BWMD_LOGO-07
Chartered Accountants &
Business Advisors

Working with you to design a business you love so you can reach your definition of success.

Chartered Accountants &
Business Advisors

PHONEICONS-02+ 04 910 3340
WELLINGTON

PHONEICONS-02+ 04 910 3340
WELLINGTON

Non-Profit Accounting and Tax Tips 101

24 Jun 2022 | Biz Finances, Non-profit

People are yearning to be asked to use the full measure of their potential for something they care about. – Dan Pallotta, author

We continue our series on non-profit organisations, with tips to help you navigate the rewarding venture of running a charitable operation for a cause you’re passionate about. If your non-profit is still new, or you’re still considering whether to start one, read What You Should Know Before Starting a Non-Profit in New Zealand first. 

Now let’s look at the accounting and tax-related aspects that are unique to non-profits. Since the purpose, goals and needs of non-profits are different from those of conventional businesses, there are some aspects of their accounting that are handled differently too.  

Because the purpose of non-profits is to serve their cause, they are accountable to their supporters and contributors. The most important bit to understand is that there should be a money trail for all money that comes in and flows out of the bank account.  

Here are a few more tips that will help you run your organisation smoothly, and legally. 

Record All Your Income

You need to keep different sources of revenue separate in your accounts, because not only will it be easier to track and report on, but some income could be taxable.

Types of Revenue:

  • Donations – People donating to your organisation can get a tax deduction, so it’s both important to keep a proper record, and you need to send donees a receipt which they can include in their tax return.
  • Pledges – Some pledges could be conditional, like matching a future pledge from another donor, so track these accordingly.
  • Membership Dues – Subscriptions could be recurring monthly or annually and are usually for some type of service in return, like educational material in the form of magazines, webinars, or other events.
  • Special Events – These could include entrance fees to attend fundraisers or other occasions.
  • Grants or Other Lump Sums – There may be grants available from local or federal government agencies or from the private sector for your industry.
  • Volunteer Time and In-Kind Contributions – The donation of time and non-monetary services or goods also needs to be accounted for. This could be services from skilled professionals such as counsellors, tradesmen, marketers or bookkeepers, or someone gifting your organisation with a free piece of equipment such as a new computer.

Choose the Right Accounting Software

We don’t recommend you compromise when it comes to the engine that drives your accounting. Look for these must-have features:

  • Designed for Non-profit Organisations – Choose a package that features this customisation to handle the unique features that charities need, and even better, was developed with the input and recommendations of other non-profit entities.
  • Robust Reporting – Don’t settle for minimal features here, but look for the ability to track and report on multiple statistics that you can customise, such as debtor days, asset to debt ratio, expense cover trends, and liquidity graphs.
  • Supports Your Growth – Choose software that can grow with you and can be scaled up for extra add-on apps, additional users, or other features at a higher level of usage than what you might first start out with.
  • Other Handy Features – These could include donation tracking, donor management, third-party app integrations, and easily accessible customer support or FAQ forums.

We recommend using Xero for your accounting, with Spotlight Reporting for creating your monthly or quarterly reports. Xero has a great function to track different types of income and expenses with tracking codes, so you can report on each individual income stream separately. You need to set it up correctly from the start, so make sure you get in touch so we can help you with that. Spotlight Reporting has great reporting functions and a template specific to non-profit organisations, which we find useful.

 

What About Tax?

One of the great advantages of having non-profit status is that you don’t generally have to pay tax on your income, which will leave more money in your accounts to put towards running your organisation and providing a better service to your cause.

However, some forms of income are taxable. These include:

  • Business-related revenue, such as income from op shops (e.g. Salvation Army);
  • Investment income, such as interest on a term deposit, shares or real estate transactions.

Some non-profits could qualify for an exemption on the first $1,000 of taxable income from business activities or investments, so make sure you get in touch with us for more guidance.

Even if you have no taxable income, you will still have to file a tax return each year with the IRD, and you still need to deduct PAYE from your employees’ salaries as with any other job.

 

Do I Need to Register for GST?

As with for-profit businesses, if the income is above the GST threshold – if turnover is/or expected to be more than $60,000 in 12 months – you will need to register.

If you’re unsure whether you should register, or if you need help with registering and completing your GST returns, get in touch with us.

 

Partner With the Right Accountant

Operating a successful non-profit organisation requires professional support, as the reporting is distinct from conventional businesses. It’s vital to hire an accountant who not only understands your vision and goals and can give unbiased advice, but also understands the compliance and legal obligations specific to non-profits. Contact the team at BW Miller Dean to see how we can keep you on top of the finances in your non-profit.

