Death and taxes are often referred to as the only two things we can never escape. For many business owners, tax is a swear word to never be uttered and can send shivers down the spine of even the most hardened businessman. It doesn't have to be this way. Knowledge is power so read on as we break down Terminal Tax and Provisional Tax so you can face it with confidence and plan for the inevitable tax take.

If you are trading well and making a profit, you will eventually have to pay tax on this profit. If you have done really well, you will have to pay tax in advance based on what the IRD thinks you will make in profit next year. For the year ended you will be paying Terminal Tax, for the year coming you will be paying Provisional Tax.

Terminal Tax

Terminal Tax is the end of year clear up of tax due on your taxable profit.

In your first year that you make a taxable profit, your Terminal Tax will be the total tax due on all of your declarable profit. If you have been paying taxes throughout the year, like Provisional Tax, then your Terminal Tax will be the difference between the taxes you have paid to date and the total tax due on your taxable profit. Lets look at an example: Client Company Ltd has just completed its first year of trading and has made a taxable profit of $10,000. As they are a company they pay tax at a flat rate of 28%. The total tax due on their profit is $2,800. This is their Terminal Tax and as they have not paid any taxes during the year they have to pay this full amount to the IRD in one lump sum.

If your Terminal Tax is over the threshold set by the IRD (currently $2,500) then you will need to pay Provisional Tax.

Provisional Tax

Provisional Tax is the tax that the IRD would like you to pay in advance for the year in progress, based on your previous profit.

You are currently only required to pay Provisional Tax if your tax to pay on your previous years profit was $2,500 or more. When you are in this position, the default method of calculating Provisional Tax is to take the previous years figure and add on 5%.

Lets look at an example:

From the example earlier, Client Company Ltd had Terminal Tax of $2,800 for the year just finished. This means that they now need to pay Provisional Tax. The Provisional Tax they need to pay is going to be the total tax payable for the previous year plus 5%. This means that their total Provisional Tax due will be $2,940.

Don't panic, unlike Terminal Tax, Provisional Tax is not due in one lump sum. Instead, Provisional tax is split into payments throughout the year and if you calculate that it is an over payment when you file your next tax return, you will be refunded the difference and have no Terminal Tax to pay.

Key Dates

Lets continue with Client Company Ltd as our basis for this as your circumstances can alter the dates a bit, they are GST registered on two-monthly basis and have MBP as their accountants and tax agents. This means that their Terminal Tax will be due on the 7th of April in the year after balance date (e.g. Terminal Tax for the year ended 31st March 2017 is due 7th April 2018).

Their Provisional Tax is due in three installments in line with their GST cycle. They will have one installment due on the 28th of August, the next on the 15 of January and the final installment on the 7th of May.

In the second profitable year of business all of these taxes can be quite a burden but they really shouldn't be. Plan ahead and make sure that you have money in a tax savings account to cover the inevitable taxes. Talk to your accountant about what is a good portion of your revenue to squirrel away into savings so that you don't have painful cashflow issues come tax time.

In Summary

Terminal Tax is the end of year clear up for the year just finished. If you have made more than before you will have tax to pay. If you have made less and been paying Provisional Tax, you will likely have a refund due.

Provisional Taxis paying in advance for the taxable profit you are currently earning so that you don't have to pay it all in one big lump sum.

Still in the dark? Get in touch with the team at MBP and they can help get you sorted.

This advice is general in nature. Every situation is unique and requires tailored advice. MBP have the expertise to

When your business starts to stagnate or head in the wrong direction, its easy to blame external forces. While the economy, customer demands and other broad factors do have an impact, there are actions you can take inside your business to minimise or avoid any negative impacts.

Keeping up with Demand?

Have you experienced a rapid phase of sales growth followed by an equally rapid drop off in demand? This could be due to an inability of your internal systems to keep up with this rapid growth.

You may be perfectly capable of selling hundreds of items a day but can you deliver that many? How quickly can you restock? If you can not quickly follow through with the sales and restock for new sales in a rapid turnaround time frame you will disappoint your newly acquired customers who will not return for repeat sales. If negative feedback or shortcomings are not addressed then public opinion and word of mouth will stop your growth in its tracks.

If you are aiming for growth, you need to ensure that your internal systems are scalable and actually capable of achieving and following through with your growth goals. Make sure you have extra capacity or the ability to rapidly add the capacity you need to give your business the room it needs to move forward.

Room to Move?

If you are operating at full capacity, you and your business don't have any room to move. With no room to move, you will likely need to hire additional staff to achieve higher capacity. Hiring the right staff is a long process and will not be conducive to rapid growth.

The best way to achieve rapid growth is to ensure that as many of your internal processes as possible are automated. Automating processes with the use of technology will free up your time, and the time of any staff, to focus on value adding and growth driving initiatives and production.

Keeping Pace with your Customers?

Your customers have expectations, you need to keep up with them in order to keep them happy. This means you need to stock the goods that they want to buy, when they want to buy them. Deliver them in a timely manner and restock as soon as possible. Everything needs to be right and it all starts with a well trained sales team.

Your sales team needs to be familiar with your customers and their needs. If they are not familiar with their needs, it is impossible for their service to meet their expectations. This is a handbrake of growth that can only be overcome by having the right staff or by retraining your existing team so they are capable of understanding your ideal customer and giving them a high value service experience.

Sales Up, Profit Down?

It can be a shock wen you have a really busy month and you feel like you are making a small fortune, then at months end your bank account is lower than usual. You need to understand the profitability of your customers. This may sound odd but some of your favorite types of customers may not actually be as profitable as you think. Your margins may be a lot tighter then you think.

Assess the cost, return and margin on each segment of your business. Perhaps, some of the customers you are targeting are not as valuable as you think, maybe the margins on your products are not covering your overheads and the more of those products you sell, the less profit you have at months end as you have no time left to focus on selling the larger margin items.

Cash Flow Pinched?

The flow of cash in your business is one of the main challenges that all small business owners face. The time between when you buy an item, sell it and when your customer finally pays for it can put a lot of pressure on a small business. Constraints on cash flow will impact your ability to respond to changes in the market and will limit your ability to respond to and take advantage of new opportunities.

The best way to reduce the pinch on your cash flow is to use automated accounts receivable technology to chase up debtors while you focus on the important things. Most cloud accounting software can automatically send out debtor statements to chase up overdue payments. Following up regularly can help to reduce debtor days which in turn reduces interest charges for your business and boosts the cash available for you to use to achieve your growth goals.

Do You Actually Have an Eye on the Ball?

To make effective decisions you need accurate, reliable data. With up to date information on the performance of your business, you can pivot your business to take advantage of every opportunity. With a cloud based solution, kept up to date, you don't have to wait until the end of the year to see how you are doing, or even the end of the month. You can assess performance in near real time and make the changes you need in order to optimise your operation.

Good quality forecasting tools can also help you to gauge what may happen in the future and how you could best respond.

The performance of your business will rise and fall with the impact of economic forces outside of your control, however, you can take a number of action from within your business to minimise these impacts. Planning and understanding your business inside and out is key. Utilising modern software and systems can help to automate some tasks, build capacity and improve cashflow. The start of the new financial year is the perfect time for you to assess your business and highlight areas for improvement. It is also a perfect time to implement any new technologies that may help to move your business in the right direction.

This advice is general in nature. Every situation is unique and requires tailored advice. MBP have the expertise to

From the 1st of April 2017 there are some changes to tax legislation that will affect all new contractors and those who hire them. The changes are an expansion of the existing rules around schedular payments and the taxing of these payments.

There are three main changes to the schedular payments regime. The first change is that for contractors, the IR330 form is being replaced by the new IR330C form. The old form will remain in use for declaring tax codes for salary and wage earners while all contractors will fill out the new form which is tailored specifically for them and their updated tax requirements.

The second change is that now, rather than just using the default rates of tax deductions outlined in Schedule 4 of the Income Tax Act, contractors now have the freedom to select their own tax rate (above a minimum of 10%). As every individuals requirements are different, this new flexibility will enable many to get their taxes right from day one and minimise the large fluctuations of annual tax refunds or payments due that can result from the default rates.

The third change is the addition of a new activity to the schedular payments regime, number 19, labour hire business.

If You Already Receive Schedular Payments...

Nothing changes until you switch jobs or sign a new contract and need to fill out the new IR330C form that replaces the old IR330 form you would have filled out previously. When you fill in the new form you can either keep the old default rate of withholding tax that you have now or choose a new rate from 10% up.

If you want to change your current rate without changing jobs, you can fill out the new form and give it to your employer so that they can adjust the deductions that they make from your schedular payments.

If You Work for a Recruitment Agency...

One of the main changes in the new rules is that they now explicitly apply to contractors who are hired through a labour hire business (employment recruiter or agency). This essentially closes what many considered a loophole in the legislation.

The agency will deduct tax from the payments they make to you. This applies regardless of whether you are an individual, company or trading through a trust. You will need to fill out the new IR330C and select a tax rate that fits your circumstances.

If you complete the IR330C but do not select a tax rate, the default rate of 20% will be deducted. If you do not complete the form then from the 1st of April the non-notification tax rate of 45% applies. In order to not lose half your income to tax, you need to accurately complete the form as soon as possible.

If You are a Self-Employed Contractor...

If you work directly for a business as an independent contractor and are not in an identified activity, you now have the ability to choose to have tax deducted from your schedular payments.

