The Pulse New Zealand » End of Financial Year

FREE: MYOB’s Employment Guides

Aishah Mustapha — Tue, 12 Mar 2013 22:50:59 +0000

Starting and running your own business is as much about your products as it is about the people working for you. Get your team right, and that’s already half the battle won.

According to the annual AON Hewitt Best Employer survey 2012, your employees need more than a cool office to work in.

There are 5 characteristics that distinguish best employers: engaged senior staff, clear performance expectations, managers who build an environment to excel in, rewards and recognition and clear communications.

This is something we strive for at MYOB and is in our strategic planning. Last year, we were recognized in the top 5 best places to work in New Zealand.

But we’ve been around for 20 years. What if you’ve just started your business or planning to launch a startup? Or what if you’ve been in business for years, but can’t seem to get the right people in to drive your vision forward?

In light of this, MYOB is releasing 20 guides on all things employment from recruitment to managing your staff and dealing with payroll. Whether you are a first time employer, or a veteran, we’ve got loads of information for you.

Check these out:

Our recruitment guide
The quick tax guide for first time employers
The 10 ways to retain your best employees
How to have a painless performance appraisal
Our guide on reducing stress for the end of financial year.

Our guides are free, packed full of useful information and we’ve also included to-do lists so you can start today. Come on, get cracking today.

Your common accounting questions: Answered! Entertainment and car expenses

Tracey Sharah — Wed, 10 Oct 2012 03:06:09 +0000

Entertainment and car expenses—these are two common business expenses that I am constantly asked about. Let’s explore an entertainment scenario first:

“I meet with business clients at coffee shops and restaurants. How do I account for these costs in my business?”

In the ever-increasing mobile business world, client and work meetings are often held at cafés and restaurants while drinking and eating. These expenses need to be treated as entertainment costs in your business accounts, and, for tax purposes, you cannot claim back the GST paid. The expenses are not tax deductible for the client portion of the cost. Only some of the total cost can be claimed as a tax deduction, and only if your business is registered for Fringe Benefits Tax (FBT). I know what you are thinking—I need to “entertain” to assist with marketing and promoting my business. This might be true, but for accounting and tax purposes there are specific rules to adhere to (unfortunately). It gets tricky when, for example, you have a Golf Day for employees in your business, their partners and the business clients. A Golf Day is a social event and considered entertainment. If the cost for the day for the employees and their partners is less than $300 each, then these costs are considered entertainment, but for tax purposes the business cannot claim the GST paid, cannot claim the expense as a tax deduction, and no Fringe Benefits Tax is payable. In relation to the business clients’ costs, the expense is classified as entertainment in your business accounts, but you cannot claim the GST paid or claim the expense as a tax deduction.

So are there any tax breaks? Yes—if you provide food and drink on your business premises and it is enabling you, your employees and clients to complete the working day in comfort, and it is consumed on your business premises, then this is not entertainment. It only becomes entertainment when it is a social event (if you and the employees are “enjoying” yourselves). So remember: no “enjoying” the coffee and tea—ok?

What expenses can I claim for my car?

Does your business own the car? That is, is the registration and insurance of the car in the name of your business? If so, then the business can classify the following as business expenses: car registration and insurances, petrol and servicing costs and even car washes to keep it looking pretty. The amount of the car expenses, though, needs a little bit more work. If you want to maximise the amount of the car expenses you can claim for your business, then you need to establish a business-use percentage by keeping a logbook over a continuous twelve-week period to substantiate the business kilometers traveled by the car. The log is good for five years, and then you will have to track it again. It is this percentage that you can claim of all the car maintenance expenses, including depreciation and financing the cost of the car. (Note: travel from your home to your work place is not business travel.) You must reimburse your business for the percentage of the car expenses that is for your private use, or your business may be subject to Fringe Benefits Tax (FBT). Also, your business can only claim the business-use percentage of the GST paid.

So, to keep your accountant happy and the taxman at bay, stick to the above guidelines.