When Great Minds Don’t Think Alike, Exceptional Things Happen

14 Jun 2022 | Team

Although single-minded determination and laser-like focus may be necessary to drive towards an outcome, dismissing other perspectives and ideas from your team can block your success in more ways than one. Not only could it prevent your business from moving forward, it shuts down dialogue, creativity and trust; the things your team needs so that they can voice their opinions even when they’re different from yours.

What makes a great leader? Among the well documented attributes we’re all familiar with is the one skill that trumps them all: knowing how to listen.

“Most of the successful people I’ve known are the ones who do more listening than talking.” -Bernard Baruch

 

Embracing Different Opinions Brings New Opportunities

Doors you didn’t know existed can open to new possibilities when diverse viewpoints can flourish. You and your team won’t always agree, and that’s okay. What matters is that they feel their opinions are valued and heard. Besides, by not considering their opinion, you’re negating why you hired them in the first place – for their skillset which inevitably includes innovative and fresh ideas.

During the pandemic, business owners have endured the stress of adapting to sudden changes out of their control. Disagreements with your team, business advisor, family and friends are inevitable, but conflict resolution starts with you. If you do that, you can build a strong team and innovative team who will keep fresh ideas and creativity flowing.

 

Lead By Listening

“Most people do not listen with the intent to understand; they listen with the intent to reply.” -Stephen R. Covey

The first step to managing conflict effectively and building trust is, you guessed it, to actively listen. But what does that mean?

  • Not interrupting. Although it may be tempting, take a deep breath instead and allow the other person to finish what they’re saying. This benefits both of you, as it shows them respect, and you might just learn something.
  • Demonstrating that you’re listening. Small gestures go a long way, such as nodding, or saying “yes” and “I understand” to let them know you’re paying attention and what they’re saying is really landing.
  • Reiterating the gist of what they said. Repeat it back by paraphrasing in your own words, to show you understand their message.
  • Asking open-ended questions. Put aside ‘yes’ or ‘no’ type-questions for another time. Instead, your constructive inquiry reassures that you’ve been hearing them, and open-ended questions that invite a more thoughtful answer moves the dialogue forward.
  • Acknowledging their emotions. Identify with their feelings such as “You sound understandably frustrated”, or “I realise how you must have felt upset about that.” Giving their feelings a name, whether you think they’re valid or not, helps bridge an understanding and releases tension.

 

The Benefits for All Involved

“The aim of argument, or of discussion, should not be victory, but progress.” – Joseph Joubert

Modifying your own behaviour in even the smallest way with active listening can make a giant leap of improvement in your leadership and business. It creates:

  • Positive Change: The trust that is built means you’ll both be less defensive and can work together to come to an agreement on what has to be done.
  • Stronger Influence: Once there’s trust, you’ve earned the right to work on solving the problem alongside them, with your input welcomed – not resented.
  • More Empathy: By really listening, you’ll get an understanding of where they’re coming from and how they feel. You’ll know them better and have more appreciation for their point of view.
  • Better Rapport: A connection occurs when the other person feels your understanding and empathy. It creates a momentum to continue building affinity and trust.

Ready to move your business forward?

 

We’re Here to Listen

Every business needs a confidant, and the ‘great minds’ at BWMD are a sounding board for your ideas and concerns. We take effective communication with you seriously, and utilise the Disc Profile personality framework as a tool to help us best match your communication style. Contact us today to help us to help you achieve success on your terms.

What You Should Know Before Starting a Non-profit in New Zealand

27 May 2022 | Biz Strategy, Non-profit

The entrepreneurial spirit of business ownership goes hand-in-hand with the desire for making an impact on the world. What better way than launching a non-profit organisation?

Although getting started might seem overwhelming, it doesn’t have to be. If you want to start a non-profit, this post will guide you in what you should consider when creating your plan, with links to support your research. 

 

Step 1: Know Your Legal Obligations

A good starting place is to understand the legalities for non-profit entities and how that differs from conventional businesses.

Who Can Qualify? 

Whether or not your organisation will be granted non-profit status depends on a number of factors. Ask yourself:  

  • Purpose – what is its motive and purpose? For instance, do you want to relieve poverty, advance education or health, protect the environment, or something else? Learn more about determining your organisation’s purpose here.
  • Revenue – where will it come from? Will income be sourced from donations, membership fees, fundraising, grants or investment income?
  • Similar Organisation to Model After – are there other non-profits with a similar structure as an example to help your process? 

Documents and Structures

When applying for registration, the government assesses your organisation’s rules document.  The rules should satisfy the following criteria: 

  • they should be the legally binding rules for your organisation
  • they should clearly set out the charitable purpose
  • they should not assign powers that further non-charitable purposes, or profit any private or individual cause.

Continue learning more here.

