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.

The post Xero Tips and Tricks: Keeping track of different rental properties appeared first on GECA Chartered Accountants.

Nowadays many of our business meetings are held in cafes and restaurants. However, costs associated with these meetings are treated as entertainment and subject to 50% non-deductibility.

From an accounting perspective, typically entertainment expenses are treated as deductible during the year and then the 50% non-deductibility is applied as a year-end adjustment when preparing the annual accounts and tax return. However, this means your GST and profit and loss will be inaccurate during the year.

A more efficient procedure is to set up your accounting software to post entertainment expenses and automatically subject them to the non-deductibility adjustment at the time of recording the expense. Doing this will ensure you have an accurate Profit and Loss and file accurate GST returns during the year.

Read on to find out how Xero can be set up to do this for you.

First, think of using bank rules in Xero. It is a handy option for reconciling transactions that recognises expenses of similar nature and suggests how to code them. To set up a bank rule for your entertainment expense you need to:

1. In the Accounting menu, select Bank accounts.
2. Click Bank Rules.
3. Click Create rule, then select from Spend Money rule.

Now the most interesting part begins: we need to enter the conditions to make our entertainment expense bank rule work. These conditions will identify the bank transactions that our bank rule will apply to. At least one condition can be entered, apart from that you can have as many conditions as you want.

In this post I would like to show you some tips that will help Xero automatically identify and code the majority of your entertainment expenses.

1. After selecting Spend Money rule choose “Any” option.
2. The majority of places where you may entertain your clients and suppliers contain such words as “cafe”, “coffee” “bar”, “restaurant”, “kitchen”, “eatery”, or “pub” in their names. So including these words as conditions for entertainment expense bank rule can help Xero pick out the right transactions for you.
   Please note that you should choose “contains” option as it allows you to include all the names that contain the necessary words regardless where they actually are.
3. Set the contact. Here I would recommend setting the contact as the Payee from the bank.
4. Do not allocate fixed value line items since you probably don’t have them for entertainment expenses.
5. Since in most cases New Zealand entertainment expenses incurred away from the office are only 50% deductible for income tax and GST purposes, they need to be split 50/50 between deductible entertainment and non-deductible entertainment. Some accountants do relevant tax adjustments at the end of year, however, you do have the option to do this throughout the year. Here is how you can do it while setting up bank rules in Xero:
   Please note that you can have different codes for entertainment in your Xero Chart of Accounts.
6. Now you need to set up the reference. The default option may work well for this bank rule. Choose the bank account you would like to target with this rule. And finally give the created rule a title that can help you easily recognise it among other bank rules.
7. Click Save and you are done with creating the rule.

While reconciling next time you will see that Xero will automatically identify the majority of your entertainment expense and suggest you apply the created rule.

All you need to do is to check if this expense is truly 50% deductible and if so just click OK. If this expense was 100% deductible say it was a meal that you bought while travelling on business, you can choose to override the rule by simply clicking Don’t apply rule so you can code this expense manually.

The Author

The article is written by Valiya Gafarova, Certified Xero Advisor and Accountant at GECA Chartered Accountants. If you need any help with Xero feel free to get in touch with us on 0800 758 766.

The post Xero Tips and Tricks: Simplifying Entertainment Expense Accounting appeared first on GECA Chartered Accountants.

Avoid making loans between companies

Avoid making inter-company loans if you are operating two or more companies. Unless the shareholdings in both companies are identical interest needs to be charged between the two entities. If it is not charged, the value of the interest that is supposed to be charged can be deemed a dividend. This can lead to tax complications.

If you want to move money between companies we suggest using the shareholder(s) current account as an advance or drawings in both entities. This is assuming you have a sufficient balance in the current account.

We also suggest not paying another company’s bills from the other company’s bank account. It usually creates a lot of accounting work. This can be avoided by a simple transfer of funds, as described above.

If you have a complicated structure and too many inter-entity loan balances, have a chat to us to see if we can assist you with the loan restructures.

Accounting & tax tips for personal trainers

Motor vehicle – If you are using your personal vehicle, then take note of how much you use your car for work purposes.  This might include travel between clients, picking up supplies, heading to a seminar or anything directly business related.

Bootcamps – If you are running a boot camp or training session for clients outside you can claim particular expenses.  Any equipment or resources used are tax deductible. This includes mats, sunglasses, sunscreen, and hats.

