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.

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.

Renting out your property through Airbnb can seem like a simple way to make a bit of extra cash without too much effort – but it’s not necessarily that straightforward.

Operating an Airbnb is a bit like running a small business. Under New Zealand law, if you’re an Airbnb operator, you are treated like a landlord and expected to pay tax on any income from your rental. You’re also expected to abide by the Health and Safety Act – which can lead to issues if you are unaware of your responsibilities.

Protect yourself, your potential guests, and your property by carefully considering the issues before you agree to rent to anyone.

Here’s what to think about before you rent your property on Airbnb:

Look at liability

Property owners can be held liable if guests receive injuries caused by a poorly maintained property. For example, if a rotten deck gives way and a guest breaks a leg, or an incorrectly installed light fitting falls and strikes someone, you could be forced to pay for their medical care and associated costs.

However, if your property is well-maintained and cared for, you should be fine. Guests are responsible for their own safety as long as your property has the relevant consents and complies with building law.

Safety and equipment

Baches – particularly those by the sea – always used to come with a couple of kayaks and a bike in the garage. These days, people are more cautious about offering recreational equipment. If you supply equipment for your guests to use, you could potentially be held liable if they are injured while using it. Again, if your equipment is well-maintained and you supply safety gear like helmets and lifejackets, you lower your risk.

Insurance issues

If you’re a responsible property owner, you probably already have insurance on your property. But your potential Airbnb rentals may not be covered under your existing policy – it’s a good idea to check before you let anyone stay. If you’re planning to rent a property regularly, your insurer may require you to take out a landlord-specific policy to cover any possible damage caused by your guests. These policies sometimes cover injuries as well – be sure to check.

Vetting and valuables

Although accidents can happen, using common sense before guests arrive can help you avoid some issues. It’s a good idea to thoroughly read reviews of guests before approving them to rent your property, remove breakables and valuables before guests arrive, and check in with guests during their stay if you can.

Want to prepare yourself before you become an Airbnb host?

Talk to one of GECA’s  qualified business advisors on 0800 758 766 or email us to find out more about your responsibilities before you start.

The post Safety first: Taking care of your guests & your property as an Airbnb host appeared first on GECA Chartered Accountants.

How GECA’s Virtual Finance

How GECA’s Virtual Finance Team solution set Construct Brands up for success

In today’s fast-paced business world, it can be small innovations that give companies an edge – and sometimes it’s an operational change that can make the most significant difference.

That’s what FMCG company Construct Brands has found with GECA Chartered Accountants’ Virtual Finance Team (VFT) service.

As GECA managing director Giles Ellis explains, the service doesn’t just remove the need for an in-house accountant. It also adds business-critical expertise, for a fraction of the cost.

“If you’re a business that’s big enough to hire an internal accountant, we can replace that person with our outsourced team – a finance manager, junior accountants, clerks, payroll experts and a CFO. That means you get all these specialised experts for less than you’d be paying a bookkeeper or junior accountant – who of course don’t have that breadth of experience.”

More business smarts for less

For Construct Brands, a company already steeped in innovation and with ambitious growth plans, that smarter way of working appealed. This FMCG company creates functional confectionary such as the Wolf Energy bars that are sold globally. When the company’s internal accountant resigned, the obvious next step was to recruit for the role – until the owner, Andy Smith, was told about GECA’s VFT offering.

For less than they were paying their accountant, GECA could deliver a much broader service and deeper expertise.

“We’ve replicated the functionality of internal accounting for less, but it’s not just about cost savings,” says Giles. “We’re reducing the risk of error and fraud. Management now also has access to advice, accountability and governance coaching, budgeting workshops, annual business plans that sync with the overarching plan – and we can help with them too.”

That support goes beyond numbers to upskill business owners in corporate governance and delve into the nitty-gritty of organisational structure.