Both you and your employer must agree to this new approach as there is no legal requirement for them to take on the extra tax compliance burden for you. If you both agree, you need to complete the IR330C and submit it to your employer to notify them of your preferred tax rate. If you have multiple employers, each of them must agree separately to your new tax deductions and you will need to complete a separate IR330C for each employer.

If your employer doesn't agree, you must continue to pay your own taxes as you currently do.

If You Employ Contractors...

You need to check that your internal systems are up to scratch and able to handle the new requirements.

The first thing you need to do is check that your payroll software is capable of handling custom tax rates. You will then need to bring your payroll team up to date on the new requirements, new forms and new processes that you and your hires will have to go through. Once all of the paperwork has been completed, you will process them as with any other employee and declare the deductions on your Employer Monthly Schedule (EMS), you will of course ignore all of the deductions other than the withholding tax, as the contractor is liable for their own ACC, child support, KiwiSaver and other payments.

As an employer of contractors, you may need to update your agreements and contracts to reflect the new requirements of the updated legislation.

If you are a contractor, you can not apply for a certificate of exemption from the IRD for the tax on your schedular payments. Instead, you will need to apply for a special tax rate of 0%. This applies regardless of how you trade, either individual, trust or company.

If you have any questions, engage professionals like the MBP Payroll Administration team and our human resources partners for tailored advice on everything from software to contracts and everything in between.

This advice is general in nature. Every situation is unique and requires tailored advice. MBP have the expertise to

No business owner has the time, or energy, to be a master at every facet of their growing business. The trade-off is to be a jack of all trades, master of none. The alternative is to outsource everything you aren't an expert at. Engaging freelancers can fast track your growth by freeing you up focus on what you love.

Focus on Your Strengths

Your growing business needs a lot of attention and a lot of different skills. Not all of those skills are required on a regular or on-going basis and not all of them you will have. It is unreasonable to expect you as a small business owner to be a master at all of the skills you need. You need to focus on what you do best and the value that you can add to the business. Trying to learn new skills is an option but it will only slow you down. You need to be able to move quickly as the needs of your growing business change and expand.

Do What you Love, Outsource What you Don't

Remote access to employees has changed the definition of work itself in the modern economy. More and more people are working from home or off-site and an increasing number of them are working as freelancers for overworked, under staffed small business owners.

Your cashflow and workload may not facilitate the hiring of part-time or full-time staff. Fortunately, there is a way to help your business continue to grow without putting its cash flow at risk or losing your focus on the other areas of your business. An affordable and effective alternative is to hire freelancers as and when you need them. Freelancers can speed up your responses to new demands and challenges, helping you maintain your position and grow your business faster.

These freelancers are experts in their fields who are willing to offer their services on as needed basis to small business owners just like you who need an extra hand with a few specialized tasks from time to time.

You have less control over them than you would over an employee, however, they trade on the quality of their work and are dependent on return business to sustain their own business model. You can start by offloading smaller tasks to your freelancer and in doing so, free yourself up to look for new growth opportunities for your business.

There are a number of platforms on the web to pair you with freelancers locally or across the world to meet every need you have. You need to look beyond the cost and examine their experience, knowledge and skills as these things have far more value to you than what they charge per hour.

If you want to consider your options and discuss the areas of your business that could be outsourced for efficiency, get in touch with an MBP Business Advisor for a free consultation.

This advice is general in nature. Every situation is unique and requires tailored advice. MBP have the expertise to

When relocating your business premises, it is key to sort all the logistics. It is equally key to ensure that your staff are on-board with the move in order for it to be a painless process. A lack of cohesion between management and staff can be stressful and have a lot of implications for you and your business, all of which impact on your productivity and profitability.

Early Communication is Key

Open and honest communication with your staff right from the start of the process is the easiest way for you to get them to buy into the process and make it a seamless move for all involved. You don't need them to be involved from day one but you do need to give them enough notice to accept the impending change, you don't want to shock them at the last minute and make them defensive and resistant.

Helping them to buy into the process can be as simple as explaining what the new office space will be like, the layout of it and highlight the changes that they can expect. You also need to discuss the location of the new premises. A change in location is going to affect everything from the local cafe for coffee and lunch to commute times to the premises, potentially changing everything from what they pack for lunch to when they have to leave the house in the morning and when they get home at night. The greater the potential impact on your employees, the earlier you need to engage with your employees.

Engagement is Good

A seamless transition depends on the buy-in to get from staff. Your staff need to 'own' the move. Offering people the opportunity to ask questions and give feedback is a simple way to help them buy-in to the process. If you are refurbishing as a part of the relocation, you have a great opportunity to engage with how the building will be refurbished and what any new furniture will be like.

If your staff are used to hot-desking or to not having a fixed work space, they may not be as resistant to a change in desks or layout but they will still be interested in the communal spaces, like the break room. Even just offering opinions on the break room can help to encourage active participation and engagement between staff and management and help lead to a seamless move.

There will likely be things that you as an employer have not considered that your employees will think of and be able to give you valuable feedback on. If they have issues with the current space that can be solved in the engagement process, this will serve to create a new premises that is potentially more productive and enjoyable for you and your team.

People Need to Release Frustration

Honest and constructive engagement with your staff includes allowing them an opportunity to let out any frustrations. Laying out the differences between the current and new premises will help to pait a picture for your staff and allow them to highlight issues they have. Listening to these issues can help to solve issues before the relocation or at least let them get the issues off their back before the day of the move. This will allow them to move past their frustrations and focus on the positives when the time finally comes.

Highlight the Opportunity to Reduce Clutter

Just like moving home, moving office is a great opportunity to remove clutter. Having to pack up your work space is a key way to identify things that are really just trash. Getting your employees to focus on what they need to take with them and sort through the drawers of stuff they have accumulated over the years is an opportunity not to be missed. This process is most important if the layout of the new premises is going to have less space to stash clutter. When people know they will have fewer drawers or smaller cupboards, they are forced to strip back and focus on what it is they need to do their job rather than what is is they have at the moment.

However you approach it, your follow through is key. Start early, engage regularly and focus on the opportunities that the move of office presents.

This advice is general in nature. Every situation is unique and requires tailored advice

Are you still in love with your business? No? You may need to look at your current business plan and how it is working for you. It may also be the perfect time to consider where you see yourself and your business moving forward. Is it time to sell, pass it on to the next generation or simply walk away?

Every small business owner hits a wall at some point. A time when you will question your motivations, your success and your drive to continue. You have a business plan to lay out how your day to day activities will be achieved and the goals you are striving for but do you have a plan in place for how you will leave your business?

Whether you want to sell up, get an investor in to free up some cash or pass your business on to the next generation, having a succession or exit plan in place is key.

Inviting in an Investor or Partner

For many small business owners, the biggest sources of stress are being overworked and under-funded. A simple solution to both of these issues is to look for a willing and capable partner to buy in. If you don't need an extra hand, an investor can offer the funds you need as well as a sounding board for decision making while you continue with the day to day running of the business, giving you more confidence in your path forward.

A partner can in buy-in, offering a much needed cash injection while also bringing much needed skills to complement your own. An ideal partner will share your vision for the business while bringing in a set of skills to complement your own. If you are an expert in designing and manufacturing your products but doing the books does your head in, bring in a partner who is a master with numbers so that together you can tackle the business challenges from different directions.

An investor is a great option for you if you if your biggest challenges are cashflow and strategy. By investing in your business and taking a small slice of the ownership, an investor becomes an integral part of your business success and is often an invaluable resource for you. The investor will have skills in business management, scaling and creating efficiencies. They can also often be a gateway to new networks with suppliers, stockists or customers.

Whether inviting in a partner or investor, either option will enable you to resolve some of your challenges and spread the workload so that you can focus on what you do best, reduce the stress and all without selling out completely.

Selling Up

Selling your business is a great way to exit your business and be rewarded for all of your hard work building it into a success over the years.

If your exit plan is for you to sell-out, you need to value your business so that you know exactly what to ask for as an indicative sales price. There are a number of business valuation techniques and not all will be the best for your industry or specific operation. Taking expert advice on the best method and processes can make it a painless process and may leave you happily surprised and will help to prevent you from selling yourself short.

Not all of the sales process is financial. You also need to look at how your business runs and how someone new can step into your shoes and start running it for themselves. Having a well structured guide to your business will add value in the sales process as it will give a potential buyer invaluable insight into your business and how they will be able to run it. It will also speed up the process of due diligence and help with a seamless transition out of your business.

MBP have the expertise to help you with the valuation of your business and to guide you through the financial expectations and the preparation of your business for sale.

Succession Planning for Success

Right from day one in your business, you need to have a plan for getting out, an exit or succession strategy. Above we have discussed a couple of the common ways to exit, either partially or completely. The third main option available to you is to put a succession plan in place.

A succession plan will lay out a path forward for you and your business and give you a structured path out of running your business.

Your succession plan can be to take on a partner who will eventually buy you out, sell up everything lock, stock and barrel or pass your business on to the next generation.

A large number of small businesses opt for the third option. After years of hard work, the business is passed on to the next generation to run as their own. This is essentially a hybrid option. The younger generation starts as a partner to learn the ropes, then begins to invest into the company more as they take on greater roles within the business before finally buying out the remainder of your stake in the business.

Whatever option you choose to pursue, ensure that you have a plan in place. Map out what you want to achieve, where you see yourself at retirement and how you will get there.

This advice is general in nature. Every situation is unique and requires tailored advice. MBP have the expertise to

When you run your own small company there are a lot of things to take into account. One of these considerations is how you will pay yourself, with a PAYE deducted salary or will you just take drawings from the company?