Uniforms – IRD is very particular about what type of expenses fall under the uniform category.  Clothing which has the business logo on it can be claimed as an expense for business purposes only.  Note, running shoes also fall outside of this rule.

Separate business accounts – We recommend clients setting up separate bank accounts or credit cards.  Your clients can pay into this account and you can pay all your business expenses from these accounts.  This ensures we as accountants spend less time processing and separating out your business and personal expenses. Therefore, reducing your accounting costs.

Xero Invoice Reminders – With busy schedules, chasing up debtors can be a chore.  Now in Xero, you can turn your automatic invoice reminders on. This saves you time on debt collection and allows Xero to chase up any late payers and overdue invoices.

Please contact GECA if you need more tips on how to structure your business and if you need to know more on which expenses you can claim for better record keeping.

The post Tax Updates appeared first on GECA Chartered Accountants.

I bought my first fee book from a retiring practitioner in 2010. At the time MYOB was the incumbent accounting software provider to New Zealand small to medium sized businesses. Meanwhile Xero was a rising force with around 15% of the market.

Coming from a corporate accounting background I was software agnostic. However at the time our practice used MYOB as its practice software and many of our clients were on various MYOB packages.

The decision-making process for GECA

One of my goals in moving from corporate to public practice was to give NZ family business owners access to best in class accounting and finance team, led by an experienced CFO, to enable them to outsource their internal accountant. A key component of this offering was CFO insights and advice to the Board and senior management team to help them overcome challenges and grow their businesses. However, to provide these insights required accurate and timely financial reporting and, it soon became apparent to me that the various MYOB accounting packages used by our clients could not deliver what I needed to help them.

What I needed was real-time accurate reporting, accessible anytime from anywhere, which could be analysed for data insights and metrics.

Instead, I was faced with a situation where a client using MYOB would email me a hardcopy report, I would review and advise queries to be followed up by the client, after which we would meet to discuss. Any queries that arose would then be answered following the meeting. It took days and was hopelessly inefficient and was never able to meet our needs to deliver timely, proactive advice.

The solution?

So when Xero came along with its cloud-based approach, that enabled real-time reporting, I was instantly aware of its potential to enable me with the tools to provide my clients with those timely CFO insights. In turn this would allow informed management decision making.  Xero scaled quickly and what was a rudimentary offering in its early years quickly became a sophisticated accounting software package that can meet the needs of small to medium sized NZ businesses. They were smart in leveraging relationships with accountants who became advocates for clients to use Xero and it rapidly grew its subscriber base.  Indeed, the main hurdle for many business owners moving from MYOB to Xero was Xero’s monthly subscription model versus a one off up-front cost to buy an MYOB software package.

MYOB could see the advantages in having a subscription model and that the world was moving to the cloud. They needed to upgrade their software products to at least match, if not surpass, Xero if they were to stay relevant to business owners.  That was six years ago and during this time MYOB has invested heavily in moving its PC-based products to the cloud and taking on Xero’s domination in this cloud based accounting space in Australasia.

So does Xero still measure up or has MYOB finally got accounting software solutions to provide a viable alternative?

First off, what solutions does each provider offer?

Cost

Xero offers one accounting package that comes in three pricing plans depending on transaction volume. This simplicity of pricing does make things easier with Xero. Start a subscription and get going. Xero starts at $27.50 per month for its starter option, moving to $60 for its standard package and $75 for its premium package including accounting for multiple currencies.

MYOB requires more analysis to be sure the software is fit for purpose with its Essentials package and its AccountRight package, again each coming with various options. Essentials offers basic features and is only suitable for start-ups, sole traders or micro businesses. It starts at $25 and has a $35 per month and $40 per month option. However, whilst slightly cheaper than Xero, the feature set compared with Xero is considerably more limited. In our view Xero offers a more effective solution for anyone looking at MYOB Essentials.

The Accounts Right package is aimed at medium-sized businesses and is comparable to Xero’s standard offering. The key differential between the two is the inventory management functionality included by MYOB. Its costs $55 for its standard package and has a $90 version that allows multiple company accounts. Xero only allows one set of accounts per subscription.

