Hugh's Views
Employing school children
Do bad debts go with good business?
Changes to tax payment due dates
A reminder to Companies & Trusts
Thinking of selling your business?
Welcome to Abby
Have you visited our website lately?
Kia ora from Vietnam
Disclaimer
HUGH'S VIEWS
Well it is certainly winter now and the body got a bit of a shock coming from 40
0
in Saigon within 24 hours to -2
0
in Alexandra. Nevertheless it was a really great trip and if anyone is ever thinking about going to this part of the world I can highly recommend it, although you don’t actually have to do it on a bike.
Things are rocking along here pretty well with work flowing reasonably satisfactorily. We aren’t achieving our six weeks on all jobs, but certainly things are moving as well as can be expected when people go on holiday in the middle of the peak season. Please let us know if you are having any issues with delays.
KiwiSaver
As you are aware, KiwiSaver has commenced on 1 July. We have had a decent look at it after the Government has almost finalised its package. No doubt there will still be some “tweaking” in the future. The Australian Superannuation package had 2,000 changes to it – and I’m not sure whether they have actually finished with it yet. It is an interesting package and there are some benefits for various parts of the community. It is pretty much an individual decision as to what is in it for you, but we can suggest that younger people and perhaps people approaching retirement should be looking at it pretty seriously as the contributions made by employers and the government provide a pretty significant return for your own contribution.
The sooner you sign up the better as the Government contribution takes effect from your start up date.
KiwiSaver for the self employed
Those of you who are self-employed, being a sole trader or partnership, or a non salaried shareholder-employee, may want to review your business structure. At present the contribution by employer will not benefit you although you will receive any government contributions that are available. Whether the switch to a company is worthwhile in the long run will depend probably on how much you wish to put into the scheme.
Due to the success of our recent Alexandra KiwiSaver seminar, held jointly with Spicers, we intend running more KiwiSaver seminars in outlying areas in the near future. If you would like to attend one of these seminars please contact sandra@basbiz.co.nz.
Business Awards
I was fortunate to attend the Central Otago District Council’s Excellence in Business awards, and was very pleased to see both Neville Grubb and Ritchie Bailey (Trail Journeys), and Marnie Kelly (Touch Yarns) featuring in the finals of both the Business Excellence and the Tourism awards.
Ritchie and Neville took away both awards and this is a reward for some work they have done in reviewing how they run their business and pursuing their view that customer service comes first. It is pleasing that we have completed work with both these clients outside the normal compliance area, so we are hoping that a little of the sunshine will fall on us!!
Hugh
EMPLOYING SCHOOL CHILDREN
Did you know...
That if you are employing school children they can earn up to $2,340 a year ($45 a week) before PAYE or withholding tax needs to be deducted. Keep this in mind if you have school aged children who help out in your business - the business gets a tax deduction for the wages paid and it is tax free pocket money for your kids.
Weekly earnings of less than $45
School children who earn less than $45 a week, or who expect to earn less that $2,340 a year from all employers don’t have to complete a Tax Code declaration (IR330). You don’t need to deduct PAYE or withholding tax from payments you make to them, or include them on your IR348. However, you still have to keep wage records for them.
Weekly earnings of more than $45
School children who earn more than $45 a week, or expect to earn more than $2,340 a year from all employers need to complete a Tax Code declaration (IR330). You need to deduct PAYE or withholding tax from the payments you make to them and keep wage records.
School children are entitled to a rebate of $351 if their income is over $2,340 and they have had PAYE or withholding tax deductions made. Where the M tax code has been selected on the IR330 you can reduce the PAYE you deduct by $6.75 each week. School children under the age of 18 should not use the ML tax code.
PAYE
PAYE must be deducted from any payments you make to university, polytechnic or any other type of tertiary student.
DO BAD DEBTS GO WITH GOOD BUSINESS?
MOST bad debt is unnecessary. It arises from being too casual about giving credit.
Occasionally, clients have collection problems because they have too much of their business with one firm. If you are in this situation, plan to get out of it, even if it takes several years. If your customer’s business fails, it may take yours with it.
You can minimise your bad debts by:
· Stating your terms of trade clearly and being tough with your follow-up of those who do not stick to them. Be on to them smartly once the deadline has passed. Most bad debts arise because businesses are too busy with their day-to-day work to get on with collecting their debts or don’t like to insist on payment.
· Giving credit only when you have to. If you can collect payment on completion, why offer credit?
· Getting progress payments.
· Getting a deposit before you start.
The more materials in your product; the more essential it is to get a progress payment. If you don’t get paid, you will still have to pay your supplier. Therefore, the deposit should be at least the cost of materials.
· Better still, get payment in full before you supply.
· If you have to give credit, ask for credit references and follow these through.
· Check credit history through a debt collection company or the Mercantile Gazette.
· When you have a problem, be persistent with your follow-up. Write notes of every call made and get a commitment every time. Confront the bad payer with the broken promises.
· If you get a promise to pay, try asking the customer to keep the payment while you get in your car to go around and collect it.
