In any business with more than one employee, it’s inevitable that conflicts will arise. Family-run businesses are no different. In fact, they can be even more prone to conflict and complications. When family members work together, they bring their roles and expectations from their home relationships into the business – which can cause complex and emotion-laden problems.

That’s not to say that conflict is always a bad thing. Managed correctly, a healthy amount of conflict can lead to stronger leadership, a wider range of opinions and ideas being accepted, and eventually a stronger business. The key is managing disputes well, and never letting them fester.

At GECA, we have years of experience in resolving family-business conflict. Here are our top five strategies:

1: Plan for problems

Some people go into business with family members with an overly rosy outlook. They think working with family members means everything will run smoothly, without much effort. Unfortunately, this is not always the case.

Starting with the assumption that you’ll have problems sounds negative, but it could end up being a positive in the long run. If you plan for conflict, it’s less of a shock when it does happen, and you’ll have a strategy in place to resolve it.

2: Set formal structures

Planning for conflict means putting formal structures and rules in place before anything goes wrong. Avoid taking a casual, ad hoc approach simply because you’re working with family, and set up your business like any other. That means having formal contracts and appropriate compensation, processes around management and review, and systems for recruitment and staff leaving.

These structures don’t just help if conflict arises, they can also help avoid it. Formal structures make your organisation feel more like a business and less like a family, which helps staff leave their relationship issues at the door.

3: Create a formal family council

When you work with family, it’s tempting to talk about the business at home, at work, and at every family gathering. But this isn’t necessarily the best idea for your business – or your relationships.

Setting up a regular ‘family council meeting’ gives family members a formalised way to raise issues and discuss conflicts – without the business intruding on family life. It can also help catch and resolve conflicts quickly, rather than letting them fester. Even if your business is extremely busy, it’s worth taking the time.

4: Catch conflicts quickly

Avoiding conflict is a reasonable goal, but avoiding dealing with existing conflict is not. When problems arise between individuals or groups in the business, it’s best to identify and work to resolve them as quickly as possible. Leaving problems to worsen can make them much more difficult to sort out amicably.

Having a way to raise issues and talk about concerns makes you more likely to catch problems early. If left to fester, small problems can loom large in people’s minds, and can even start to affect the way the business is working.

5: Get guidance

When you work with the same people in the same business every single day, it’s easy to lose perspective. Sometimes an impartial outsider can see things more clearly.

Bringing in an expert mediator or business advisor can be an effective way to resolve issues without damaging relationships. This person can act as a neutral sounding board, give expert opinions without being influenced by family relationships, and help steer meetings towards solutions.

An advisor is essential for long-running conflicts, but can also be helpful for smaller issues. In fact, a good mediator can help you establish conflict resolution strategies that you’ll be able to use in the future.

Need help resolving conflict in your business? Talk to the GECA team now

The post Family feuds – five tips for conflict resolution in family business appeared first on GECA Chartered Accountants.

When you inherit a family business, you step into a new role. And, as in any new role, establishing your way of doing things can be challenging.

In fact, changing things in a family business can be particularly difficult. If you have been working in the business for many years, you may be set in your ways. Parents, siblings and other relations who work, or have worked in the business, will have their opinions about the best way of doing things, and there can be a lot of emotion tied up in the business – it can be difficult for older family members to let go, even if they’ve technically passed the business on to you.

But that doesn’t mean you should continue on with the status quo. If you want your business to grow, you need to take a hard look at the way you work and make changes – even if others don’t agree.

Here are the top five ways to kick-start your growth.

Keep your customers coming back

Increasing your customer retention rate can be a low-cost, low-impact way to grow your business. Keeping existing customers around is easier than attracting new ones, so it’s worth thinking about ways to increase retention.

The ‘how’ will be different for every business. You’ll need to investigate why customers are leaving your service or failing to buy your product again, and work on improving those factors. Does your customer service need work? Do you need to contact your customers more often to make sure they remember you? Is it something simple, like shipping cost or packaging, letting you down? Small changes could make a big difference.

Finding new leads

Finding new potential customers is the bread and butter of business. If you’re neglecting this area, your growth is likely to be stagnant.