“Often I find when a business is growing rapidly, people are thrown into the mix with no real structure,” says Giles. “We help make sure that there is a structure and that it’s fit for purpose – that’s all part of it.”

CEO, Andy Smith – “The biggest cost to us with an internal hire was our time. From hiring to managing the employee, it was time spent that we didn’t have. It’s been great to hand it all off to GECA and focus on the outputs instead.”

Seamless onboarding

Any operational change inevitably comes with a bit of upheaval as new systems are embedded. GECA’s propriety onboarding methodology is designed to minimise that.

“We’ve worked out how to do it seamlessly, with no interruption to the business,” says Giles.

The GECA team works alongside any incumbent staff, going through hand-over documents and procedures, so they’re across every detail of the function. From there they build a report of recommendation. For example, a plan for shifting to outsourcing the finance and accounting function, customised for that business.

“That customisation is key,” says Giles. “We want to make sure the new way of working will fit, and that the plan to move them over makes the most sense.”

“Like any major business system change, there has been pain, however effective communication during the transition process by the GECA team has minimised the impact on business.” Andy Smith, CEO.

Harnessing software

The GECA team then springs into action, establishing new procedures, software and integration, to deliver maximum efficiency. They moved Construct Brands from its legacy accounting package to the far more flexible Xero. That meant recoding year-to-date transactions in Xero. Then running parallel reports out of both systems to confirm the data accuracy of the starting position. In the process, they also simplified Construct Brands’ invoicing process, which has to factor in three different services.

“Just that shift has delivered the business a real efficiency boost – where before each invoice had to be manually input, now Xero auto-creates many of them” explains Giles.

Accounts payable is also a lot tidier and easier to manage.

“They had a folder of paper receipts, including printed out electronic invoices. Inefficient, costly and wasteful. Now we’ve implemented Receipt Bank, which lets you scan any invoices, which are sent to Xero to be coded. That means each transaction has a receipt recorded next to it, which allows efficient compliance with the IRD document-keeping requirements says Giles.

“We love being able to photograph those annoying coffee receipts from our phones for easy expense reimbursement.” Andy Smith.

A shift from paper to Smart Payroll has also saved days of work each month. Instead of filling in paper forms, staff can now use an app to apply for leave. Then with a few clicks, managers approve it.

“It goes straight through,” says Giles. “It’s also very fast and accurate. Where they were spending two to three days a month preparing payroll, now that’s a matter of a couple of hours.”

More Effective Reporting

As part of the onboarding process, the GECA team review all current management accounting reports against reporting metrics used by similar businesses. They then compare them against functionality available from the newly implemented systems. This informs the recommendations they can make to enhance the reports.

Of most value though, is the monthly CFO Report, which provides a financial summary to the management team. This includes valuable insights and analysis from experienced management accountants and analysts.  It covers off all aspects of the VFT service including Financials, Cashflow, Payroll, Creditors and Debtors.

Improved Governance

So often, business owners understand how important a strong governance framework is for increasing business value. However, day-to-day operational issues mean this vital business function is neglected. The GECA VFT service includes regular Advisory Board meetings, chaired by the Virtual CFO who is also an experienced Director, using insights and analytics provided by the GECA VFT.

“It’s been great having Giles challenge our thinking which had been entrenched over many years and we value the insights he brings from his work with other clients in the FMCG space.” Andy Smith

For medium-sized business, delivering that all-important edge doesn’t have to come from a cornered market or trademarked products. Clever ways of working – like GECA’s VFT service – can mean smaller businesses are operating with the efficiencies and expertise you’d expect from much larger businesses. People at every level can work faster and smarter, and the business is set up for future growth.

For more information on how GECA’s Virtual Accounting Team service could give your business a competitive edge and deliver a foundation for growth, get in touch with the team now.

The post Case Study: How Construct Brands excels with a GECA Virtual Finance Team appeared first on GECA Chartered Accountants.

2. Click Tracking categories.

3. Enter the desired name of your tracking category, say, Rentals or Properties. There is also an option to enter each property name under this category.