Tracey Sharah | Founder and Director, Metro Accounting

3 essential accounting practices for small businesses in Australia and New Zealand

Tracey Sharah — Mon, 06 Aug 2012 04:42:23 +0000

Saddle up, we are now into the new financial year. It’s a great time to set goals for the new financial year and review your accounting practices and systems for your business. Accounting processes document all aspects of a business’s financial performance, so here are three essential practices to get you started.

Your business is a separate entity to you, so keep track of what the business spends.

The business you are running is yours. If you run that business through a structure such as a company, trust or partnership, then sometimes there is a tendency to blur the lines between yourself and the business. The entity running the business owns its own assets and incurs its own liabilities, and its business activities are separate to the owners. Ensure that you are purchasing items in the business entity name. Obtain the receipt and claim a business expense so that monies you take from the business are being accounted for correctly.

If you are incurring expenses on behalf of the business, ensure you are being reimbursed by the business, so you are not out of pocket.

Be aware of drawing monies from a company in addition to a wage you are receiving. These extra drawings could be considered a loan to you as the business owner, and they may need to be repaid within one year of being drawn down or you might have to pay interest on this loan. The options available to you to draw more monies or repay loaned monies are taking a larger wage or paying yourself a dividend as the shareholder to ensure the loan is repaid within the financial year.

Make sure the business can afford to pay its bills when they are due.

You are running a business on the basis that it will continue to operate in the future. It is important that you review your cash flow and creditor position for the new year to ensure you can meet all your financial commitments as and when they fall due. A cash flow forecast can assist with this. From your accounting software, you can download a detailed monthly profit and loss for the last financial year into a spreadsheet, then use this to forecast the year ahead based on the past history and what you have committed to for the new financial year. Identify any cash flow issues now, and put steps in place to deal with this such as bringing forward invoicing and following up on your debtors before you need the money to meet your financial commitments.

Update your accounting system, and know your numbers.
Upgrade your accounting software to ensure your business complies with the latest government regulation as these can change each year. Ensure that regular, accurate bookkeeping is being done so you can routinely review the business profitability in your profit and loss and balance sheet, monitor your cash flow, and manage and meet your tax commitments. Then, if your business is becoming more profitable, you can determine what the business can invest in or pay you for all your hard-earned work.

Tracey Sharah | Founder and Director, Metro Accounting

Managing the Small Business Budget: 5 tips to Boost Efficiency Across the Organisation

Tracey Sharah — Wed, 20 Jun 2012 04:33:04 +0000

In the same way you currently manage your pool of money to pay family obligations including home, school, car, and health bills, a small business has the same challenges. Whether you realise it or not, you are using a budget every day.

Measuring the money coming in and going out in your business is vital to keeping the operations flowing. In fact, budgeting can:

Ease your cash flow constraints.
Reduce the financial stress in your life.
Make it simpler to anticipate costs and avoid nasty surprises.

If you do not budget, how will you know if your business can afford a new employee, finance a new car, or invest in new technology, all while meeting existing everyday business financial commitments, like taxes, superannuation for the employees, and rent?

The most successful businesses budget their money and know exactly where it is being spent. They monitor areas to reduce costs, know exactly what they can afford, and know when to invest money in their business. They are in touch with and monitor their business numbers constantly—they budget.

Here are 5 basic budgeting tips for your business:

TIP 1: Run Reports to Discover Your Financial History

The accounting system you use is a wealth of information about your costs. You can run reports that will show you the history of the breakdown of your monthly or yearly costs so you can compare and see where your business is spending its money. This is a great starting point, and I encourage you to do this regularly.

TIP 2: Break Down Costs and Shop Around for Deals

Identify the cost areas as a percentage of where total costs are being spent. Then evaluate these and see if there are savings that can be made. Review and evaluate your insurance supplier, telephone supplier, or materials supplier. Make some time to do this, and shop around for a better deal.

TIP 3: Give More Accurate Job Estimates

Without a budget, you will never know if you are making a profit each time you quote for a job. Budgeting the costs of providing services or goods— including fixed and variable costs—is important. You’ll know the revenue needed to at least cover these costs and hopefully make a profit.

TIP 4: Watch for Government Taxes and Incentives

Be aware of the latest tax costs (such as the Australian Carbon tax) and incentives from the government that can save you money. For example, from 1 July 2012, Australian small businesses (with gross turnover of less than $2 million) will be eligible for a 100% tax write off for asset purchases costing less than $6500, and a $5000 up-front deduction for car purchases.