Choosing an Appropriate Legal Structure

Incorporated or unincorporated? Accountable to many people or to a few? Whether social, charitable, sporting or otherwise, you’ll need to consider which legal structure will be most suitable. 

There are a number of different legal structures to choose from, and first you’ll need to determine what your organisation’s role in the community will be and how you intend to operate. Also, you need to consider the requirements in several key areas such as its size, culture and values, activities and other operational factors. Learn more about choosing the right legal structure for your non-profit here.

Register with the Companies Office

With no national association that governs non-profit organisations in New Zealand, your registration requirements will depend on the legal structure you choose. For example, organisations that qualify for registration under the Charities Act need to register with Charities Services. 

If you incorporate a company, society or charitable trust board, you need to register with the Companies Office. 

Register with IRD and Apply for Tax Exemption

As part of your setup process, you need to get an IRD number. From the 2020-2021 year, any person or organisation that wants to get or keep an income tax exemption must be registered with Charities Services. This tax-exempt status applies to business income used for charitable purposes in New Zealand. 

 

Step 2: Prepare to Launch

What’s next? Once you have your legal obligations sorted, you can start preparing for launch. Here’s where your vision, creative inspiration, and a bit of realism are needed for crafting solid plans.

Create a Business Plan

Without a well-thought-out business plan, you could have a harder time obtaining loans and grants, attracting corporate donors, or keeping your organisation on track. Even a simple one-page business plan helps you to polish your message. Also create a forecast, with a few different scenarios, to explore whether your plan is feasible. There are non-profit accounting programs available that can help you with this, and always seek help from your accountant at this stage to test your numbers and assumptions.

Create a Fundraising Plan

Get a clear plan of action for how you’ll raise money. This may include memberships, sponsorships, grants, or even selling products or services. A solid fundraising plan will get cash flowing in.

Explore Financing Options

As a non-profit, you may be able to apply for government and other types of grants. Explore the Charities Service’s Community Resource Kit for more information on raising and applying for funds.

Structure Your Expenditures

You’ll need a budget to determine what you can afford to spend, and to ensure your outgoings don’t exceed income. This is where accounting software or the guidance from an accountant can help you to create a solid and realistic budget.

 

Step 3: Put On Your Entrepreneur Hat

‘Not for profit’ doesn’t mean ‘for loss’, and just like a regular business, if you run an efficient operation, you’ll be able to provide a much better service to the people or cause you’re trying to serve. Here are a few tips: 

  • Hire the right staff. Your team can make the difference between failing and thriving in business, so make sure you hire well. Check out our blog Rockstars vs. Superstars: Get the Right Bums in the Right Seats for insight on building a great team.
  • Spend less than you earn. Although a profit isn’t technically what you’re striving for, if you make a surplus, you can reinvest that into the organisation or allocate to a new project.
  • Network. Making connections and setting up partnerships with the right people can help the organisation to raise more money, increase exposure, or improve your operations.
  • Know your ‘customers’. Just like with a for-profit business, you need to understand the members of your club or the people you’re providing charitable services to, so that you can tailor your organisation to meet their needs.
  • Get professional support. As with any other business, a non-profit is most successful  when you have an accountant to keep you on track and compliant with tax obligations. Partner with one that has experience with and a passion for helping non-profit organisations, like BW Miller Dean. 

We understand the unique challenges non-profit organisations face and can help you to put a business plan in place that supports your vision. We’re also good at being a sounding board for your ideas and give you unbiased advice. Contact us to see how we can help you make your vision a reality.

Why Making Profit is a Good Thing

31 Mar 2022 | Biz Finances

Let’s talk about profit.

Do you feel uncomfortable already?

How about ‘sales’ or ‘revenue’ – are those easier to deal with instead?

It’s interesting how words can be loaded with a negative association. Too often, the media’s unsavoury portrayal of profit makes it a dirty word, with headlines slanted toward their story angle such as “putting profit before the customer”. With the portrayal of taking something away from someone, the subtle (or not-so-subtle) messaging around ‘profit’ in a shameful or negative context has a powerful impact on our psyche.

For many reasons, the topic of profit has become stigmatised and associated with greed, or attained only at the expense of customer service, quality products, and employee wellness.

Whatever your comfort level is with it, we’re tackling the taboo topic of profit, and why it’s a good thing. Without it, none of us would be in business.

Businesses Need to be Designed for Profit

“I was mentoring some graduate students at a local university recently, and I sensed that profit seems to be a dirty word these days to many aspiring entrepreneurs. I’m certainly not a fan of customer rip-offs, but even non-profits have to be cash-flow positive, or have deep pockets, to help anyone for long. Every business needs to develop a revenue model even before a product.” – Martin Zwilling, Founder and CEO, Startup Professional

The definition of ‘profit’ is a financial gain. That’s it. Not financial gain as a result of the suffering of another. Although that can and does happen, it is only one of many ways to approach getting a profit. As with money, profit in itself is neutral, but the attaining of it and use of it has a higher and lower expression.