4. Click Save.

5. Now when you reconcile your transactions you can assign payments to a particular property. The category name will appear under Why on your bank reconciliation dashboard and you can scroll down to choose a property that the transaction relates to.

6. Sometimes you can have only one receipt for expenses that relates to different properties. Say, you went to a shop and grabbed a new lamp shade for your three-bedroom house rented for a long term. You also bought a new iron for your Airbnb apartment and a kettle for your holiday home.
There are a few ways to attribute the expenses to the properties in Xero. If you use Xero Bills you can create a new bill for these expenses and while reconciling you can match that bill against the bank payment. Another easy way is to enter the receipt details at the moment you reconcile transactions in Xero. For that:

– Go to your bank account in Xero. Find the transaction then click Add details.

– Then, you can allocate expenses to your rentals. Check whether the amounts in the receipt or invoice are GST exclusive or GST inclusive.

7. Now you can track your properties performance. Click Accounting, Reports and More Reports under Financial. There, you can see Tracking Summary.

If you want to have an easy access to Tracking Summary in future click star. This report will appear under the Accounting tab.

8. Click Tracking Summary. Choose the date range and the accounts groups you want to review. Say, you would like to know the amount of expenses incurred in relation to each property.

9. Click Update. Now you can see your Expenses Summary. Unassigned expenses are those that haven’t been assigned to any property probably by mistake or because these expenses are overhead.

10. You can also see financial statements relating to each property. Probably the most interesting report for you is Profit and Loss. For that go to Accounting, then click Reports, then Profit and Loss.

In Profit and Loss choose the Date Range and click Report Settings.

11. Under Report Settings you can choose the rental you would like to look at.

12. Your Profit and Loss for the selected date range is now displayed.

13. Please note that the reports generated are based on the transactions you have coded while reconciling. These reports are for your reference only and may be subject to year-end adjustments

The Author.
The article is written by Valiya Gafarova, Certified Xero Adviser and Accountant at GECA Chartered Accountants. If you want to know more on rental property accounting feel free to get in touch with us on 0800 758 766.

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Congratulations on getting this far and for completing Parts 1 and 2 of your Business Plan. So far you have done a lot. Your business has a clear Vision and Purpose and you know what you want to achieve and the Values you will use to do this.  You have articulated your Value Proposition that explains what you do for who and how you can help them. Finally, you have identified the Opportunities and Vulnerabilities to be addressed in the next 12 months.

In this final section, you will agree the Goals and Key Projects to achieve in the next 12 months and broken this down into 90 day actions.

11.Goals / Key Projects

Start a new page on your Business Plan – I like to do this on the back page so it is a true one page Business Plan.

Draw up five columns and title as follows:

• One Year Goals
• 90 Day Goals
• Actions to Achieve 90 day Goals
• Who
• By When

Start with the One Year Goals and list the main goals you have for the rest of the financial year.  Some of these goals may be actions in order to achieve other goals – these can be grouped together under functional headings such as HR Issues, Marketing, etc.

They should address key opportunities and vulnerabilities that have been previously identified and should align to your purpose, vision and what you want to achieve.

Try and keep it to four goals or less, anymore and its likely one of them could have been grouped into another goal. Too many and you’ll struggle to effectively achieve them.

12.Actions To Achieve Goals

Now for each One Year Goal, on a separate piece of paper list all the actions that will be required to achieve that Goal.    These actions need to be specific, broad enough that there are multiple things necessary to achieve them. Think big picture – don’t get into small specific actions yet – this is what we do in the 90 day plan.

13.Establishing Your 90 Day Plan

Consider the One Year Goals – or goals within a larger goal – that need to be achieved in the next 90 days and list these alongside the One Year Goal in the 90 Day Goals. Now review the action list you compiled previously and list the actions that can be done within 90 days in the Actions column.