AccountsRight works differently to Xero and Essentials in that it is hosted on a PC and updated by connecting to the internet. Xero and Essentials are accessed through a browser through any internet-enabled device. There are advantages and disadvantages to both approaches. Xero and Essentials are based on real-time internet connected data and therefore are always up to date without needing upgrades.  In comparison, AccountsRight is hosted on the users PCs, users are able to work on their accounts without internet access. However, this is a rare occurrence in our internet-enabled world. 

More recently, changes to employer payroll reporting required by the Inland Revenue means a Payroll function has become a strategic component for accounting software packages and valuable additional stream of revenue to the software providers.

Xero’s Payroll function costs an additional $10 per month for one person and $1 per month for additional employees. MYOB AccountsRight bundles Payroll with AccountsRight for $76 per month for 20 employees and then additional blocks of 10 employees incur a one off charge of $150. Therefore a cost comparison between Xero and MYOB will be heavily influenced by the payroll headcount.

However, cost is just one consideration. Which software package offers better value for a business owner? Read on to find out.

Functionality

All the above packages offer bank feeds. This is an automated feed from the business bank account that sends a daily list of bank transactions to the accounting ledger for reconciliation. This was a revolutionary idea when pioneered by Xero and MYOB quickly bought BankLink, a standalone bank feed service to integrate into its accounting packages and compete with Xero. Whilst integration was less than smooth in the beginning, MYOB now offers a comparable bank feed function.

For an additional $10 increase in the monthly subscription, Xero also offers a project management function that allows job tracking for one user and $7 per month for additional users. This functionality is included as part of the MYOB AccountsRight package.

AccountsRight provides a comprehensive inventory management function and for many businesses that carry stock, this can be a key differential in going with MYOB. In comparison, Xero does offer a limited inventory function but it is unable to track stock levels. Therefore it can be very limited in its usefulness for stock management.

For added functionality, Xero provides an add-on store that allows business owners to add integrated third party software to manage a myriad of functions such as inventory management, HR, on-boarding, CRM, etc. The advantage of this is the vast array of software add-ons available. The downside is again the vast array of software add-ons available. Selecting the right software can be challenging. For example, integration into Xero and the business is like any software integration – more difficult and generally more expensive than was budgeted for. To help with selection, Xero offers a review service that allows users to review software. Generally this is an effective way to see how other businesses have found using the software add-on within their businesses.

MYOB also now offers an add-on market place. However, being late to the cloud space, it is considerably smaller than Xero – 300 vs 2,800 and counting.  To help selection, MYOB offers an accreditation service which provides certification the software will work with MYOB.

Neither firm provides third party software support. Therefore, it is very much a case of buyer beware when selecting and implementing add-ons. We recommend business owners seek advice from your accountant to get help with this.

Reporting and Accessibility

As you would expect, both Xero and MYOB offer a comprehensive range of reports. With many more years in the market MYOB offers a wider selection of reports than Xero. However, Xero provides report customisation functionality that allows users to adapt reports on the fly to fit their needs. The add-on market place also provides a range of reporting packages that can provide greater sophisticated reporting.

These days we spend more time on our phones than our PCs. Therefore a functional app is an important piece of the offering.  Xero has a mobility app available for both IPhone and Android. This allows invoices to be issued, create expense claims and track debtors and sales income on the go.

MYOB also offers an app that allows invoicing and debtor tracking. It doesn’t allow bank reconciliations as the Xero app does – handy to do when there is some downtime. However, it does offer a BNZ Payclip device that allows processing of eftpos and credit cards, albeit for a relatively expensive fee, with a charge per transaction of 2.85% and a monthly fee of $30.

Again, horses for courses, if you want to be able to process mobile payments then MYOB will be the way to go.

Support

Having timely support that allows you to get on with what you are doing is crucial.

Both MYOB and Xero offer comprehensive database driven support for answering queries and then escalate to human assistance. In Xero’s case this comes in email format with 24 hour turnaround whereas MYOB provide phone-based support enabling quicker resolution of queries. However, the call times can be excruciating – up to thirty minutes in some cases as I know from experience when contacting MYOB recently. More disappointing is the lack of knowledge displayed by staff about their products and giving advice that is incorrect.

Conclusion

Like any software decision, it is important to analyse your needs and then review software for a good fit against these needs. My own experience has been Xero has been the innovation leader in the accounting software space and MYOB has been playing catch up since Xero entered the market.