There are many ways to connect with potential customers and find new leads. Advertising, whether online or in print, is the most obvious and traditional – but not necessarily the most effective. You can also use direct marketing to target people likely to be interested in your business, use social media to connect on an individual level, and work on improving SEO for your website so potential customers can actually find your business.

Conversion is key

Once you’ve increased the number of leads, you can work on your conversion rate. If you’re not converting leads to sales, you’re wasting the money and time you spend on marketing.

You can boost your conversion rate by offering promotional prices or deals for new customers, adding customer reviews and testimonials to prove your product’s worth, or improving your website to make it easier for customers to purchase your product.

Boost your transactions

Increasing transactions is a good goal – more transactions mean more money, after all. But it’s also important to work on increasing the value of each transaction. Higher value transactions bring your business more profit, with the same – or a similar – amount of effort on your part.

If you’re selling online, you can try to increase transaction value by offering free shipping on sales over a certain point, bundling product offerings so customers purchase more items, and using targeted suggestions based on customers’ browsing history. In physical stores, you can work on staff sales training, use tactics like suggesting related product add-ons, or think about increasing your prices.

Reduce your costs

All businesses have overheads, and every sale has a cost involved. Some of these costs are set, while others may be more flexible. Reducing these costs can be a relatively simple way to up your profits.

Think about your larger, monthly costs – like rent and staffing – and the less obvious expenses that apply to each sale – like packaging and shipping. Whether you find ways to reduce the larger costs and save a big chunk of cash, or reduce the smaller costs and save slowly over time, it could make a significant difference to your profit margins.

Looking for ways to grow your family business? Book a complimentary meeting to talk to a qualified business advisor at GECA for advice and support.

The post How to make your family business flourish appeared first on GECA Chartered Accountants.

After the Christchurch earthquakes the standard Auckland District Law Society (ADLS) commercial lease agreement was changed to include a clause 27.5, the relevant parts of that clause are as follows:

“If there is an emergency and the Tenant is unable to gain access to the premises to fully conduct the Tenant’s business from the premises because of reasons of safety of the public or property or the need to prevent reduce or overcome any hazard, harm or loss that may be associated with the emergency including: …

1. Restriction on occupation of the premises by any competent authority, then a fair proportion of the rent and outgoings shall cease to be payable for the period commencing on the date when the Tenant became unable to gain access to the premises to fully conduct the Tenant’s business from the premises until the inability ceased.”

We have been informed that clause 27.5 means in the main rent and outgoings, with the possible exception of insurance, will abate by 100% for the Lockdown Period.  The exceptions to this will be businesses that operate an “essential service” during the Lockdown Period or circumstances where access to the premises is less relevant.

The standard ADLS Lease prior to 2012 contained no provision relating to lack of access.

If the standard ADLS Lease is prior to the 2012 version, or if a lease makes no provision for “no access” then:

1. The Tenant will have a right to claim for its losses or damages, by not being able to access the premises, which may well end up being a fair and reasonable proportion of rent or outgoings, similar to the clause in the standard ADLS Lease since 2012.
2. If the Tenant provided an essential service, entirely or in part, then in a similar way their claim to damages would be reduced.

News media has reported that The Warehouse Group has penned a letter to its landlords relying on the ‘no access in emergency’ lease clause to stop paying rent.  A letter from The Warehouse to its landlords, obtained by NBR said,

“Due to the government activating Alert Level 4, effective from 11.59pm on Wednesday night, we will be unable to trade from the premises which we lease from you due to the restrictions imposed.”

“We will be relying on clause 27.5 of our lease and as a result all rent and outgoings cease to be payable from March 26, 2020, continuing during the period we are unable to trade.”

The above is general commentary only and each business should take expert legal advice. Specific legal advice as to your specific circumstances should be sought, and this commentary should not be relied upon as if it is specific advice to you.

The post COVID-19 and Commercial Rent Payments appeared first on GECA Chartered Accountants.

Working through the Covid-19 lockdown.

Thanks to our move a couple of years ago to cloud based software, GECA is able to support it’s clients in these very challenging business times with advice and accounting services. We will be operating during normal business hours 8am to 5pm,Monday to Friday, and available on 0800 758 766 and our usual DDIs.