TIP 5: Forecast and Project to Plan for the Future

Project your costs by having a forecast budget for the next financial year and beyond. Use your accounting system to achieve this. You have historical data in your accounting system you can use as your starting point. You can also account for any plans you have in the coming year that might require extra funds.

If you do not know where you are going, and you are not measuring or planning, then how will you know when you have arrived?

Tracey Sharah | Founder and Director, Metro Accounting

Want to avoid EOFY stress?

Julian Smith — Mon, 26 Mar 2012 23:44:12 +0000

What every business needs to know about the upcoming tax changes.

The end of the financial year is always a busy time, and EOFY 11-12 is set to be the most challenging yet for New Zealand businesses. The Government is bringing in a range of small changes that will make your end-of-year calculations more difficult than they’ve been before. New tax changes mean a new set of rules and regulations, and a raft of new problems for non-compliance. If you haven’t already, it’s time to check out what these mean for your company’s EOFY preparations.

The key to surviving the end of financial year rush is knowing what these changes are, what they mean for you, and making sure you’re prepared ahead of time. This will help you navigate your end of the year returns and keep everything running smoothly, letting you get back to the all-important business of running your business!

So what are the main changes that all Kiwi business owners need to know?

There are three main differences that you should ensure you’re complying with: an update of the ACC Levy system, adjustments to Student Loans, and changes to Kiwisaver.

The good news is that changes to the ACC Levy system are relatively simple. The ACC Earner Levy is dropping from 2.04% to 1.7%. This means for every 100 dollars paid in PAYE, your employees will only need to pay $1.70 in tax instead of $2.04. Great news for your employees, who can expect a few extra dollars in their pay packets – instead of sending it to the IRD!

Another major changes affects the Kiwisaver scheme. and the way the Employer Superannuation Contribution Tax portion of the scheme works.

This one is a little more complex. In previous years, employer contributions to their employee’s Kiwisaver were tax exempt up to 2%. Since 2% is the standard compulsory employer contribution, most employees would not have seen these contributions taxed at all.

However from the 1^st of April, things will change. The 2% exemption is gone, and the entire employer’s contribution will be taxed.

How does this impact you as an employer? The simple answer is that this means you have to pay more tax on your employee’s Kiwisaver accounts. It’s important to explainthis to your team, as they will see a decrease in the Net Employer Contribution figure on their pay slips.

Finally, there will also be changes to the student loan scheme. From April 1^st, all employees will need to use an SL tax code, regardless of their earnings. There will also be different tax codes for compulsory student loan repayments, and those made voluntarily It’s very important to ensure that you’re applying the correct tax code to all of your employees.

The hardest part of these changes is getting your head around them, and making sure they’re set up for April 1. Don’t be afraid to chat to your accountant or financial advisor if you need assistance, or have any questions – it’s far better to be over-prepared than starting the new financial year off on the wrong foot!

Do you understand the latest round of Government tax changes? Is your business prepared? What do you find is the most challenging part of end of financial year in your business?

Julian Smith | General Manager – MYOB

Five things you need to know this week

Emma Mulquiney — Fri, 23 Mar 2012 03:12:27 +0000

Friday 23rd March 2012

Happy Friday! The countdown to the End of Financial Year is on! With just a few days left until April 1, businesses around the nation are tallying, reporting, analysing and cleaning up – getting ready to start the new FY with their business sin order.

Over the next week, we’ll be bringing you checklists, advice, tips and tricks to surviving the EOFY – so make sure you keep an eye on The Pulse, on our Facebook page and don’t forget to follow us on Twitter!

Before you run off to enjoy another weekend, make sure you check out latest from the news sites…

EOFY health check for your business

The looming end of the financial year is a great time to check how your business is performing. Like checking under the hood of your car, it’s a good way to make sure everything is running smoothly and you’re not in for any nasty surprises down the road. MYOB’s New Zealand General Manager, Julian Smith, runs through his top tips to make sure everything’s ready to go for a new financial year.