· If the sum is large, you could try getting two or three cheques making up the total. A smaller cheque might get honoured whereas a larger one might not.
· Cash, even if only for part of the total, is better than a cheque which you expect will bounce.
· People who give you bouncy cheques should be asked to get a bank cheque (one drawn on the bank’s own account).
Debt collection can take a lot of time, which could be better used developing your business. Therefore, be ready to sack your troublesome customers, particularly if the business you get from them is small. You are probably losing money by having them. Recommend they deal with your least favourite competitor and tell them how to get there!
CHANGES TO TAX PAYMENT DUE DATES
GST is now payable on the 28
th
of the month instead of the end of the month. If the 28
th
falls at a weekend or public holiday, including Anniversary Day, the GST can be paid and the return sent in, on the next working day.
From 1 April 2008, income tax dates will be aligned with GST dates. Provisional tax will become payable six times a year. To achieve this, income tax and GST period end dates will have to be aligned. Where they are not, the taxpayer will have to put in an extra GST return to achieve this or change their accounting year end by a month, subject to the Inland Revenue Department approval.
A REMINDER TO COMPANIES & TRUSTS
Just a reminder to our company clients that company law requires companies to complete and file their financial accounts within five months of balance date. For small companies this can be extended to nine months after balance date, providing the directors sign a resolution to do so.
For clients with trusts, it is important that any income of the trust which is to be allocated to beneficiaries, be done within six months of the trust’s balance date. Under trust law, income which is not allocated within six months of balance date automatically becomes trustee income and cannot be allocated to the beneficiaries as income.
The message here is – if you operate a company or trust structure, get your financial accounts information into us early so we can complete the accounts and do any allocations within the required time frames.
THINKING OF SELLING YOUR BUSINESS?
If land, building and stock were all that mattered then valuing a business for selling would be a breeze.
Far from it. Lots of intangible assets are involved in the makeup of any business and working out the value of these is a mite trickier.
Traditionally these assets such as copyrights, intellectual property, business systems, good reputation, and loyal customers, are generally referred to as the ‘goodwill’ of a business, and are often considered to be where the real profit of a company lies.
The difficulty though is working out how much this goodwill is worth. Often the vendor’s view will vary considerably from that of the potential purchaser. You need to get an objective opinion from your accountant (or someone experienced in business appraisals), at least two-three years before selling, to review all the material and prepare a valuation of the business.
Increasing the Goodwill Factor
If you’re thinking about selling your business, don’t leave it until the last minute to plan the event. You need expert advice and plenty of time to get the business ready, if you want the maximum sale price.
Steps Involved
- Have the business valued – plant, equipment and stock are easily agreed on; less obvious are the intangible assets – the goodwill factor. Work with your accountant to draw up a list of these assets.
- Be realistic – your many years of hard grind may, in reality, add up to very little in terms of goodwill; more valuable will be your excellent planning, leadership, systemising and customer relations and the retention of highly trained, motivated employees.
- Ensure documentation is up-to-date – have you legally registered patents, trademarks and copyrights and do you have documentation to protect intellectual property?
- Demonstrate your future planning – potential buyers will want to know your plans for growth and the strategies in place to reach them. Business plans, performance indicators, marketing plans and an effective customer database are critical intangible assets.
- Get us to prepare a Memorandum of Sale document which will contain all the good things about your business that a purchaser will need to know and will assist you to maximise your sale price.
WELCOME TO ABBY
Welcome to the team Abby Rusbatch.
Abby joined us in April and works as our administration assistant and relief receptionist. She can often be found on the front desk or answering the phone when you call. Outside of work Abby enjoys, quad motorbike riding, kayaking, swimming, art, dancing, and music
HAVE YOU VISITED OUR WEBSITE LATELY?
Please take the time to visit our website
www.basbiz.co.nz
While you are there you can:
· Make an appointment - click here
· Put a face to the name in our Firm Profile area, and find out who does what - click here
· Check out key filing and payment dates with the IRD - click here
· We have a Tax Facts area that holds a great deal of information - click here
· We also have a Newsletter section, where you can access archived newsletters - click here
· For those of you who want to take the hassle out of writing and posting cheques, we have a payment on line secure area - click here
We are continuously looking to add to our website, and welcome any feedback you may have.
KIA ORA FROM VIETNAM
As mentioned in Hugh’s Views, Hugh recently returned from cycling his way around Vietnam.
Below, Hugh and fellow “bikie” Elsie take a break from the road to stop and spend time with some of the locals. A very colourful and friendly group of people.
DISCLAIMER
We don’t claim to know it all, so with that in mind here’s what we’re obliged to say; this newsletter has had input from a variety of sources, people and publications. For all input we are grateful. Grateful and careful. Whenever we can, we do our very best to ensure all the information contained in this newsletter is accurate and timely. If there’s something here you plan to place some considerable reliance on and we haven’t made the implications totally clear to you, get in touch and we’ll clarify it for you.