To comply with social distancing requirements and the lockdown, we have changed our processes to allow remote meetings and signing of your accounts and tax returns.

Year End Accounts and Tax Returns

As in prior years, the year end accounts and tax return preparation process begins with you receiving by email our electronic questionnaire. Completing this will provide you with a checklist of information we require to prepare your accounts and tax returns. Once compiled, the information can be scanned through to us. Alternatively, please get in touch with us and we will send you a courier bag for collecting your documents to be returned to us for scanning.

We will then prepare your accounts in the usual fashion and come back to with any queries. Once the accounts are ready, we are now providing an electronic signing facility for remote signing called Hello Sign and will conduct our accounts signing meetings using Zoom video conferencing software. These are great apps for conducting business remotely and can be downloaded here.

https://zoom.us/download   https://www.hellosign.com/

Once your accounts have been finished, we will return the original documentation to you if requested. However, there’s also the option to have your scanned documents returned to you as an electronic file and the original documents destroyed in a confidential secure destruction facility.

GST and Tax Management

Any IRD correspondence will be emailed to clients.  As usual, we send out the terminal tax notices and provisional tax notices to clients by email.

GST returns – We have the two monthly and six-monthly GST returns for 31 March 2020 due 7 May 2020.  We will send you a reminder email on 1 April.

3rd Instalment of the 2020 Provisional tax is also due 7 May 2020 and notices will be sent out for GST clients once GST returns are completed.

Sheral can be contacted by email or on her mobile if you have any tax or GST queries.

The post GECA Client Operations Update appeared first on GECA Chartered Accountants.

Avoiding a cash-flow crisis

This post is by Giles Ellis, an experienced business coach and Director at GECA Chartered Accountants. GECA offer Business Planning and other Business Advisory Services.

10 ways to prevent cash flow problems in your business 

Your business doesn’t have to be tiny or struggling to experience cash-flow problems – in fact, periods of rapid growth can often trigger issues with cash liquidity. Left unchecked, cash-flow issues can slow growth and even take your business down.

If you’re having problems with cash flow now – or if you can see them on the horizon – there’s no one way to get your company back in balance. You need to identify what’s causing your cash-flow issues and try a few different strategies to get things back on track.

Here are 10 ways to get started:

1: Cost-cutting measures

Cutting costs is the most obvious way to boost cash flow in your business. And unlike raising revenue, it can have an immediate effect on your income flow. Where to cut costs depends on your business – you might be able to cut unnecessary expenses like business travel or company cars, put a freeze on overtime, or even reduce staff numbers to save on salaries.

2: Raising prices

Raising your prices is another simple way to increase cash flow – and you don’t need to implement a major price hike to make a difference. Even modest price increases can have a significant impact on your profits. If you’re nervous about losing customers through a price rise, consider offering deals on bundled products or services to offset the increases.

3: Check new customers

New customers are great for business – but only if they actually pay their invoices. Avoid issues and ensure cash flow by carrying out credit checks on all new clients. You should get a notification if the business or individual is in the habit of making late payments or defaulting on bills.

4: Tighten payment terms

You don’t have to give your clients months to pay their bills – in fact, a long payment term can be a major factor in cash-flow problems. If your payment term is set at 60 or 90 days, consider cutting it to 30 days to speed up your cash cycle.

5: Reward prompt payment

Prompt payment of invoices keeps cash flowing, so it should be incentivised. Offer a small discount for early payment, to encourage clients to get their invoices in as soon as possible. However, you may not want to offer this option on a permanent basis, as it could impact on your profit margin.

6: Invoice quickly, follow up regularly

You can’t demand prompt payment if you take months to issue an invoice. Keep things rolling by sending invoices as soon as the work is completed or the product is sent, and make sure to follow up on late payments. Every unpaid or late invoice is costing you money in goods and services – and damaging your cash flow.

7: Lease, don’t buy

Buying furniture, IT equipment, cars, property, and anything else you need to run your business is a huge expense. If you’re considering a new purchase, think about leasing instead – that way, you’re only making a small payment every month, which should help improve cash flow. Cancelling a lease is generally easier than on-selling if you need to downsize.