IT lesson from Quakes

While there are no reports of companies being put out of business due to disruption to their IT systems in the wake of the Canterbury Earthquakes, many were disadvantaged, highlighting a need to ensure proper backup and staff communication processes were in order. The end of financial year is the perfect time to make sure your business is ‘disaster-proof’ and these great tips will help get you on the right track.

More delays for Port of Auckland dispute

Wharfies at the centre of the Port of Auckland dispute now face further delays as the port company says that they can’t return to work due to rostering issues. Ongoing strike action has caused delays and issues over the past four weeks, and in this post, Julian Smith outlines why it’s crucial for the New Zealand economy that it’s sorted – quickly.

Focus on the End of Financial Year – new edition of InFocus

This edition if InFocus – MYOB’s magazine for business, tackles a key issue for many Kiwi businesses – the end of the financial year – and includes regular columns from key business leaders, including EMA, BusinessNZ, Business.govt.nz, and Westpac. We also look at emerging trends in the New Zealand business environment, and how businesses can manage the expected growth. Check it out now!

How spreading yourself too thin can have the opposite effect

So many business owners spend time and effort investing in the health of their business…neglecting their own health along the way! The latest from Ms Mad Woman, Melina Schamroth, is a timely reminder for all to keep an eye on what those long hours in the home office is doing to our waistlines…

Have a fantastic weekend!

Emma Mulquiney | Online Editor – MYOB

How-to guide: payroll changes

MYOB Team — Fri, 09 Mar 2012 03:45:15 +0000

ACC Earner Levy changes

The PAYE tax is actually made up of two components – the main being tax, the other being a portion of the ACC Earner Levy that funds the ACC scheme. After increasing steadily for a few years, the Earner Levy is dropping for 2012/13 from 2.04% to 1.7%. While not a massive decrease, it does mean lower PAYE overall for your employees, which will be appreciated.

You don’t need to do anything to manage this change. Your payroll software will manage this automatically once you install MYOB Payroll 2012.

KiwiSaver changes

KiwiSaver seems to be a scheme that is constantly tinkered with and 2012/2013 is no exception. This year introduces a significant change to the way that employer contributions are taxed.

Employers’ contributions to KiwiSaver have always been subject to a tax known as ESCT (Employer Superannuation Contribution Tax). Up until now, any contribution made by an employer to an employee’s KiwiSaver was exempt from tax up to 2%, and anything over 2% was taxed. Because 2% was the compulsory employer contribution, most employees would not have seen these contributions taxed at all.

However, for 2012/2013, the full employer contribution is taxed. You can see this by viewing the ‘Super’ button in the Enter Pays screen. This shows what the Employer Contribution is and what has been deducted.

This change means that employees will see a decrease in the Net Employer Contribution figure on their payslips and you – as an employer – might need to explain the difference to employees. It might be helpful to add an explanation to your payslips if you anticipate confusion.

Because all employer super contributions are taxed, it is now important to use the correct ESCT rate. MYOB Payroll will make this easier by introducing a new ‘Calculated’ option for the ESCT rate. This option will apply the relevant IRD rules to select the ESCT rate based on employee earnings. From 1 April 2012, all existing and new employees will default to this option. You still have the option of overriding the ESCT rate if you choose, but you will need to follow the IRD rules for ESCT.

ESCT rate calculation

The ESCT rate needs to be set based on the sum of an employee’s annual gross earnings, plus annual gross employer contributions. If the employee has already been employed for a full tax year, the calculation should be based off the last year’s actual earnings, plus last year’s gross employer contributions.

If the employee is new, or was not employed for the full prior tax year, then the rate needs to be estimated based on the annual gross earnings and gross employer contributions.

ESCT rate threshold amount	Tax rate (%)
$0-$16,800	0.105
$16,801-$57,600	0.175
$57.601-$84,000	0.300
$84,001 upwards	0.330

Student Loan changes

The 2012/2013 financial year also sees the introduction of changes to the student loan regime. All borrowers are now required to use a student loan (SL) tax code, regardless of their earnings threshold. Therefore, some employees may need to present you with a new declaration and you can simply change their tax code in the Maintain Employees screen.