At its highest expression, striving for profit fuels the entrepreneurial spirit, innovation, creativity and invention, and produces excellence. It’s not only good to strive for profit; it’s the fundamental driving force for society to progress and move forward.

As a business owner, you take risks and work hard. Therefore you deserve to make money! It’s not about getting filthy rich and walking over people to get there. Rather, the positive attributes of profit should be recognised. It gives you more options for things like:

  • Growing the business so you can create more value for customers, and have a positive impact on your community.
  • Creating prosperity and opportunity by employing more people and helping them have a better life.
  • Contributing to causes you care about.

Ironically, often people who aren’t making profits are driven to unscrupulous actions to save a dime or make a buck. Being constantly stressed because of no profit results in a stressed working environment, and is harder on employees.

Profiting Unapologetically

“A great merchant delivers both joy and profit. Then profit gets reinvested in more joy.” – Andy Dunn

Businesses and organisations need to profit to exist, create employment, and continue making a difference in the world.

As an entrepreneur, being in business is your opportunity to do something meaningful, provide products or services to customers that value them, and succeed on your terms. The more profit or surplus you can create, the better value you can deliver.

The team at BW Miller Dean can help you design your business for profit by putting processes in place to steer it in the right direction so you can achieve your revenue goals. Contact us today to see how we can help boost its profitability.

How to Stay on Top Of Your Business Finances

3 Jul 2020 | Biz Finances

Finances aren’t sexy. But ignoring that part of your business can have a detrimental impact on your business.

Does this sound familiar? 

“If I work hard, my finances will sort itself out.”

“I’m too busy to worry about the numbers now.”

“I don’t understand accounting; my accountant can sort it out for me when my tax bill is due.” 

Simply put, these beliefs are wrong. Here’s why:

  • If you work hard you may be successful. But that’s not a guarantee. You may work on things that aren’t profitable or that don’t move your business forward in any way. The key is to work hard on the right things. And you’ll only know what the right things are when you delve into the numbers.
  • You may be too busy because you don’t have a handle on your finances. You may spend time on unproductive, non-profitable tasks without even knowing it.
  • You can’t wait until the end of the year to analyse your numbers. It would be too late. If you want to succeed, especially in such an uncertain time as now, you should plan ahead, measure your performance regularly, and make strategic decisions as and when they’re needed.  

So, what should you do instead?

 

Turn Your Vision into Measurable Numbers

It all starts with developing a vision and a plan for your business. 

Once you’re clear on what you want to achieve, you should put numbers around your vision. For instance, develop a cashflow forecast and other performance metrics that would help track how you’re doing against your goals. 

You should also measure your metrics on an ongoing basis and use the numbers to make the right business decisions. For instance, if you’re finding that one of your services is unprofitable, you may want to drop it like a hot potato, and channel your marketing bucks towards a more successful product. Or you may decide to work on improving productivity in your production team. 

 

Which Financial Metrics Should You Measure?

There are many financial metrics to track. Trying to cover them all may be overwhelming. Instead, focus on a few ones at the start, and add more as you begin to understand your finances better.

Here are the most important financial metrics to start with:

 

Your Cash Flow 

Staying on top of how much money is flowing in and out of the business is crucial. If you don’t plan ahead you may run out of cash just before a pay run, or you may have to say no to a marketing opportunity that can bring in thousands of dollars in the long run.

 

Debtors/Debtors Days 

Keep on top of your outstanding debts and how fast people pay you. If you don’t follow up frequently, you may not be able to recover the debts at all. There’s a saying that people pay those who scream the loudest. 

Everybody is feeling the pinch right now and many businesses are holding on to their money in fear of running out. That is flawed thinking because if everybody stops paying each other, the economy would halt. But if we keep on paying each other, the economy can keep on turning and recover over time. 

As much as we would like to help others out, we need to think about ourselves as well.

 

Profitability

We often put too much of a focus on increasing sales, but forget about profitability. For instance, if you’re in the service industry and things aren’t as busy as usual, you may spread out the work to fit the time you have available. That would increase your labour bill, making the business unprofitable. Instead, look for ways to be more productive and rather spend your extra time on bringing in more clients.

 

Take Control of Your Business Finances

Planning your finances doesn’t come naturally to everybody. Just like we may need your help with a haircut or drawing up a plan for a new house, so do you need our help to make sense of your finances. Get in touch with us so we can help you to stay on top of your finances and take control of your business’ destiny.