8: Think about invoice financing

A large, outstanding invoice can put a major dent in your cash flow. That’s where invoice financing comes in – some lenders offer quick, short-term loans based on outstanding invoices – ideal if you need instant access to cash. You’ll get up to 85% of the value of the invoice within 24 hours, then get the final 15% once your customer pays the invoice.

9: Look into loans

Short-term loans can help you bridge a cash-flow gap – whether from your usual bank, a non-bank lender, or alternative finance sources like peer-to-peer lending. You could also think about looking for longer-term funding from partners or investors if you’re often running into cash-flow problems.

10: Get help from the experts

Many cash-flow issues can be solved with quick-fix solutions, but if you’re finding yourself short more often than not, it might be time to get expert advice. Working with a finance expert can give you an outside perspective and help you find new ways to generate cash for your business.

You could bring in a business accountant or part-time CFO to help you sort your finances long-term – creating financial forecasts, reviewing your expenses and income, and helping you find innovative ways to boost your cash flow. They can also help with decisions around spending, hiring, and pricing your product or service. It’s about getting an objective outside view of your business – with years of experience behind it.

Read one of our other blogs for further information on how to combat cash flow problems.

Need expert help with your cash flow problems? Get in touch with GECA today.

The post Issues With Cash Flow? Here’s How to Solve Them appeared first on GECA Chartered Accountants.

Finding cash, fast 

This post is by Giles Ellis, an experienced business coach and Director at GECA Chartered Accountants. GECA offer Business Planning and other Business Advisory Services.

How to solve cash-flow problems 

No matter how well your business is doing, cash-flow problems can bring everything to a screeching halt. Without adequate cash flow, your business can’t pay staff, suppliers, or creditors – which could eventually shut you down. 

The good news is, there are ways to find cash both inside and outside your business. Whether you choose to cut costs or improve processes, seek funding from an outside source, or even look at crowdsourcing, there are options when it comes to boosting your cash flow. 

Here’s how to get started: 

Start inside the business 

Before you apply for loans or seek funding, look for ways to improve cash flow within your business. If you’re able to free up some cash without going to a lender or investor, you’ll avoid adding to your overall debt. 

Cut your overheads 

Take a hard look at your expenses and find ways to cut overheads. This might mean reducing staff numbers, moving to a smaller office or less popular area, or cutting back on extras like company cars.  

Clean up and cash out 

If you have excess stock, unused technology or equipment available, think about selling or renting it out to gain some ready cash. 

Talk to your vendors 

If you’re struggling to pay suppliers, it’s worth trying to renegotiate your payment terms. This might mean asking for an extra week to pay your bill or a reduced rate on certain products. If your suppliers won’t budge, it’s time to look at other options – you may be able to get better payment terms or lower prices if you switch to a new vendor. 

Chase your invoices 

Late payment can be a huge problem for businesses. Although you’ll always have some clients who are slow to pay, you can minimise issues by making your terms clear. Get all customers and clients to agree to a fixed payment period, issue invoices promptly, and chase late payments every time. Consider offering an incentive for early payment.

Finally, always get a deposit before you start a large project or take on a large order. That way, you’re not left out of pocket if clients cancel or fail to pay their balances. 

Finding outside funding 

If changes inside the business don’t boost your cash flow sufficiently, it’s time to look elsewhere. There’s a huge number of options out there, from traditional lenders to crowdfunding, so it’s a good idea to seek expert advice before you make a decision. 

Get an overdraft 

Applying for a bank overdraft is a quick, relatively simple way to access some cash. However, banks can call in the debt on demand, which makes them a risky proposition for some business owners. 

Take out a loan 

A loan from a traditional bank gives you a set lending-term, so the bank can’t call back the debt before you’re ready. On the other hand, you will usually need to provide security in the form of business or personal assets, which means you’re taking on risk. 

Asset financing 

If your business has high-value assets, you may be able to apply for a loan using these assets as collateral. 