New Student Loan deduction codes

The IRD has also introduced new student loan deduction tax codes for additional student loan deductions. SLCIR is for compulsory deductions required by the IRD, and SLBOR is for voluntary additional deductions made by the employee. These are set up in the Employees Deduction tab. It is important to use these codes so that the information is correctly reported to the IRD on the Employer Monthly Schedule, which allows the IRD to accurately reconcile these deductions to the employee’s student loan balance.

Latest research shows a focus on business growth in 2012

MYOB Team — Fri, 09 Mar 2012 03:15:52 +0000

The tough trading conditions of the past three years have highlighted how important it is to keep existing customers happy, while being constantly aware of new opportunities. According to the latest MYOB Business Monitor, businesses are planning to focus on customer satisfaction and growth in new markets in 2012.

The most popular strategy for businesses is customer retention. This speaks volumes about the way business owners are structuring their business, and gearing them to be more service focused and proactive in keeping their existing customer base.

More than one-third (35%) of business owners surveyed expected customer retention activity to increase in 2012. Business owners who expected to put most effort into this strategy were much more likely to be a medium (73%) or small (56%) business; to have an annual revenue of $1-5m (57%); and to have a business website (53%, compared with 26% without a website).

During the recession, business owners became all too aware of how hard won every new customer was. This new focus will actually make businesses more responsive and more competitive as an economy.

The second most popular strategy for 2012 is new market growth. One-third (33%) of business owners expected to increase the activities of their business in new markets. The trend towards diversifying into new markets shows Kiwi business owners are looking at opportunities beyond the current, constrained performance of the local economy. Again, this trend towards a broader mix of products and new markets will position the whole country well for the future.

New Zealanders are also recognising the importance of the digital economy and finding ways to use the internet to engage both local and international markets. In the survey, one quarter (25%) of business owners hope to increase online sales. Two-fifths (41%) of all businesses say they are likely to use their website to drive offline sales.

Top 10 priorities for Kiwi businesses in 2012 | MYOB Business Monitor

Focus on customer retention strategies – 35% of businesses
Increasing business activity in new markets – 33%
Focus on customer acquisition strategies – 31%
Increasing the number of products or services offered by the business – 27%
Sales of products / services offline – 27%
Sale of products / services online – 25%
Increasing spending on online marketing & advertising – 23%
More sales promotions – 22%
More investment in IT systems and processes – 22%
Increasing salaries and wages – 20%

The MYOB Business Monitor surveyed over 1000 business owners around New Zealand on their approach to business in 2012.

Use your 2012 financials to plan ahead

MYOB Team — Fri, 09 Mar 2012 03:09:18 +0000

The close of the 2012 tax year provides you with useful figures to benchmark and assess your business performance – use this data to implement strategies and improve your results for the 2013 tax year.

It’s never too early, or too late, to start planning ahead. As the financial year comes to a close, now is as good a time as any to reflect on business operations and find ways to work smarter.

In fact, with up-to-date, accurate financial information readily available, it’s possibly the best time to compare your 2012 tax year performance against previous years’ data. This allows you to spot both positive and negative trends and plan accordingly.

Build on positive trends

Look for areas where your business is doing well – and then look for ways to do even better to make the most of your competitive advantage or market conditions. If your sales peak in summer, or winter, look for ways to maximise sales and revenue in these peak periods.

If you’ve brought in a new product that correctly anticipates a market trend and sales are going well, find ways to capitalise on this as demand grows. Can you add more products to capture a larger share of a growing market, or anticipate user demand again and add new features?

If your gross profit margin has improved year-on-year, can you continue the trend in 2013 with a small increase in prices, or by buying in bulk, sourcing new suppliers or trying other products to reduce your cost of sales?

Minimise the negative trends

Look to minimise, or even negate, those negative trends. If your sales cycle has a traditional slump in winter, or after Christmas, look for ways to increase your turnover during this period. Can you appeal to a different market segment by offering off-peak specials or package deals? Can you increase sales by offering free lessons – such as a free casting clinic with every trout rod sold?

Similarly, can you reduce your sales troughs by introducing new products that will sell in your slow season? If most of your profit comes from ice cream sales in summer, can you boost winter sales by selling hot chocolate? Look for your business equivalent to help minimise your sales troughs.

