton spelled out in his blog “Will you still need to prepare Financial Statements?”

It’s also an obligation under the Income Tax Laws to file an annual Income Tax return for the year ended on the businesses Balance Date. Fortunately these two things tie together and can be done at the same time. Read More »

What happens if the IRD come knocking on your door?

It came to our attention recently that teams of IRD staff have arrived unannounced at the business premises of some mechanics and motor repairers in the Porirua/ Plimmerton region.

These teams are made up of members of the investigation team (who’s role includes identifying gaps in cash collection and reporting), and the community compliance team (who’s focus is more on assisting businesses with understanding their obligations).

This raises a couple of issues:

  1. Is this legitimate – are they allowed to do this?
  2. What are your rights, what can you do about it?
  3. What are their powers?

Yes, they can do this. They do have to carry ID and warrants. But if they arrive on your doorstep, other than ensuring they are wearing the appropriate ID, all you can do is co-operate, and call your accountant to ensure you understand what they are trying to achieve.

Having robust, transparent systems and good records will ensure they leave quickly.

The IRD have stated that they want to visit small businesses more.  These teams will continue to “target” specific industries and identify areas that they think need addressing. They will collate their findings and issue a report. We will pass on any useful information we get from it.

Privacy Act

What safeguards do you have to ensure you maintain your clients Privacy and that your clients information doesn’t get into the wrong hands?

I am sure you all have better processes than the lawyer in last week’s paper who used the back of sensitive documents to photocopy information for sending to other clients! And that you have systems in place to avoid ACC style document mail outs. But systems and personnel change so it may be a good time to check your processes and review the requirements.

Here at BW we are all for recycling as much paper as possible but privacy is paramount and we are aware that a lot of the information we handle is for your eyes only. Rest assured your records and details are securely stored and we securely destroy all unwanted documents and don’t use client information for scrap. Our staff are all aware that information is sensitive and don’t divulge any of your details to others outside of BW unless you give permission.

Have you thought about the information you and your staff have access to? And have you discussed with them the unintended consequences that can come from casual conversations- many may not be aware that what is a normal conversation at work can really backfire in the wrong setting

Even with the best processes mistakes can happen. If you are on the receiving end of someone else’s error please think how you would like your information treated and resist the temptation to read it, contact the sender and either destroy it or return it as soon as possible.

To find out more about your responsibilities Business.govt.nz has some very good information and guidelines for processes as well as some examples of relevant situations.

If you have any concerns about your data or privacy please give us a call.

Have you got a Shareholders Agreement?

Following on from our previous blogs about buying or selling businesses, the importance of having a good shareholders agreement is evident.

Like wills these can be very easy to put in the too hard basket, but take a moment to think what would happen if your business partner(s) were to suddenly die or decide to sell their shares?

It isn’t all about value of shares (although having a method for valuating future sales/purchases is important) it is more about considering potential events. Even just having the discussion is great as it gives everyone a chance to establish priorities, find out if you are on the same wavelength and address any areas that may cause concern in the future. Do you have the funds/insurances in place to cover unforeseen circumstances? Do you want rules about selling shares, who to, notice period?

Even if you are already in business it isn’t too late to do a shareholders agreement.  If cost is contributing to your procrastination, the more groundwork you put in to get an understanding of your needs the easier the agreement will be for your lawyer/accountant and the lower the cost.

Parts of the conversation required can be pretty difficult but the importance cannot be stressed enough. Most people find that when they go through the process they not only learn about their partners priorities but also their own and it helps to clarify why they got into the business and what they want to achieve from it.

Give Peta or I a call and we will be happy to point you in the right direction, help start the conversation or act as an independent facilitator at a meeting of the partners.

We look forward to hearing from you