Invoice discounting 

Invoice discounting means borrowing from a bank or specialist lender based on your upcoming receivables. This type of loan tends to have a very quick turnaround, and you’ll usually be able to borrow up to 80% of the invoice amount. 

On the downside, invoice discounting can be more expensive than other forms of loan. 

Peer-to-peer lending 

Peer-to-peer lending platforms match individual lenders with borrowers and let them set the terms for their loans. Although you will have to go through a credit check and often pay a fee, interest rates for P2P loans are often much lower than for traditional lenders. 

Crowdfunding 

Crowdfunding isn’t just for charity – it can be a way to boost your business as well. With equity-based crowdfunding, you offer an equity share in your business in return for funds. Several online platforms let you find people to invest in this way. 

However, unless you have a particularly interesting or unique business, it can be difficult to get enough people to invest. If you don’t get the numbers, many crowdfunding sites will require you to return the money to investors, leaving you with nothing. If you do find investors, you run the risk of ceding too much control.  

Finding the best solution for your cash-flow problems 

There’s no one magic bullet when it comes to cash flow. Some businesses will be able to find the cash they need by making changes. Some will need to take on loans, and others may do both. It’s about finding ways to bring in cash and achieve sustainable business growth.

If you’re not sure where to start, seek help from an expert. The team at GECA knows the ins and outs, the risks and the benefits of every cash-flow opportunity, and we can help you find the best option for your business. 

Get in touch today!

The post Where to find the cash you need appeared first on GECA Chartered Accountants.

Lifting your business to the next level

If you’re a small-to-medium business, the thought of hiring a CFO, even part-time, may sound excessive – aren’t they for big corporations? Would you have enough for them to do? 

But if your business is entering a period of rapid growth, a part-time CFO could be exactly what you need. After all, if you’re trying to move up to the next level in business, who better to talk to than someone who’s already been there? 

Having access to an expert with experience in bigger, more established companies can help you make the right decisions and avoid expensive mistakes. They can provide everything from operational support to in-depth strategic analysis and can find new ways to move your business forward.  

Bringing on a CFO part-time means you get access to high-level finance expertise when you need it, without paying an unnecessary full-time salary. 

More than just accounting services 

These days, CFOs offer far more than simple bookkeeping or accounting services. They deliver invaluable strategic analysis. This can have a huge impact on your performance, profitability, and long-term business success. 

When you hire a part-time CFO, the scope of duties will depend on the size of your business, your specific needs, the industry you’re working in, and your overall business strategy. Generally, they will work to shape your company’s finance strategy and provide day-to-day support for your financial operations. 

A CFO should also be able to help with business planning and forecasting, tax planning, risk management, compliance, auditing and reporting, investment, working capital management, and general budgeting. 

As an experienced finance expert, your CFO will act as your company representative and help you communicate and negotiate with lenders, investors, and auditors more effectively. They may work with your board of directors to hammer out financial details. They’ll be in the ideal position to offer advice and guidance around any business decisions – mergers, sales, acquisitions, or any other major changes.

A new perspective 

A good part-time CFO isn’t there to simply tick the finance box and go along with every idea the CEO comes up with. They act as more of a strategic partner to the CEO or business owner, using insight and perspective to identify opportunities and offer solutions. 

When you’re running a business, it’s easy to get bogged down in the day-to-day, so an outside perspective can be incredibly valuable. A good part-time CFO will act as a sounding board for your questions and problems, but should also be able to spot issues, boost efficiency, and identify opportunities that you may not have considered. As money experts, they’re the most likely to notice when your strategy isn’t on a firm financial footing and should be able to help you shift your vision to match your financial reality. 

Even though your part-time CFO wouldn’t be working in your business every day, they should be able to offer their own expert opinions on company decisions. More importantly, they can speak up if they disagree. It’s not about negativity, it’s about challenging assumptions and pushing your business forward. 

Face challenges with a part-time CFO

Growth is positive, but it can also mean rapid change and serious business challenges. If you’re struggling to keep up, working with a part-time CFO can help make sure you make the right decisions and avoid financial pitfalls. 

Need help navigating your business through a growth period? Talk to the team at GECA about our part-time CFO services. 

The post What to expect from a part-time CFO appeared first on GECA Chartered Accountants.