If net profit is down year-on-year, look for ways to increase sales, reduce overheads and fixed costs, or to reduce your input and running costs. Explore ways to operate more efficiently – whether you’ve had a bumper 2012 or struggled through the year, it will all help to improve your 2013 bottom line.

Update your business plan

The financial year-end is a good time to look back over the year and review your progress relative to your business plan – or to write up a business plan, if you don’t have one. It’s relatively easy to get side-tracked by a new idea or opportunity, so you’ll want to assess if you’re on track to achieve your business goals and ensure you’re not diversifying when your goal is to specialise in a niche market, for example.

This is also an opportunity to assess whether your goals and plans are still valid. You might find market conditions or trends have changed, or that you’ve uncovered a new opportunity that you would like to explore. Schedule some time to review your plans and work strategically for the 2013 tax year.

Sharon Davis | The Small Business Company

Payroll non-compliance can cost thousands

MYOB Team — Fri, 09 Mar 2012 01:20:44 +0000

With a number of different products – both electronic and online – now on the market, it is important for business owners and managers to ensure the system they use is one hundred percent accurate.

Many Kiwi businesses now use technology to streamline their business systems, but it is a double-edged sword if the programme is not fully compliant. Inaccuracies in the amount or the process used to pay staff can have serious financial consequences for both the payroll clerk and the company involved.

It is important that business owners ensure the payroll function they rely on is up-to-date with current employment legislation, and is also calculating those functions correctly. Noncompliance can result in fines of up to $10,000 for the individual and up to $20,000 for the company. However, it is easy to avoid such outcomes by selecting a payroll management programme from a trusted source.

To safeguard against any mistakes – even unwittingly made – it is important to invest in payroll software from an established, credible source. MYOB has been working with Inland Revenue for a number of years to ensure all software is fully compliant, with regular releases timed to ensure all functions are up-to-date with any legislation changes.

With the end of financial year nigh, Kiwi business owners are advised to talk to their accountant about their current payroll system to ensure its accuracy, particularly around holiday pay calculations. Regular approved training for all relevant staff also ensures they are able to competently use the program.

The complexities of payroll can be overwhelming, so being able to rely one hundred percent on the accuracy of business management tools can make a huge difference.

MYOB Payroll accurately calculates all payroll functions. A new release is scheduled for March 2012.

For more information on MYOB or to download free trial software, visit myob.co.nz

What you need to know: key changes to Payroll 2012

The 2011 budget announced several tax compliance changes that will have a major impact for employers and the management of their payroll. MYOB Payroll 2012 will take care of all these changes and take the worry out of managing their payroll.

KiwiSaver changes

Currently all members of KiwiSaver are entitled to an exemption from Employer Superannuation Contribution Tax (ESCT) for employer contributions up to 2%. Any contributions above 2% are subject to ESCT at varying rates and thresholds.   As part of this change, users will need to ensure that the correct ESCT rate.  Payroll 2012 will automate this procedure based on the employee’s historical earnings.

ACC levy rate change

The ACC levy rate is a component of the overall PAYE rate. The current rate for the 2011/12 year is $2.04 per $100 of earnings and this is set to drop to $ 1.70 per $100 earnings for the 2012/2013 year.   This is a significant decrease, so if employers do not update their payroll their employees will be over-taxed. Payroll 2012 will automate this change.

Student loan change

New rules for student loan borrowers will be introduced in 2012. All student loan borrowers will be required to use a student loan (SL) tax code, regardless of earnings. Previously this had only be required if earnings were above the repayment threshold.

A new regime has been introduced for additional voluntary or compulsory student loan deductions. This requires new tax codes and new reporting requirements. Whilst the overall number of student loan borrowers impacted by this change is low, it could impact any employer with employees who are SL borrowers.

Employers will need to ensure the SL code is used for employees who are student loan borrowers. Payroll 2012 will automate the tax change for those employees with the SL code allocated.

The IRD is also introducing new tax codes for students who need to make additional compulsory or voluntary student loan repayments. MYOB Payroll will support this with new deductions, pay codes and changes to the necessary changes to IRD reporting.