These actions need to be specific and a responsible person identified. Ideally no more than five actions per person (or you won’t achieve them) and they must be time bound. Include these details in the appropriate columns of your plan.

If there are parts of your business plan that need further work, add finalisation of your plan as a goal and set actions to achieve this.

Next Steps

And now your Business Plan should be complete! Next consider how to roll this out to your team, customers and suppliers to get the most benefit from your plan. Several clients of mine have publicised various aspects of their Business Plan such as Core Values on their websites and some have had them put up on the office walls.

Set a date in 90 day’s time to review your plan and put in place your next 90 day action plan.

Good luck creating your business plan and remember, if you need help to do this, contact Giles or his team on  0800 758 766 or sign up for our business planning service.

The post How to create a business plan in 4 hours – Part 3 appeared first on GECA Chartered Accountants.

Having completed Part 1 of Creating a Business Plan in 4 hours, you will now have a one page template that states your business’s Vision and its Purpose. You have identified what the business needs to deliver to you and the Core Values that provide the basis for how you will do this. Now we are going to delve into the detail to operationalise your strategy – by setting goals for the next 12 months, along with actions to achieve and metrics to ensure you’re clear around what success looks like.

5.Revenue Targets

Under “What we want to achieve” section, write Gross Revenue Target. If you have an existing financial forecast, use the projected annual revenue figure.  If not, see the PlusOne website for a financial forecast template. If appropriate, divide the Gross Revenue figure by 12 to get a monthly target (not relevant for businesses with seasonal variation).  Now add any other relevant high level financial measures such as Gross or Net Profit and a monthly target.

Note the Gross Revenue Target should tie back to your “What we want to achieve” statements.

6.Key Performance Indicators (KPIs)

Head up the next section in the right hand column with Key Performance Indicators (KPIs). These are the key business drivers and identifying these enables business owners to measure progress accurately and then apply strategies and tactics to improve each KPI.

Start by listing as many KPIs as you think are appropriate for your business. These will be drivers of your business and are levers, that if pulled, can have an impact on your results. Your KPIs need to be measurable on a daily, weekly or monthly basis.

For example, 5 KPIs that drive Sales are client retention rate, leads generated, sales conversion rate, average transaction value and average dollar sale.

Now rank your KPIs from most important and include the top 5 in your business plan. You will need to ensure your selected set of KPIs covers all core business areas, and also decide which of these will be key levers for change – not just for the coming 12 month period, but running through your entire strategic plan.

The next two sections are quick and easy to complete.

7.Our Ideal Client / Customer

Consider who you would like to work with and describe this customer in one sentence. Think about the Vision for the business and how the ideal customer would fit in with the Vision. Now complete the following sentence and enter on your Business Plan; “Our ideal customer is…”

8.Our Value Proposition (for ideal customers)

The Value Proposition is one of the most important, if not the most important, parts of your business plan.  Think of it as your ‘elevator pitch’ that summarises what you do and for who. It can be shared with customers and staff and is a powerful business tool.

Consider the following and spend 25 minutes brainstorming the things that describe your value proposition to your ideal customer.

• Why should your customers do business with you?
• What makes you stand out from the competition?
• What is your point of difference?
• What objections from customers have you overcome that your competitors may not have?

Now complete the following statement “I help target market do topic so that benefit. If you have three main problems you should call us.”

For example “We help small to medium sized business owners unlock their business potential so they improve performance and increase profits. If you want to grow the wealth of your assets, have your business running more efficiently and sleep at night knowing your assets are fully protected, you should call us now on 0800 7587 766.”

9.Our Most Critical Challenge

Write down as many critical challenges to be addressed in the next 12 months and rank in priority.  Now include the most important critical challenge in a new section on your Business Plan under the Ideal Client section.

10.Opportunities / Vulnerabilities We Must Manage

The purpose of this section is to identify key opportunities to take advantage of and vulnerabilities to be addressed. Consider the following:

• What keeps you awake at night?
• What’s happening in your industry that you need to respond to?
• How much family time are you getting?
• How much YOU time are you getting?