As you may all be aware, the continuing spread of COVID-19 which has been classified as a pandemic has seen the government taking action and making various announcements this week.

The Finance Minister announced on 17 March 2020 a $12.1 billion support for New Zealanders and businesses which includes a business package containing proposed tax measures to support businesses being affected by this outbreak.  

Proposed Tax Changes:

The proposed tax-related measures include:

• Reintroduction of depreciation on buildings for commercial and industrial buildings to encourage investment.
• Increasing the provisional tax threshold, from $2,500 to $5,000 for the 2020/2021 financial year only, to relieve small business owners.
• Cancellation of use of money interest (UOMI) on underpayment of tax for taxpayers who are unable to pay the tax on time due to the outbreak.
• Sharing of information between Inland Revenue and government departments to help these agencies to assist with the outbreak.
• Allowing deductions for low-value assets by increasing the threshold, for low-value asset purchases, from $500 to $5,000 for the 2020/2021 financial year. Also, having a threshold of $1,000 going forward from 2021/2022 financial year.

The proposed tax changes will be included in the Bill to be introduced. For further details on the proposals, please refer to the link below:

https://www.beehive.govt.nz/release/121-billion-support-new-zealanders-and-business

Wage Subsidy Scheme

The announcement also includes support for workers and businesses who have to be on leave or self-isolate to prevent the spread of the COVID-19. This will be part of the wage subsidy scheme available for all employers that are significantly affected by COVID-19. 

The payments will be $585.80 per week for full-time workers (20 hours or more) and $350 per week for part-time (less than 20 hours) workers. These payments will cover a period of 12 weeks and a maximum amount any one employer can receive is $150K.

The wage subsidies will be especially beneficial for businesses in the Forestry and Tourism industry who have been impacted the most due to the outbreak. 

There are certain eligibility criteria for the wage subsidy. Businesses will be required to take active steps to mitigate the impact of COVID-19 and have a signed declaration form to that effect. 

If the COVID-19 outbreak has had an impact on your business and you are facing financial difficulties and require our assistance or advice, please contact Giles now on 0800 758 766.

The post COVID-19 Proposed Tax Changes appeared first on GECA Chartered Accountants.

Using an in-house person to manage your accounting and finance functions might seem like a great solution. You have someone on hand to answer questions who knows your business inside out.

What many businesses don’t consider are the risks that come alongside it – some of which can have devastating consequences to a business. At GECA, we’ve helped a number of businesses come back from the brink of bankruptcy after relying on an in-house finance person.

Here are some of the most common risk factors.

Illness, death and departure

We often see businesses operating with a one-person finance team. This person holds key information to the business’s finances – from small details like logins to access financial systems, and where documents are stored, to overarching information like the strategic direction of the company’s financial future. If something happens to the finance person – they leave suddenly, they get sick, or worse, they pass away – the company is unable to operate even the most basic of functions.

Fraud

You want to trust your people, but the sad truth is that fraud happens, and it’s seen most often in scenarios that don’t come with checks and balances. Having one person in your company’s finance role means you won’t have the basic controls, like dual authorisation, that can help protect against fraud.

Compliance errors

Human error is a fact of life – and when it comes to compliance, those errors can cost your company time and money. A single finance person has no support – no one to check their work, which means that errors can happen more often, and can go undetected for longer. It also means that any errors are your company’s fault alone – you can’t blame a third party and demand they cover any penalties and fines.

Employee data privacy breaches

In-house finance people are often asked to manage payroll – and even legal HR issues – something they could have no experience in. This allows errors to creep in, but also exposes the company to risks around the mishandling of employees’ private data. Any breaches, inadvertent or otherwise, can at best damage employee relations, and at worse lead to a public relations or legal nightmare.

Outsourcing – the smarter option

Unless your company can afford to sustain a larger finance department with the right mix of skills and protocols, outsourcing might be a smarter solution. It means you sidestep many of these risks, or pass them on to people who are much better equipped to manage them. For example, with GECA’s Virtual Finance Team service you get a group of experienced professionals covering all aspects of your accounting and finance. The service is designed to act as your own finance department – you get exactly the services your business needs, such as banking, payroll and management accounting, strategic planning and business coaching.