This is an issue that we field questions on weekly. The answer is not simple and there are good and bad things about both of the options. Below we cover a few of the common considerations in broad strokes. For tailored advice, speak with your accountant or business advisor.

Salary with Pay-As-You-Earn (PAYE) Tax

Having a relationship with your own company as a shareholder, director and employee can mean that you are wearing many different hats everyday. This is especially evident when and if you decide to employ yourself and pay yourself a fixed wage or salary. As your company is a separate legal entity, you (as the director of the company) will need to offer yourself (as an employee) a contract for employment and sign this individual employment agreement in order to comply with the law.

If you decide to pay yourself a fixed salary, just as if you were an independent employee with your company, you will pay the tax on your income as you earn it throughout the year. The appropriate taxes are deducted from each pay run and paid to the IRD monthly along with the filing of the PAYE Return. This option breaks your tax liability up into bite sized monthly payments and can allow for much easier planning of your company cash flow as your tax bill will be the same every month (unless you give yourself a raise).

Having a fixed income from a salary will also mean that you have a declared salary for ACC purposes. The appropriate levies for ACC will be deducted as a part of your PAYE payments, ensuring that you are always up to date with levy payments and have a certain level of income should you have an accident and need to make a claim.

Ease with ACC is not the only benefit of a fixed salary, you may also have an advantage if you are trying to personally raise funds, such as a mortgage. In most cases, it will be easier to borrow a mortgage if you have a regular income rather than if you are living off the profit generated by your company (drawings). If you are living off drawings, many financial institutions require at least two years worth of financial statements when considering your application.

One of the downsides of paying a fixed salary is that you may end up with a bigger overall tax bill than you would with drawings. This is especially true in the formation years as many businesses run at a loss in these early phases and have minimal tax liabilities. A loss generated by your company would not mitigate any tax on your salary. Drawings offer much greater flexibility in allocating exactly what you and your company and afford and has the ability to structure payments for the greatest tax advantage (within the limitations of the income attribution rules).

Drawings and Shareholder Salary

An alternative to paying yourself a fixed salary is to live off drawings from the company throughout the year and then allocate a shareholder salary at year end. Ideally, the entire amount of your drawings throughout the year will exactly equal your allocated shareholder salary. The main advantage of this method is that it allows you the benefit of hindsight and to maximise your personal and company tax benefit at year end based on the actual financial performance of the company.

It is important to draw out lump sums as drawings from the company into your personal accounts (like a salary would be paid) rather than to start paying personal expenses direct from the company. Having too much cross over between your personal and company finances can lead to difficulties down the line if the company gets into any legal troubles and could lead the IRD to make an argument to pierce the veil of incorporation and leave you with none of the legal benefits or protections of the company structure.

To use drawings instead of a salary with monthly PAYE payments you will need to be disciplined in your drawings and plan for upcoming Provisional and Terminal Tax payments. The tax on your shareholder salary will be paid in three or four installments throughout the year as opposed to monthly with a PAYE salary. Having a cashflow forecast in place at the start of each financial cycle as well as a strategy to save for all taxes will help to mitigate any last minute panic as big lump sum tax payments become due.

Any drawings that you take during the year will be your income for ACC purposes and may be inadequate. This can be mitigated by opting for ACC Cover Plus or by having Income Protection Insurance with set weekly payments. MBP strongly advises our small business clients to consider their insurance options and to speak to a professional about policies such as Income Protection and Key Person insurance. Please get in touch if you would like us to put you in touch with a trusted advisor who can assess your needs and help you get the best cover at an affordable rate.

All or Nothing

It needs to be noted that if you opt for a PAYE salary, it is an all or nothing option. You are not able to have a salary one month and then switch back to drawings and then back to a salary. Once you are committed to the PAYE salary option for a particular income year you must deduct PAYE, period. You will have a contract for employment with yourself and will be in breach of that contract if you stop paying yourself for the work you do. If in doubt, ask for advise before doing anything.

Working shareholder salaries are a complex issue for all small businesses. There are a number of things that need to be taken into account from taxes to income attribution rules and tax avoidance measures. We recommend that you get in touch with your accountant or business advisor for guidance before making any final decisions.

This advice is general in nature. Every situation is unique and requires tailored advice. MBP have the expertise to

We've all heard of 'the cloud' and Xero but many people aren't taking advantage of this game changing software. What many people don't realise is that they are already using the cloud everyday with online services like email and internet banking.

There are many features of cloud accounting that make it a perfect tool for everyone from small business entrepreneurs to rental property owners.

Let's run through a few of these benefits.

One of the key benefits is that you have access to your data and the tools to make sense of it from any internet connected device at any time and from anywhere. No more having to be chained to the desk to get your accounts done or check up on your financial performance.

Your money is centralised with feeds direct from your bank accounts into a single ledger allowing quick access, saving you time and increasing the accuracy of your financial and tax information. Removing the need for manual data entry greatly reduces the chance of errors, ensuring that the data you have access to is of the highest quality and capable of provide a sound base for all those big business decisions.

Cloud accounting software like Xero and MYOB Essentials is designed with small business owners in mind. You have better things to be doing in your business than pouring through boxes of receipts or struggling through an archaic, out dated desktop accounting system. Cloud accounting solutions are easy to use, secure and are constantly backed up. This minimises the risk of losing any data to error or corruption and removes the risk of having your data lost in a theft or fire at your premises.

Not only is cloud based accounting soft more secure, it is also always up-to-date. The software is automatically updated without the need for you to do anything. No more receiving old-school update discs in the post or having to schedule a patch download for your desktop. Every time you log in to your cloud accounting software, you will be using the most up-to-date version.

All of this great convenience and security is also very affordable. Cloud based accounting solutions are most often offered on monthly subscriptions with options staring from just a few dollars a month. This makes it easy to plan your cash flow with affordable monthly payments as opposed to large lump sums as with older desktop based software.

Take advantage of cloud accounting to streamline your money, give you greater insight into your business and give yourself more time to get back to doing the things you love.

About the Author:

Chris Mercer is Managing Director of Mercer Business Partners Limited and is a Xero Certified Advisor. Chris is the driver of MBPs innovative business practices such as our commitment to a paperless office and our ability to always be contactable by our clients. Cloud software such as Xero is essential to this mission and allows MBP to advance its relationship with its clients well beyond just crunching numbers. Call Chris on (07)3786655 or email him direct at chris@mercerbp.co.nz for a free cloud consultation and a no-obligation quote.

Cloud accounting software has revolutionized how small business owners manage their businesses. This game changing software has had a massive impact not just on small business but on the quality of life of the small business owners. By eliminating and reducing many of the time consuming, redundant work of older systems, cloud accounting streamlines processes and makes processing a breeze from business owners and accountants alike.

You have probably seen or heard of cloud accounting solutions like Xero and MYOB Essentials. These systems have redefined accounting for small businesses. They allow business owners real time access to their financial data and the ability to collaborate from anywhere, at any time with their business advisors and accountants. This is invaluable in enabling these businesses to make well informed decisions based on reliable, timely data.

There are countless benefits of cloud accounting so we will narrow this down to five and discuss some of these key reasons why cloud accounting is such a beneficial shift in financial management for small businesses.

Data Integrity and Backups are a Breeze

With a cloud based solution you no longer need to keep track of which file is the most up to date version. You no longer need to have all your computer storage space consumed with large accounting files. You no longer need to remember to run a time consuming backup. Everything is securely stored online, accessible anywhere, anytime and always up to date with backups taken care of automatically. What could be easier?

Every File Up to Date, All The Time

Multiple users can have access and be working on the same file at the same time from multiple locations, without error. This is a game changing feature of cloud accounting that enables accountants and business owners to collaborate with each other in real time. Any queries you have can be sorted then and there, allowing your financial data to be processed in a timely manner and with the reliability required to inform those big business decisions.

No More Data Entry

Data entry is a major was of time, money and effort for all small business owners. Your bank data is imported into your accounting system direct from your bank. This offers a level of reliability not possible with manual entry. All that is left to do is allocate the bank data to the correct account codes and even most of this can be memorized by the software. What used to be a chore that took all day can now can be done in minutes. Less data entry time means more productive business time, allowing you the opportunity to make more money.

Reliable Data, Reliable Decision Making

Manual data entry and reconciliation is often time consuming and full of errors. Timeliness is increased and errors all but vanished with cloud accounting. This enables real time data to be viewed and better inform you business decisions. With cloud accounting your financial information is no longer lagging behind but is now able to offer almost real time insight into your operations, enabling effective, well informed business decisions to be made.

Anywhere, Anytime

Cloud accounting allows you to see your business account balances, debtors, creditors and your overall financial performance from anywhere, at any time of the day or night, as long as you have an internet connection. This gives you the freedom to run your business from wherever you are. You are no longer chained to a desk in the back room but are free to move about, visit customers or spend time on the shop floor while your accounting system remains at your fingertips at all times.

Running your own business just got a whole lot easier with cloud accounting. If you are interested in discussing your cloud accounting options, give the team at MBP a call on (07) 378 6655 or email any queries to mailbox@mercerbp.co.nz for a free consultation. We can even set you up on trial version of the most popular options so that you can see the benefits for yourself before making any decisions or spending a cent.

This advice is general in nature. Every situation is unique and requires tailored advice. has the to guide you and your business through the process of switching to a . If you think you may need some advice or would simply like to bounce some ideas around, talk to our team today by calling or email

Why new businesses fail is a tough question to answer, almost as difficult as explaining why the lucky ones succeed. Every single business is unique, even those in the same industry have different factors effecting their success. The following issues are a few that we have witnessed but you need to critically think about your business, your risks and what your road to success is.