Starting with a clean slate, Xero has created accounting software that is intuitive to use and is on a continuous development path. Upgrades to the software are seamless with no requirement from the user to do anything.

MYOB tried to maintain its existing client base and port them into a cloud based model. However this approach has been flawed. The requirement to host AccountsRight on a PC means the MYOB product cannot access many of the advantages to be gained from cloud-based technologies.

Therefore, we recommend Xero to our clients and use it as the basis for our Virtual Finance Team and Virtual CFO services. However, MYOB will be suitable for some businesses especially those with Inventory requirements.

In conclusion, careful consideration will need to be given to what accounting software is suitable for your business.

If you need assistance determining the accounting software for your business – give Giles a call for a no obligation, complimentary chat about your circumstances on 0800 758 766.

The post Xero vs MYOB – What works best for your business? appeared first on GECA Chartered Accountants.

Last week a colleague sent me a fascinating article on how the future may look, the full copy of which can be found here (it’s a short read and I thoroughly recommend it). One fact really stood out for me from a personal and professional point of view.

Artificial Intelligence: Computers are becoming become exponentially better in understanding the world. In the US, young lawyers can’t get jobs. Because of IBM Watson, you can get legal advice (so far for more or less basic stuff) within seconds, with 90% accuracy compared with 70% accuracy when done by humans. So if you study law, stop immediately. There will be 90% less lawyers in the future, only specialists will remain.  Watson already helps nurses diagnosing cancer, 4 times more accurate than human nurses. In 2030, computers will become more intelligent than humans.

And while we accountants think we are already dealing with changes to our industry with recent developments like cloud based software, what lies ahead will completely disrupt the traditional professional advisory services model. The role of an expert adviser, providing costly advice and analysis based on knowledge and experience to a limited number of clients will more than likely be replaced by an app on your phone with the intuition to know what the questions are and the processing power and data storage capacity to provide better advice than a human adviser. While this will democratise business advice and provide a level playing field for small business to complete with large business, it means I need to reinvent my business model to stay relevant. And I need to start doing something about it now because the speed of change is getting faster every year.

However, I still need to maintain profits and pay the bills whilst changing my business model and achieving this will be a critical challenge for myself and many other businesses – even the world’s biggest company Apple is facing the very same issue (read the article).

To do this, I will follow the path adopted by businesses in other industries impacted by technological change, such as the postal service, by firstly understanding and acknowledging the impact on my industry. Croxley is a global wholesaler of stationery and related products with Kiwi origins. While they know their postal mail business faces an ever decreasing market, they are determined to be the market leader of this space and make money until the last letter is sent.

Having understood the impact on my industry, I then need to decide how to position my business to adapt to the change.  Typically the technology disruption begins with the adviser acting as an technological interpreter for the client, keeping up to date with changes and acting as an interface between the new technology and the client. However, in time the technology becomes so simple there is no need for an interpreter and my role as a business adviser will change again.

So whilst computers will eventually have the capability to replace me as a pure expert adviser, this will take a number of years and the interim step is for me to embrace the new technology as a tool in my business to improve our offering as business advisers.

There is no doubt the value of compliance work, that can increasingly be done by software, is diminishing and those traditional accountants who try to maintain high margins with intensive labour rates will see clients move to business advisers who provide real value with commercial advice that leverages the software tools at their disposal. A good example of this is the Xero Business Performance Dashboard. This powerful tool is free for all Xero ledgers and yet is rarely used, however, a good business adviser can set up a simple dashboard for your business and provide real time advice about those numbers that can help you grow your business and your cashflow. A much better way to spend your money than getting a pretty set of accounts done at great expense that are used by no one.

And as the computing power increases over the next five years, I will need to refocus our offering more intensively on the empathic side of being a business adviser, providing the coaching and mentoring services that rely more heavily on a human interaction (although this will no doubt be taken over by computers as well in due course – look at how good Facebook’s facial recognition software is). Which will require upskilling my team of advisers to ensure they have the skills and experience to remain relevant to our clients in this brave new world.

Wish me luck! And if you are in an industry facing significant disruption and need an adviser who understand these challenges and can help you with strategies to stay profitable, call me now on 0800 758 766.