Strong internal controls give you the checks and balances that are missing from one-person finance departments. They are designed to catch errors and protect against fraud – and since we’re a team, if we lose one person it won’t affect your business at all.

More often than not, VFT also reduces costs – you’ll save on wages, and management time can be spent more productively. You’ll also only ever pay for the functions you need now – VFT can be scaled as you grow.

Outsource for peace of mind

Most importantly, an outsourced finance model like VFT delivers you peace of mind. Rather than keeping an eye on finance and accounting, you can refocus on the business, knowing it’s in safe in the hands of experts.

So, is it time to outsource your finance department? Talk to us about how our Virtual Finance Team could save you time, money and stress –  Call us now on 0800 758 766 for a complimentary, no-obligation meeting.

Time to outsource your finance department? Learn how GECA helps owners of family businesses grow their profits and increase their wealth.

The post In-house finance functions – more trouble than they’re worth? appeared first on GECA Chartered Accountants.

The end of financial year deadline

As the end of the financial year approaches, it always pays to spend a little extra time examining your financial records and considering ways to increase your after-tax income. There is a high chance that you will find a couple of extra savings from 2019-2020, which can add up to reduce your tax bill by a significant amount. It is also a good time of year to reflect on your financial position, and think about tax minimisation strategies and goals for 2020–21.

Top tax tips for preparing for the end of the financial year:

Write off bad debts

Businesses with outstanding amounts owed, no matter the size, that are unlikely to be recovered in full should consider writing these off as bad debts. Bad debts can be used as a tax deduction, effectively reducing your taxable income for the relevant year.

For a debt to be considered bad, you must have formally written the debt off in your accounts, and be able to prove to Inland Revenue that you have taken reasonable steps to recover the amount.

Pre-pay expenses

By pre-paying for tax-deductible expenses before March 31, you will be able to minimise your tax bill. Some categories of business expenses can be pre-paid without any limitations, meaning that you can claim as much as you like. Examples include stationery, vehicle registration, accounting and auditing fees and postal charges. Most other expense categories have caps that limit the amount that can be claimed in a year.

Split business income

In some circumstances, it may be possible to minimise your tax liability by redistributing the flow of income from your business. For example, if your partner is a low-income earner, it may be advisable for you to split the business income with them. It may also be possible for you to redirect some of your income towards your children.

However, if your family members are employed in your business as wage earners, you should be aware that Inland Revenue may elect to make tax adjustments if they consider the remuneration to be excessive.

Discount reserve

You can claim a deduction for a discount reserve. For example, a discount for speedy payments, if your debtors are traditionally entitled to this discount. In the years following on from the first year that you are allowed, you can claim a discount reserve deduction, adjustments will be made to maintain the discount level at a consistent level.

Trading stock valuation

Trading stock must be valued using a cost valuation method unless the market selling value is lower than the cost. Therefore, to lower the value of your stock before the end of the financial year, you should either physically dispose of it or sell it at market price (if the market price is lower than cost).

Work In Progress (WIP)

It is recommended that on 31 March you assess all the jobs in progress. Make a list of these jobs and add up the costs associated with these jobs (exclusive of GST). The costs will include any stock items used and employee/contractor time on these jobs. These costs are treated as closing Work In Progress as at 31 March and are costs yet to be billed to the customers. These won’t be deductible as an expense at the end of the financial year.

Fixed Asset Schedules

We suggest reviewing your fixed asset registers and assess whether any assets are no longer in use by the business, not working or stolen or disposed of during the year. By writing off these assets (only if they meet the write off criteria) a deduction will be allowed with respect to those assets.

Bonuses and holiday pay

It is possible to claim amounts payable to your employees as a deduction for the current financial year, so long as the full amount is paid to the employee within 63 days of the balance date. Amounts that are paid more than 63 days from the balance date can only be claimed in the following financial year.

Got a tricky tax problem? Call us now on 0800 758 766 to see what we can do to assist. Alternatively, you can email support@geca.co.nz.

Download a pdf of the 2020 year-end tax tips.

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