Two Heads are Better Than One

Most successful new businesses have more than one person as a founder. It is almost always better to start a new venture with someone that you trust rather than trying to go it alone. The old adage is correct, two heads really are better than one.

When making the life changing decision to jump into business, most new business owners simply underestimate the sheer volume of work and stress associated with getting a new business off the ground. For many, the stress will likely be too much to handle and even a promising business may fail due to founder fatigue. Having a trusted co-founder will help to spread the work load, offer a sounding board for ideas and help to mitigate a lot of the risks associated with having everything resting on a single persons shoulders.

Location, Location, Location

A business may thrive in one location and fail in another. Not all locations are created equal. Some communities are hubs for new small businesses with lots of local support and a thriving small business community. Other communities aren't as supportive of new businesses and you will have bigger hurdles to overcome. Picking the right location can help you avoid these hurdles in the first place.

Know your target market and ensure that any location you settle in has a ready and waiting supply of potential customers. Also look out for your competitors locations and take those into consideration. Don't write off a location because there is a competitor just down the street. If the location is working for them, it will probably work for you too. That is where you want to be and where you will likely have a greater chance at success than completely uncharted territory.

Tiny Target Market

Most new business owners look at an industry they like or see an opportunity in and highlight a niche market in that industry that they think they could serve. One of the biggest mistakes is targeting a niche market that is way too small, especially if you have chosen a niche for no reason other than your competitors aren't focusing on it. You don't want to completely avoid any competition, especially not by narrowing your vision too much. You need to accept that competition is a healthy part of being in business and is a major driver of growth and business success. Some of the best business ideas and local success stories in recent memory have come from the most competitive markets.

Originality is Key

It is really hard to come up with a new idea, something that no one has ever though of before. Every new business owner struggles with this and many fall into the trap of imitating the competition. Imitation may be the sincerest form of flattery, but it may be the nail in your business coffin. You competition can be a great source of ideas and inspiration but you should avoid imitation and look to create your own, original business. Focus on what you can offer and how you can serve your target market. By making sure that you are offing something original and not easily or readily imitable, you can increase your chances of success and reduce the likelihood of someone else witnessing your success, imitating you and pushing you out of your own market.

Change is Good

Having a clear business plan and a vision for what you want to create is the foundation for all successful new businesses. However, new business owners that refuse to look critically at their business as it evolves and do not adapt their original plans will likely falter and fail. All new businesses will run into problems and challenges that you haven't planned for. Your ability to change and adapt to these challenges will be the key to your success. You need to be open to new ideas, responsive to challenges and welcoming of results that may not be exactly what you had in mind when you wrote your business plan at the kitchen table all those months ago.

Invest in Your Staff

If your new business needs more than just the founders to run it, you need to ensure that your staff are up to the challenge. Attracting experienced, qualified staff to a new business can be tricky as there is no guarantee of job security for them. Do not be tempted to hire whoever will take the job in the hope that you can train them up in time. To reduce the stress on you at a time when you have more important things to worry about, it is critical that staff are both experienced and share in or understand your vision and path forward.

Hiring inexperienced staff will only add to your workload and stress. You may need to offer higher remuneration or other incentives to attract experienced staff but if they can manage themselves and know exactly what they are doing, you will be in a much better position and your chances of being successful will increase dramatically.

Don't Fear Your Launch

Starting up and launching a new business is not easy and can at times be a process filled with fear and apprehension. Most new business owners are afraid of failure from the outset and as a result they want to control every little detail in an attempt to minimize their perceived risks. While this is normal, it can be the root of more, serious problems. When you start setting up your new business you need to set a timeline to launch and stick to it. Chances are that not everything will be perfect by launch but you need to build momentum and ensure that you launch before people in your target market and location lose interest in your new venture before it has even properly started. A slow or delayed launch can kill your new business before you even open the doors.

Don't Launch Too Early

Don't be afraid of your impending launch but also don't be too eager to jump the gun and launch before you are truly ready. You have the business idea that you just know is going to work, the product that people want to buy and the perfect location. It must be time to jump in with both feet and get going, right? Wrong. You need to take the time, pace yourself and ensure that you have a sound business plan and path forward. Far too many new businesses are launched in the heat of the moment. The vast majority of the tens of thousands of new businesses formed in New Zealand each year are set up in the first few months. The sun is shining, the ideas are flowing, your on holiday so hey, lets just give it a go. Hold on a bit. Launching too fast is just as sure to kill your business as launching too slow.

Find a healthy mid-ground, if you aren't sure where the middle ground is then speak to a professional. Your local accountant and business advisor will be able to offer you a wealth of knowledge, experience and expertise to guide you through the entire process and offer insight you may never have otherwise considered. Having an impartial outside opinion can also help to create clarity and realistic time frames and expectations.

New businesses can easily fall into the traps highlighted above and fail. This list is by no means exhaustive and there are a myriad of factors effecting success. In our experience, the lack of any properly defined plan is often the Achilles heel in otherwise stellar businesses.

Mercer Business Partners has a free Business Plan Workbook to help you work through your new business idea and lay the strategic groundwork for a successful new business venture. For a free copy of the workbook, email mailbox@mercerbp.co.nz and request your copy today.

This advice is general in nature. Every situation is unique and requires tailored advice. MBP has the expertise to guide you and your business through the process of making informed decisions about all of your new businesses challenges. MBP have a team of expert business advisors who can help take you from start-up to success story. If you think you may need some advice or would simply like to bounce some ideas around, talk to our team today by calling 07 378 6655 or email mailbox@mercerbp.co.nz

Being a new business owner is an exciting moment in anyone's life. Nurturing a new venture to life can be an intoxicating experience for an entrepreneur. This is when things can become subjective. A lack of experience in operating a business, coupled with a lack of objectivity can be fatal to any business and is why most new businesses are dead within five years.

Many of the businesses that fail are actually making money when they shut the doors, so why did they have to close? One of the main reasons is poor cashflow management. The business is profitable but the poorly managed flow of funds in the business means it is constantly underwater and struggling to stay afloat. Many new business owners think that as long as they are making sales they will have enough cash to do whatever it is they want. This isn't necessarily accurate and all business owners need to keep an objective eye on their business finances at all times.

You May Not Have All The Cash You Think You Do

Many business deals take place over extended time frames. You may sign a deal today and record a sale in your system but payment may not physically appear until a future payment date. This is where a lot of eager new business owners can fall into the trap of ordering more supplies before the payment has arrived. You can often negotiate delayed payment terms with some suppliers but many will want payment on or before delivery.

Even when the money arrives in you bank account, it is not all profit. Chances are you have already spent most of the cash. If you are selling products, you will need to take into account the cost of restocking those items, as well as your upcoming power bill, staff wages, phone bill and any number of other expenses. You need to understand how much of your sales will be consumed by these operating costs and budget for them accordingly.

Budgeting and Cash Flow Management go Hand-in-Hand

It is important to budget exactly what you can and can not afford and keep a close eye on your costs. A well thought-out cash flow forecast can help you to visualize your financial path forward and highlight areas where you may need to tighten your budget or other areas where you may have a little more room to move.

A cashflow forecast is a necessity for any new business. Getting one set up can be time consuming in the first year and may take a few hours, although getting professional help can speed up the process and offer you greater insight. Having a forecast is by no means a guarantee of avoiding problems. However, if you haven't taken the time to think through the next 12 months in detail and plan out your highs and lows, your income and expenses, you can be guaranteed to stumble across easily avoidable problems that will seem to jump out at you endlessly. Once you have an idea from your forecast as to how much cash is available in any given month, you can budget your extra spending accordingly.

If an opportunity for sponsorship or marketing presents itself out of the blue and you don't know if you can afford it, you either don't have proper cash flow management in place or you are ignoring it. Proper cashflow management isn't a once a year exercise you need to prioritize it on a monthly basis and track your actual performance against your budgeted cashflow.

Make Cashflow Management a Monthly Priority

Once a month, get a summary of your financial performance from your accounting software. With new cloud based solutions this is a painless exercise and you can easily request help from your accountant. Using the summary, update your cashflow forecast with the actual performance figures (in a separate column so that you can compare them to the original budget). Doing this monthly will help you to track your performance and see if you are under or over performing. Knowing this and understanding your performance allows you to budget for any likely income taxes at year end as well as highlight areas of your business that are doing better and focus on these more while also assessing the viability of under-performing products or services.

If you need more insight or understanding, schedule regular meetings with your accountant or business advisor to discuss your performance. They will likely be able to interpret your financial data in ways that you may not have considered and offer you advice on how to optimize your business moving forward. New businesses that actively engage with professional advisors are far more likely to survive past five years than those that go it alone.

This advice is general in nature. Every situation is unique and requires tailored advice. MBP has the expertise to guide you and your business through the process of setting up a cashflow forecast and tracking your performance throughout the year. We have a free template for a cashflow forecast that we make available to all of our clients and can guide your through completing it painlessly. If you think you may need some advice or would simply like to bounce some ideas around, talk to our team today by calling 07 378 6655 or email mailbox@mercerbp.co.nz

'The Cloud' or 'Cloud Computing' are pretty common terms these days but what are they, what does it mean and what does cloud accounting actually entail?