Giles Ellis (Chartered Accountant & Business Adviser)

The post Prepare Yourself – Change is Here appeared first on GECA Chartered Accountants.

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1. Talk to your accountant before year end
Start thinking about tax now. It is best to start planning for tax early. If you are unsure about your particular circumstances, talk to your accountant. They will be able to give you specific advice for your situation. They know what you can claim and what you can’t. And best of all, any fees you pay them are deductible too.

2. Stay on top of your record keeping
At the end of your financial year, make sure that all of your bank reconciliations are up-to-date. Send out all of your sales invoices promptly and make sure your have processed all of your bills to pay.

3. Claiming Expenses
Remember that any expenses you want to claim need to be supported by invoices or receipts. Taking photos and scanning your financial papers throughout the year will save a lot of time. It also makes it easier for your accountant so they don’t need to keep going back to you for receipts etc. And remember, it is a requirement to keep business financial records for seven (7) years so going paperless allows for easier storage. Another tip is to get an external hard drive to back up this information.
It is important to know what expenses you can claim against your taxes, and what you can’t claim. For instance, office supplies like printing and stationery costs are usually 100% claimable, but you can only claim a proportion of your home office costs. Your accountant is always the first person you should ask about this. They are experts about this stuff.
If you use your car for business, you can claim some of the costs. You can claim a proportion of repairs and maintenance, fuel, registration, insurance and depreciation. Keeping a logbook can be helpful, especially if you use the car a lot for business. If you think more than 25% of your travel is for business, you need to substantiate this with a logbook.
If you travel less than 5000 kms per year, you can claim mileage based on your actual travel. Of course, you need to keep a record of the distances travelled and the purpose of the trips. The Inland Revenue publishes an approved mileage rate each year.
It is also possible to claim for depreciation of assets. Purchases over $500 (like a laptop or tablet) that have a useful life of more than one year must be capitalised, not expensed. The capital cost is then written off over the assets useful life. This is called depreciation. The Inland Revenue publishes a comprehensive list of the depreciation rates that apply to different assets.

4. Review Fixed Assets, Inventory and Receivables
Review your list of fixed assets before balance date. Sell any surplus or unused assets that can be sold. Other surplus assets should be written off, along with any assets that have been thrown out or lost.
Review your inventory before balance date for out-of-date or obsolete items. Dispose of any unusable inventory before balance date. Any obsolete inventory can be written off to save you tax.
Review your overdue receivables before the end of your financial year and write-off any bad debts. Be proactive with your invoicing and use a system to get that cash coming in quicker. An online system is a faster and easier method to send out invoices and track them. It also greatly reduces the amount of paperwork and administration time required.

5. Plan Your Expenditure
To reduce your taxable income, purchase any upcoming expenses, like postage or printer ink, before 31 March in order to claim them as early as possible. Prepayments such as insurance can be claimed in full, as long as the total prepaid is less than $12,000.

6. File on Time
Avoid late payment penalties by filing your tax returns on time. If you prepare your own tax return, and your balance date is between 1 October and 31 March, the due date of filing your income tax return is 7 July. If your accountant prepares your tax return, talk to them about when you should give them your records.

7. Accounting Software
Use cloud based accounting software to stay on top of your financial position. The ‘cloud’ is a platform to make data and software accessible online anytime, anywhere, from any device. It’s scalable, cost-effective and easy to use. For small business owners this allows the ability to stay connected to their data and to work remotely.
If you use cloud based accounting software it is easy to share information with your accountant. They see the same data as you and you can both work on your data at the same time. This helps your accountant to help you. You can resolve problems as soon as they happen, rather than leaving them until the end of the financial year.

The post Xero’s Top Tips for Tax Time appeared first on GECA Chartered Accountants.

For years, businesses have struggled with the storage and processing of receipts and invoices. From storing them in shoeboxes, and the boring data entry required to process them, its been time consuming and difficult. Now with Receipt Bank, you can get rid of all those annoying bits of paper, and have them processed quickly and easily into Xero for you!

Simply take a photo of receipts using Receipt Bank app. Receipt Bank will extract all the key details
and send that to Xero for you. We will also store the image, so if your accountant or the tax man need a copy you don’t need to go hunting for a copy.

You can throw away that pesky piece of paper. No more data entry, no more paper, job done!

Contact us for more details!

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