These issues are often identified by doing a SWOT analysis and a SWOT template is available here for you to complete your own SWOT analysis. Now include these in a section alongside the Critical Challenge.

The opportunities and vulnerabilities identified are often used as the basis for Goal Setting in Part 3 of How to create a Business Plan in 4 hours.

Good luck creating your business plan and remember, if you need help to do this, contact Giles or his team on  0800 758 766 or sign up for our business planning service.

The post How to create a Business Plan in 4 hours – Part 2 appeared first on GECA Chartered Accountants.

Airbnb Hosting: Nine Tax Basic Rules You Need to Know.

There are a few things about New Zealand tax you should be aware of when you enter into Airbnb, BookaBach or other peer-to peer renting. The following may help you when speaking to your accountant or may provide you a general guidance if you are preparing your tax return on your own.

Here are the nine must-know tax rules for peer-to-peer hosts:

1. The money that you get from renting out your room, house or a bach is an income. You need to keep track of any income you receive in relation to your property short-term renting.
2. From your income, you can deduct expenses that relate directly to your rental income such as advertising and cleaning. To be able to deduct expenses you will need to be accurate in keeping all receipts.
3. If sometimes you or people associated with you privately use the property you will need to figure out how many days you used it and how many days your property was unused during a tax year. You will need this information when determining how much of your expenses you can deduct for income tax purposes. Depending on your circumstances you will use either mixed use proportion or standard income tax rules.
4. You are not allowed to claim depreciation on your property. However, you can still claim depreciation on assets used in your rental activity such as beds or bigger appliances. The threshold for fixed assets is over $500 for assets purchased prior to 17 March 2020.  The threshold is over $5,000 from 17 March 2020 till 16 March 2021 and then will be permanently over $1,000 from 17 March 2021 financial year.
5. If you manage your AirBnB property from your home you may be eligible to claim your home office expenses against your rental income.
6. If your AirBnB income before deductions is $60,000 or higher in the last 12 months (or you suggest that it will be $60,000 or more in the next 12 months) you will need to register for GST and file GST returns. You will be able to claim GST from your purchases. There is always an option to become GST registered voluntarily whatever your turnover is. Read more information on tax consequencesof becoming GST-registered.
7. From 1 April 2019 ring-fencing losses legislation was introduced. In practice, that means if you make an overall loss from renting your property you are not allowed to offset your loss against your other income. There are a few exceptions from this rule for example, if your property is a mixed-use asset. However, for the properties to be considered as a mixed used asset, the property needs to be also used by the property owners for their own private use instead of being rented out for short term rentals 100% of the time. You can read more on the ring-fencing losses here.
8. Also, you need to know that some properties cannot be sold tax-free. For determining your tax obligations, you need to take into consideration the date when the property title was transferred to you. From a legal point of view, this is when you became the owner of the property. If it happened before 1 October 2015, you will pay tax only if you bought the property with an initial intention to resell it. If the purchase took place from 1 October 2015 to 28 March 2018 inclusive you will be subject to tax if you sell the property within two years after the purchase date. From on or after 29 March 2018 the five-year period applies. These rules are called bright-line test.
9. In some New Zealand cities such as Auckland and Christchurch hosts are required to pay commercial rates instead of residential rates. A peer-to-peer host needs to do their own research on local rates applicable to their situation.

The Author.

The article is written by Valiya Gafarova, Certified Xero Adviser and Accountant at GECA Chartered Accountants. If you want to know more about tax consequences of having an Airbnb or other peer-to-peer rental feel free to get in touch with us on 0800 758 766.

Please note that this blog post should be considered as a general overview but not as a tax advice relevant to your situation.

The post Airbnb Hosting: Nine Tax Basic Rules You Need to Know appeared first on GECA Chartered Accountants.