Cloud accounting is one of the most fundamental and game changing shifts in small business accounting in years. Don't worry, it has nothing to do with actual rain bearing clouds. To help you get your head around it and understand this great new phenomenon, we have highlighted a few of the more common questions we get asked and outlined the answers below.

What is 'The Cloud' or 'Cloud Computing'?

The cloud is simply a term used to refer to using the internet to access software and files rather than physically installing it on your computer and just accessing it from that device. This gives you the freedom to access your data from any internet capable device, whenever and where ever you are.

Am I Using Cloud Computing?

Most probably, yes. Most people now a days are using cloud computing without really realizing it. A common example is email accounts such as Gmail or Hotmail or your internet banking service. You have access to these via any internet capable computer or phone but the actual files are all stored online and you log in to access them over an internet connection.

What is Cloud Accounting?

Cloud accounting is also known as online accounting and is in many respects the same as cloud computing outlined above. In some instances you may have to install some driver or access software onto a device but the actual accounting software is all stored on servers that you access via the internet. In some instances, like with Xero, you don't even need any access software on your computer and you access the online files directly from your standard internet browser.

What are the Benefits to My Business of Cloud Accounting?

There are numerous benefits to small and medium sized businesses of using cloud based accounting software solutions. Lets run through a few of the key benefits:

The cloud removes your need to have expensive onsite hardware to store all of your records, accounting software files and backed-up redundant systems. Most solutions allow you to work from any standard off the shelf computer with an internet connection, without the need to be connected to an expensive server or having specialized software installed on your computer.Access your data anywhere, anytime. You don't need to be in your office to have access to your accounting software. As long as you have an internet connection, you can access it from wherever you happen to be, whenever you need access.A single cloud based ledger reduces error and improves the accuracy and reliability of the data, necessary for making those key business decisions.You can collaborate with your accountant at any time and work on the same data file from desperate locations with no errors or data corruption.Cloud based solutions are most commonly paid for in monthly installments. This massively reduces up front costs and allows the new solution to be easily incorporated into your annual cash flow forecast with minimal financial impact.The monthly subscription format also has the benefit of continuous updates. No longer having to download or install updates manually will save you time and ensure that without you even noticing, your software will be kept in the most up to date format available.

What is the Impact on My Accountant and Our Relationship with Them?

Accountants and business advisors have been the some of the most ardent supporters and fans of cloud accounting since it first burst on to the market. It has unlocked a whole new world of potential for collaboration between professional advisors and their clients. Accountants have seamless access to their clients data whenever they need it. This allows them to keep an eye on your operations and advise of any changes that may be of concern or may lead to new tax strategies and planning needing to be implemented.

At year end, your accountant can access your data as soon as they need it without the need for you to download and send them any files. They can make any adjustments that are necessary and finalize your year end performance and tax position in a far more timely manner with far more reliable data than ever before.

All of the year end processing happens with very little, if any, disruption to you. Your business and software continues to run as normal. If needed, your accountant can lock off the dates for the prior year to prevent any corruption of the data while they finalize the years financial statements. If you use an in-house bookkeeper, there is no need for your accountant to send them a copy of the journals to enter to update their system as everything will be sorted in the single ledger with no need for duplicate entries. Allowing you and your team to focus on your current year, not get bogged down in the past.

All of these features add value to your relationship with your accountant and business advisor, helping to keep your business running smoothly and simplifying your tax compliance.

This advice is general in nature. Every situation is unique and requires tailored advice. MBP has the expertise to guide you and your business through the process of making informed decisions about adopting a number of different cloud basedaccounting solutions. If you would like to talk through your options, contact our team today for a free consultation by calling 07 378 6655or email mailbox@mercerbp.co.nz

The season of client shouts and staff Christmas parties is rapidly approaching. In all the seasonal joy it is important not to get carried away and claim expenses that may not be deductible. Claiming entertainment expenses is a minefield that has seen many a taxpayer fall foul of Inland Revenue. Most common entertainment expenses are at least partially personal and as such need to be adjusted accordingly.

There is often an undeniable portion of personal enjoyment in addition to the business aspect of the expense in helping you to retain the staff and customers that generate your income. It is important to understand exactly what expenses are fully deductible and which need to be adjusted. The list below is a few of the common expenses we field questions about and how much of each is deductible.

100% Deductible Entertainment Expenses:

Dinner for team members while working out of town (no client present),Taxable allowance paid to team members to entertain clients,Donating food to support a local charitable Christmas dinner/ party,Golf club membership for senior/ management team members paid for by the company,Gym membership for any team member paid for by the company,Refreshments provided to your team at company meetings,Morning and afternoon tea for your team,Sponsoring a local sports team (with no material consideration such as tickets in return),Taking a client to dinner while working out of town (overseas/ out of New Zealand).

50% Deductible Entertainment Expenses:

Drinks for clients or team members on your premises,Drinks for clients or team members at your local pub,Christmas party for your team, on or off the premises,Sponsoring a local sports team, with tickets to games in return (50% of the value of the tickets is not deductible),Sponsoring a local sports team by providing refreshments or a meal after games,Taking a client to dinner while working out of town (but still in New Zealand),Taking a local client out to dinner in town,Hiring a boat/ launch to entertain clients.

The above lists are by no means exhaustive but are a sample of some of the more common queries we field from our clients about what is or is not a deductible entertainment expense.

If you are ever in doubt, give your accountant a call or ask the friendly team at MBP by calling the office on (07) 378 6655 or emailing your query to mailbox@mercerbp.co.nz. We are always ready and willing to help.

This advice is general in nature. Every situation is unique and requires tailored advice. MBPhas the expertise to guide you and your business through the process of making informed decisions about all of your tax obligations and responsibilities. If you think you may need a some advice or have been contacted by the IRD and aren't sure how to proceed, talk to our team today by calling 07 378 6655 or email mailbox@mercerbp.co.nz

Thinking of taking the leap and becoming your own boss? Make sure you are actually buying a business and not just purchasing yourself a job. Its easy to get lured into the romantic notion of taking control and being your own boss rather than just cashing a paycheck. However, if after all your risk and hard work the business is only going to deliver you a profit comparable to what you could safely earn by cashing a paycheck, is it really worth it?

Whether you are buying your first business or adding another to your budding business empire, it's a challenging process that can involve a lot of money and just as much risk. To help guide you we have compiled a few of our top tips to consider before you take the leap.

Buy a Business, Not a Job

If you are spending your hard earned money or leveraging your family's home to buy a business, you need to make sure it is a business and not actually just a job.

So, what's the difference? Most businesses are valued based on their ability to generate profit. If a business is going to require you to work full-time and is only going to generate profit comparable to what you could safely earn in the same industry by just cashing a paycheck, is it really worth the added expense, risk and effort?

Let's look at an example:

A business with revenue of $200,000 and profit of $75,000 is on the market for $100,000. This looks good, right? But what if you could get paid $75,000 as a management-level employee in a comparable business and you need to work full-time to generate that $75,000 profit, you will essentially be paying someone $100,000 for a job with all of the added risk and stress of running your own business.

Make sure the numbers work for you. Maybe you will be earning less in the short-term but can see an opportunity in a business to greatly expand the profit margin and turn a borderline deal into a true, rags-to-riches success story.

Do Your Homework

As with any big purchase it pays to shop around. There is no shortage of businesses for sale up and down the country so take your time and make sure that any business you look at is in an industry and location that is attractive to you with a potential workload you can handle.

Get independent expert advice, don't just rely on the information provided by the seller or their business broker. If you are looking into a franchise, look at what other franchisees are saying about their experiences, what support does the franchisor offer, what sort of autonomy do you have?

Focus on an Industry Where You Have an Advantage

There is a lot to learn when you become your own boss. You all of a sudden have to wear a number of different hats all at once to make sure you have a successful operation. Make life easier on yourself, don't invest in a business where you have no advantage. Buy into an industry where you have experience or insight that will make the day to day work a breeze for you and help to alleviate at least of the stress.

Having to learn new skills at the same time as managing cashflows, employees, marketing, etc. will only compound your stress. You can of course outsource a lot of the mundane operational work like payroll and cashflow forecasting to your accountant but this is an added expense that you could easily avoid if you buy smart at the start.

Most importantly, look at the overall industry, growth potential and overall impact of the business on you to make sure that any opportunity you are considering is at the right price, in the right industry and offers you the work and lifestyle balance that you are looking for.

Determining the Right Price

Purchasing at the right price can be a ticket to financial independence whereas paying too much can create an insurmountable financial obstacle that suffocates your success.

Let's look closer at the example we discussed earlier:

The purchase price may have been calculated as a multiplier of the profit, as is the case in a large number of business sales. The average multiplier value usually falls between 2 to 7 times the average profit of the business. Riskier business like cafes and restaurants generally have lower multipliers and safer, stable, long-term investments may have multipliers of 14 or more. The multiplier in our example is only 1.33. This identifies a high risk business and sets some alarm bells ringing. If you have to borrow the full purchase price of $100,000 and need to work full-time to generate the profit of $75,000 then this investment may not be a good idea.

The profit we have been referring to is less all of the general operating expenditure like interest on loans, as this will change from one owner to the next. The interest on your business loan will reduce this profit and reduce the benefit to to you. You may also have trouble securing a business loan on a risky venture. This may mean that you need to use your family home to secure the financing, putting your family's financial security at risk. Never enter into a business deal unless you are prepared to accept a worse case scenario and never risk anything that you cant afford to lose.

It is crucial that the purchase price takes into account all of the real and potential risks and rewards that underpin the potential success of the business. Getting independent expert advice, not just relying on a brokers valuation, is important to be sure you are paying a fair price.

Look for Opportunities to Add Value

There are a number of ways for you to make money in business. Two of the clearest are by generating profit from the running of the business or by adding to the value of the business and making a capital gain when you move on to your next venture.

When buying a business, it is important not to just thing about the short or medium-term profits but also how you can develop the business and add value to it. A business that is currently struggling to make a profit may be a valuable investment for you if you can see an opportunity where your particular expertise, ideas or experience could add value and improve its performance.

This goes back to what we discussed earlier about buying a business in an industry that you have existing skills and experience in. You might be a world class baker looking to buy a cafe that has been generating a poor profit by buying in all of its baked goods. This is an opportunity to instantly lower the operating expenses and boost the profit. If the cafe has also been run by a disengaged owner, you may also have an opportunity to develop a relationship with your customers by providing friendly service and remembering the regulars and their orders will help to boost your goodwill.

Looking for these opportunities before you buy a business is key. If you buy it in the hope you will find a silver bullet later on or just in the hope that things will magically turn around, be prepared for disappointment.

Imagine the Worst Before You Take the Leap

Every business deal has the possibility to be a flaming disaster and lose you everything you have put in. Accepting that this is a possibility is the first step towards developing strategies to avoid this worst case scenario.

If you can't handle the thought of losing everything you will need to put into a venture, is it really a business deal worth pursuing? Talk to an independent expert, develop a plan, be prepared. If you do, you will be in the best possible position to succeed.

This advice is general in nature. Every situation is unique and requires tailored advice. MBP has the expertise to guide you through independent business valuations, acquisitions and help you plan for the future. If you are thinking of taking the leap and becoming your own boss but aren't sure how to proceed, talk to our team today by calling 07 378 6655 or email mailbox@mercerbp.co.nz

The 'hidden economy' and in particular 'cashies' in the building and construction industry are a "high priority" for the IRD. People known to be working in the construction industry can expect to receive regular reminders from the IRD on their obligations to record and declare all of their income.

Lets be clear, there is nothing illegal with receiving cash payment for a job or giving a customer a discount for paying in cash at completion. What is illegal, and unethical, is not declaring that cash correctly as income in your Tax Returns. The IRD has no desire to stamp out the cash economy, they just want to make sure that tradies and anyone else who gets paid in cash understand their obligations and responsibilities to correctly declare that cash as income.

The IRDs biggest source of intelligence about the hidden economy and tradies committing tax evasion is on-the-ground intel and anonymous tips to their hotline. These tips could be from anyone, a disgruntled client unable to get proper redress on improper work due to the lack of a paper trail with the cash job, to an angry ex or a fellow tradie who is doing everything above-board and wants to see you pay your fair share. So, what do you have to do to avoid jail (yes, tax evasion is a crime and you can go to jail) and do everything above board?

Doing Cashies Above Board

Its pretty simple really, keep good records and declare all of your income and expenses when you file your GST and Income Tax Returns.

The IRD knows how much gross profit you and every other average person/ company in every industry should be making based on bench marking comparisons with your competitors. When you fall out of the usual profit range it sends up red flags and prompts them to look closer at you. You can avoid this scrutiny and all of the added stress and expenses associated with an audit by being upfront, honest and accountable.

Keeping good records is key. This not only allows you to correctly declare your income but to maximise your deductible expenses and optimise your tax position. If you have clear evidence that you have recorded every job, including the cashies, and only deducted those expenses that you are entitled to, any audit is a painless and inexpensive process that might be over after a simple review of your records. For more information on this refer to our earlier update on IRD Audit Survival 101.

What If I Don't Declare It?

Failing to declare all of your income is against the law. There are considerable financial penalties on top of back taxes, late payment interest and, like any other crime, the prospect of jail time. All of this is on top of the necessary professional accounting and legal fees associated with any audit and resulting court action.

If you are concerned that you might have income you need to declare or think you may be at risk of getting caught, talk to a tax professional as soon as possible and go through your options. There are pathways forward that can help you to avoid the worst of the penalties by being upfront and declaring any errors before the IRD catches up with you.

The IRD has more funding than ever before to catch up with those who are trying to avoid their tax responsibilities. The likelihood has never been greater to be audited or investigated by the IRD, especially if you are in an industry that they consider high risk such as building and construction.

Don't be Afraid to Ask for Help

If you are concerned you may have made an error it is always better to ask for some advice and assistance to set it right than sit back and hope you don't get caught. If you need any help you can always talk to your accountant or tax agent and they can set you on the right path. If you don't have one, all good accountants will be more than willing to have a free, confidential chat with you to get a picture of where you are at and how they can help you. Asking for help now is a lot cheaper and easier than being dragged through court later.

This advice is general in nature. Every situation is unique and requires tailored advice. MBP has the expertise to guide you and your business through the process of making informed decisions about all of your tax obligations and responsibilities. If you think you may need a some advice or have been contacted by the IRD and aren't sure how to proceed, talk to our team today by calling 07 378 6655or email mailbox@mercerbp.co.nz

As your business workload builds it may be necessary to take on an extra person to help. Moving from being a one-man-band to being 'the boss' is a major milestone for any business owner and there is a lot to get your head around to make sure you get it right.

Before you place an ad for a new team member, you need to understand exactly what help you need from them, how frequently you are going to need them and whether or not this is a short or long-term need. Understanding these key factors will help you to hire the right type of employee or alternatively engage the services of an independent contractor.

There is an important distinction to be made between employees and contractors. Your obligations to your new team member as well as to the IRD and ACC vary greatly depending on the key factors in the contract between you and the new member of your team.

In general terms, employees are people who work for you, while contractors are people who work for themselves. Let's run through both in a little more detail so that you can be sure you make the best choice for you and your business.

Hiring an Employee

Employees fall into a number of different categories from part-time to full-time, permanent or casual, it is important to know what type of employee you need and get the right person for the job.

Part-time employees work set hours each week that range from just a few up to 30 hours, while full-time employees generally work from 30 to 40 hours per week. Start and finish times can vary to take into account the needs of both the business and the employee (for example, an employee may start earlier so that they can finish in time to collect their children from school).

Whether part-time or full-time, if you need help on an ongoing basis for a set number of hours each week for the foreseeable future, it is likely that you need a permanent employee.

If the work is not ongoing but for a specific period, like a month over Christmas in a retail store or to complete a certain project/ task over six months in your office, then a fixed term employee would be more appropriate.

Casual employees are a popular choice for a number of businesses, particularly in service industries where customer demand can be difficult to predict weeks or even days in advance. This type of employee has no fixed schedule and generally they often only work for you occasionally when you call them in at short notice to help you in your time of need (to cover a sudden rush or a sick day for example). Casual employees do not necessarily have to accept every offer of work you make, however, you still need to treat them the same as any other employee.

As an employer, you have a number of responsibilities towards your employees and to the IRD and ACC. All the types of employment arrangement above require you to supply an employment agreement/ contract, supply any/ all of the equipment required to do the job, deduct PAYE and pay ACC levies. All employees are entitled to paid leave, however, for fixed term and casual employees you may opt to deal with this in a different manner to you permanent employees. You will also have KiwiSaver obligations for those employees that are eligible.

Taking on an Independent Contractor

Contractors are a great option when you need a specialized set of skills or a hand with a specific project over a limited term and do not want to commit to all of the paperwork and hassle that can often be associated with managing employees. Perhaps you need someone to help with marketing, project management or to help you crunch some numbers, hiring someone as a contractor is a great way to get the help you need with minimal hassle and can be a stepping stone to see if you could hire someone as an employee when you grow further in the future.

Independent contractors are self-employed either as individuals or work through a company of their own. As such, they take care of their own taxes, typically provide their own work equipment and work the hours that suit them to get the tasks you assigned done (rather than working when you tell them to like with an employee). Once the work is complete, or at reasonable intervals, they will invoice you for the work and you will pay them just as you pay any other supplier. A service agreement/ contract may be supplied but isn't a necessity.

This is an appealing option for a number of businesses across a range of industries. There are no long-term commitments and no employment management or compliance requirements. This also means that you save time and money on compliance, the invoiced cost of the contractor is the true cost to you with no additional expenses in terms of KiwiSaver, management time or payroll management.

Help Your Team to Help You

A lot of team members may not understand their contract, conditions or obligations. Make sure that they understand their position and have the opportunity to seek independent advice on any contract that you offer them. A lot of people can get caught out thinking they are employed as employees, only to find at tax time that they were actually a contractor and are liable for all of their own taxes and ACC levies. Avoid any nasty surprises by being upfront and supportive of your staff.

You don't want any member of your team to end up resenting working with you. This can be demoralizing for both the employee in question as well as those working with them and be destructive to the success and ongoing growth of your business. Ensure that any agreement is as mutually beneficial as possible and that both parties are getting from it what they expected.

Hiring employees or contractors doesn't need to be a headache. Getting the right people, at the right time and on the correct terms is key to furthering the success of your business. Making the correct decisions about some extra help will not only take some of the pressure off your shoulders but will set you up to grow your business on a sustainable path to success.

This advice is general in nature. Every situation is unique and requires tailored advice. MBP has the expertise to guide you and your business through the process of making informed decisions about hiring staff. If you think you may need an extra hand or help with a key area of your business and aren't sure how to proceed, talk to our team today by calling 07 378 6655or email mailbox@mercerbp.co.nz

The taxation of property in New Zealand is an increasingly complex area of law and can be a minefield for the unprepared. Although there is no comprehensive capital gains tax in New Zealand, income from trading in property is taxable.

As a general rule, if your intention is to make a profit when you sell the property, you will likely have to pay tax on the profit from the sale. However, to complicate the matter further, there are different rules for rental/ investment properties, holiday homes, family homes and family homes held in a Trust.

This article offers a broad summary of the key issues and outlines your potential tax liabilities under common circumstances. For detailed insight into your personal situation and potential property tax liability, it is always a smart move to have a talk with your accountant before selling or buying.

Intention is Key

It is extremely important that you think carefully about your intentions towards a property when making a decision to purchase. It is this initial intention that will ultimately determine if you have to pay tax or not. If you are in the property industry or associated with someone who is, you will also be under much closer scrutiny.

The new rules brought into effect in 2015 (the bright-line test) requires you to provide your IRD Number when making a property transaction. This serves to make it much easier for the IRD to assess tax liabilities on property sales and identify those in the property industry who are selling property for a profit.

The IRD has more funding than ever before to catch tax evaders and property tax is a key area of interest to them. Make sure you don't take any unnecessary risks with your family's most important asset, consult with professionals as soon as you have a query.

The Bright-Line Test

Any residential property purchased after the 1st of October 2015 is subject to the Bright-Line Test. This means that you are automatically liable to pay tax on any profit if you sell the house within two years of the purchase date.

However, there are few exceptions to this 'rule'. The biggest exception is that the bright-line test doesn't apply to the sale of your family home. However, if you have a history of buying and selling within short time frames, the IRD may deem you to be in the business of trading in property. This changes things.

Your Property Past Matters

If you have a history of buying and selling properties you may be deemed by the IRD to be a property dealer, in the business of buying and selling properties. This will mean that you are liable to be taxed on any profit from the sale of your properties, regardless of whether the property is your family home or not.

Buying a Rental/ Investment Property

If you buy a property with the intention to operate it as a rental and have no intention of selling it for a profit (capital gain), it is unlikely that you will be liable for tax on the sale of the property. You will, however, be liable to pay tax on any income generated from operating the property as a rental.

Buying a Property with an Intention to Sell

If you are buying a property with the intention to sell it, you will likely be taxed on any profit you realise from the sale, no matter how long you hold the property.

When purchasing a property is is possible to have multiple intentions towards it. You may want to live in it yourself, rent it out as discussed above or you may want to sell it and make a profit from the resale. If reselling the property is one of your intentions when buying, whether your primary intention or not, any profit/ capital gain you reseal will be taxable whenever the sale is made.

Dealers, Developers and Builders

If you are in the business of dealing in land, a builder or a property developer, then income from property in the general course of your business is taxable. However, you may also be liable for tax on property sales outside of your usual business operations within 10 years of purchasing those properties, regardless of whether the purchase of the property was part of your business or not.

If you fall into these categories, you are still entitled to a residential exemption for your family home. However, you can lose this exemption if you have a habit of buying and selling your family home within short periods. As a general rule, if you move your family twice during two years, you may be stripped of your residential exemption and have to pay tax on any capital gain from future sales of your family homes.

Ask for Help

There are a lot of factors that need to be taken into account to assess whether or not you are liable for tax on the sale of a residential property. If you have any questions it is always safer to ask than to simply hope for the best.

Our team of property tax experts can assess your unique situation and will provide you with an assessment that takes into account your circumstances, intentions and outlines your responsibilities in plain English. All for a small fixed fee of just 220+GST. Rest easy knowing exactly where you stand in regards to tax on your property transactions. Get in touch today, call the office on (07) 378 6655.

This advice is general in nature. Every situation is unique and requires tailored advice. MBP has the expertise to guide you and your family through the process of making informed decisions about all of your tax obligations and responsibilities. If you think you may need a some advice and aren't sure how to proceed, talk to our team today by calling or email

Many Taxpayers, particularly contractors, are not aware that income derived by their company or trust may actually be deemed to have been derived by them personally, with considerable tax implications as a result.

The little known Personal Services Attribution rules are a anti-tax-avoidance measure enforced by the IRD to make sure that certain taxpayers are paying their fair share of tax. The rules impact people, such as contractors, who derive 80% or more of their income from a single source. The effect of the rules is such that the income derived by a company or trust can be deemed to instead be the income of the individual shareholder or beneficiary who provided the services.

The rules for the attribution of income apply when:

80% or more of the trading entity's (company or trust) income is derived from services performed by an associate or relative, 80% or more of the entity's income from personal services is derived from the sale of services to a customer or individual associated with a customer,Your net income exceeds $70,000 for the year (including any attributable income), andSubstantial business assets are not a necessary part of the business structure.

These rules are of greatest concern to contractors such as builders and other tradesmen. Contractors such as these often trade through a limited liability company, with themselves holding most if not all of the shares, and derive up to 100% of their income from a single source throughout a tax year. If they have a single lucrative contract or one that makes for more than 80% of the total income, then they will be caught by the attribution rules. In this situation, the income generated by the trading entity must be attributed between the entity and the individual providing the services accordingly.

The purpose of such attributions is so that the IRD can ensure that taxpayers can not avoid paying the top marginal rate of individual tax at 33% by holding profit earned by them in a company that would pay it at 28%. It also helps to minimise tax avoidance by income spreading to other shareholders or beneficiaries (that are on lower incomes than the contractor) of the entity that have not provided the services that have generated the income.

The attribution of income can mean larger than expected tax bills, especially if the trading entity has had a more profitable year than expected. However, failing to properly attribute income can be even more expensive as the IRD will likely add on penalties and interest for failing to properly follow the rules.

The IRD is not the only government body to be wary of in these situations. The ACC may also reassess the levies they have charged or provisionally assessed based on allocated income, especially if it has greatly increased. This can lead to a sharp increase in ACC levies at the same time as increased Terminal and Provisional Income Tax obligations. You should consult your accountant as soon as possible to allow for proper tax planning ahead of time and to establish a payment plan with the appropriate agencies to smooth out the payment of your obligations when they become due.

No matter the scale of your operation, it is smart business to save for your taxes as you earn the income. Knowing just how much income you are liable to pay tax on is important, so discuss this with your accountant regularly, not just at year end.

Of course, if a contracting entity has a number of different sources of income so that none are more than 80% of the total income generated, the attribution rules will not apply.

This advice is general in nature. Every situation is unique and requires tailored advice. MBPhas the expertise to guide taxpayers through the attribution process. If you think you may be at risk of falling into the scope of the attribution rules, talk to our team today by calling 07 378 6655 or email chris@mercerbp.co.nz

The IRD has a responsibility to all taxpayers in New Zealand to ensure that everyone is contributing their fair share. To this end, the IRD is continuing to increase its audit activity with a key focus on the 'hidden economy'. Whether you are self-employed, running a business, are a high income earner or recently sold a property, the chance of being audited by the IRD is higher than you may think.

There is no doubt that the IRD is significantly increasing its audit activity. With unprecedented levels of resources devoted to ramping up their audit activities they are able to closer inspect areas that have always been of interest to them, such as travel, repairs and maintenance and vehicle expense claims, as well as zero in on areas that they previously had little time or resource for, such as property transactions and the 'hidden (cash) economy'.

A Visit from the Tax Man

The IRD are entitled to drop in unannounced to your business premises. On many occasions this may just be a member of their community liaison team to make sure that you know about your record keeping obligations and other current issues. Visits like this are taking place across the Central Plateau region now so make sure you have appropriate record keeping in place. In particular, have a journal to record all cash sales if you do not use an electronic point of sale system. Industries with high levels of cash sales, like hospitality and trades, are under increased scrutiny as the IRD clamps down on the 'hidden economy' of cash jobs.

However, if this visit is by an IRD Inspector for an audit they must announce themselves as such and have a warrant. It is important to remain calm, ask to see the warrant and obtain business cards from any and all of the IRD Inspectors that are present. Once you have these contact details, advise the Inspectors that you would like to get professional advice before answering any of their questions. Give your accountant a call right away. MBP prioritise all audit activities and will likely be able to meet you on-site in order to minimise the disruptions to your operations and speed up the process.

If the IRD Inspectors need any business records from you, ensure that you make copies to give to them and retain the originals for yourself.

Communication with the IRD

Whenever possible, communication with the IRD should be in writing. It is, of course, a good idea to run any correspondence through your accountant or at the very least consult with them before you compile and send any correspondence. Always ask the IRD to confirm the receipt of all correspondence and advise you of how long they will take to follow up on any matter.

Following initial communications you will likely be required to attend an interview with the IRD as part of your audit. Do not attend an interview without a professional advisor. Best practice is to ask the Inspectors what questions they intend to ask so that you and you advisor have time to prepare all of the relevant information to best answer the questions.

Minimise the Risk

A reality of being a taxpayer is dealing with the uncertainty you may be audited. This uncertainty can be alleviated by proactively discussing with your accountant the areas that you may be most vulnerable to an audit in and taking the appropriate steps to mitigate or minimise the risks. It is always cheaper to ask for advice and assistance first than to wait for an audit. Interest and penalties can considerably increase any additional tax payable, especially if the error is historic.

Voluntary Disclosure

If you have made an error that is keeping you up at night, it may be worthwhile discussing with your accountant the possibility of voluntarily disclosing an error you believe you may have made. Voluntary disclosure may help to limit the penalties that would be charged if you otherwise left it to the IRD to discover the error on their own. A voluntary disclosure may not prevent an audit but it will normally significantly reduce the penalties that would arise following an audit.

Ask for Help

Being selected for an audit is likely to be a stressful time for you and an inconvenience on your business. If faced with an audit the first thing that you need to do is contact your accountant. The law is complex and the IRD will use this complexity to their advantage. Don't go at it alone, we are here to help.

This advice is general in nature. Every situation is unique and requires tailored advice. MBP has the expertise to guide taxpayers through the audit process. If you think you may be at risk of an IRD audit, talk to our team today by calling 07 378 6655 or email diana@mercerbp.co.nz . Diana has years of experience working in the IRD prior to her past two decades in public accounting and tax advisory.

A cashflow forecast is your financial road map for the year ahead. Most businesses that fail are making money when they go under. A failure to understand your cashflows can be lethal to your business. No plan is ever a silver bullet but the process of planning engages to to think critically about your business and understanding the flows of cash in and out of your business will help you to maximise every opportunity and avoid the pitfalls that trap so many others.

A well considered and responsive cashflow forecast is key to the sustainability and success of your business. Most well managed businesses can generate reasonable levels of profit but still run out of money for a number of reasons. Large outflows such as purchasing new capital assets or borrowing funds can place increased financial pressure on a small business and if these expenditures have not been planned for, they can be a lethal blow to an otherwise successful operation.

So, if you have 'x' amount in your bank account at the start of the year and you want to have 'y' in there at the end, the only way to achieve this is to plan.

However, it is key to note that no plan is ever written in stone. Economic, social and business pressures are constantly changing. Despite the best planning and intentions, a cashflow forecast will almost certainly turn out to be different from the eventual reality. The end of year result is never going to be a perfect match to the forecast because life never follows the exact path we tell it to. The most important thing a forecast will do is encourage you to sit down and look critically at your business.

The process of planning a forecast is far more valuable to you as a business owner than the actual plan itself. If you understand your business, the pressures on it and the results of these pressures, you will place yourself in a position that allows you to be able to act responsively to changes in your operating environment as the year progresses. This will likely optimise your ability to respond to threats to your business more proactively and minimise their impact, while also being able to identify and maximise all of the opportunities that present themselves.

The planning and forecasting process is a healthy check-up for your business and shouldn't be avoided. The tips below can help guide you through this process and offer even the most financial planning averse business owner a path to successfully developing key insight into their operations.

Lets Get Started...

Cash Coming In

What are all of the inflows to your business bank account? Make a note of all the different types of inflows? These could be sales revenue, funds introduced by owners, bank loans, interest on a business savings account, rebates and industry grants.

How do we assess the inflows into our business? Firstly, look at what happened last year. Most businesses follow trends year after year so what happened throughout last year will offer good insight into what may be ahead. As a good starting point, put all of your data for the previous year into a spreadsheet. The easiest place to get most of the relevant data is from your Profit & Loss or Statement of Financial Performance.

Secondly, look at what has or is changing from last year. There will undoubtedly be new trends, new business directions as well as changes to your business, the environment that it operates in and the wider economy. Make a note of all of the things that you think are or will likely change during the next period.

If you are starting a new business and looking to plan from scratch, with none of your own comparable figures, research as much as you can about your industry and use this information as the context for your planning. It will be more generic but its better than nothing.

Spend time considering what the key drivers of your revenue are. It is vitally important to understand what is driving the revenue you are generating so that you can work out the best ways to maximise the opportunites provided or minimise threats exposed when these drivers change. For example, look at the number of customers you have, the number of sales per customer, your production capacity and seasonal effects. What are all of the factors that can impact on the revenue you are able to generate? If you understand these driving forces then you can develop a sensitive cashflow forecast that allows for the affects of different scenarios.

Planning ahead for these scenarios (such as, what happens if we sell 100 units one month and then 500 the next?) will ease the stress created by peaks and troughs in actual revenue during the year as you will already understand your processes and effects.

Cash Going Out

Go through the same process for all of your outgoings as you did for the inflows. Use the same reference points like what happened last year and what has/will change in the next year.

Assess all of your expenses and the drivers that effect them. Overheads like power, rent, internet and phone will likely be the same month to month but there are a lot of other things you need to consider that will have a huge impact on your cashflow and profitability. Ask yourself questions like; are you planning to purchase any capital assets in the next year? Do you want to hire any staff? What drawings are you planning to take or would you like to pay yourself a salary? What loans do you have and are they fixed or floating? What are your repayments? Are interest rates likely to rise, hold or drop? Think of all of the items that are going to or could leave your bank account.

Spend a good deal of time looking into and considering the main drivers that affect your costs. As we discussed with revenue, you need ot have a firm understanding of the drivers of your business inflow and outflows in order to be able to minimise risks and maximise opportunities presented by changes in these core drivers. Looking at key expenses such as cost of sales and wage costs can help you to streamline your operations to improve your cashflow performance and profitability. Consider a number of different scenarios and the effects they will have. For instance, what would happen if you hired an additional, casual member of staff to help in busy periods? Would the added benefits (such as improved sales, customer service and satisfaction) outweigh the impact of the increased wage expense.

Key Points for Preparing a Cashflow Forecast

So far we have just churned up a lot of raw data on our inflows and outflows. We now need to turn this in to a responsive and easy to follow forecast.

There are several key things that you need to consider and your cash flow needs to take into account to best serve you;

Consider how profitable your business is, is it possible to improve this profitability? Do you, or will you, have enough cash to keep pace with your plans for growth? Are you really in a position to push for growth this year or should you hold off for a year and build up your cash reserves to reduce the risk when you do push for growth?

Do you need to borrow anything from the bank? A cashflow forecast may highlight a need to either borrow funds at a certain point or arrange for a business overdraft facility to get you through tight periods.

Look at your draft forecast, what can you change to improve your position? Are there expenses that can be reduced or eliminated? Can you look at sourcing more affordable supplies?

Look at the overall forecast and see how you are tracking throughout the year compared to the previous year. Keep the forecast on hand throughout the current year so that you can update it with actual results and look at any variances. Consider the drivers causing these variances throughout the year. The forecast is an annual task but can help identify issues throughout the year. Continue to think critically about variances to look for possible areas for growth or risks to your business.

Getting a good forecast sorted now will help with setting forecasts for all future years as you will have a strong base to work from and will need to invest a lot less time and money each year.

Three Ways to Transform Information into a Forecast and Future-proof Your Business

Option One:Do it yourself.

Going at it alone is obviously the cheapest option. Export your Profit & Loss data into a spreadsheet (a template spreadsheet is available free to all MBP clients so just email us and ask). Then add in all of the data that isn't included in your P&L, like loan repayments, drawings, and asset purchases or sales. The MBP template is a great tool for business management so keep it handy throughout the year so that you can keep an eye on how your forecast is comparing to your actual results.

Option Two: Use software.

There is a vast range of software to choose from when looking to make budgets, forecasts and financial plans. Depending what accounting software you already use, you may be able to add-on a forecasting feature or export your data into a separate program. This cuts down on data entry and speeds up the overall process so you can quickly get back to the work you enjoy.

Option Three: Get a Hand from a Professional.

This is the easiest way to get a responsive and reliable forecast but you can't outsource all of it. You are the only one with firsthand insight into how your business operates so you need to be actively involved or a good portion of the benefits will be lost. However, a professional can offer insight and options that you may never have considered and you will likely end up with an end result that is superior to going at it alone.

MBP are committed to the success of our small business clients and as such we offer a comprehensive and affordable cashflow forecast planning service. Get in touch today for a quote tailored to your individual needs. Generally, we offer our cashflow forecasting services for between $275 and $995 plus GST, depending on the level of planning, research and responsiveness required. Annual financial forecasts are included as part of our 'Mercer Assist Plus' and 'Mercer SME-CFO' service packages. These packages are designed for small and medium businesses and offer you all your compliance and advisory for affordable fixed monthly payments.

This advice is general in nature. Every situation is unique and requires tailored advice. MBP has the expertise to guide you through the forecasting and planning process. For a free consultation and a no-obligation quote, contact our team by calling (07) 378 6655 or emailing your inquiry through to mailbox@mercerbp.co.nz

Once the dust settles, the silver lining of this defining moment in world history will come into sharper focus. Although businesses usually look for stable markets in which to invest, volatility marks opportunity. No matter what the scaremongers keep peddling, there is an opportunity here, not just for the people of the United Kingdom, but for the entire world to embrace. This post is just my attempt to vent some frustration at the over zealous reporting of the issues and the scaremongering surrounding this historic event.

The people of the United Kingdom have proven their nation to be one of the greatest democracies on the planet and voted to leave the European Union. It is now time for the divisive campaigning to cease and the reality to sink in. There is no point in people continuing to scaremonger over global economic collapse, adjustments to the markets are necessary, the size of the EU economy is set to shrink by about 18% while the UK is set to regain its position as one of the largest and most powerful independent political and economic powerhouses on the planet. Under such circumstances the status quo is an impossible position to sustain.

The dramatic effect of the stock market sell-offs of the past 24 hours has been a self-fulfilling prophecy. The global media has been whitewashed for weeks with scaremongers peddling their fear of global collapse if the outcome of the referendum was in favor of the leave campaign. The British Pound is still the most valuable currency on the planet, although you may be forgiven for thinking it was comparable with the Zimbabwean currency given the rhetoric being flung around by some.

I recently had the opportunity to spend a few weeks in the UK and on many occasions the discussion turned to the topic of the referendum and the potential of the 'Brexit'. Following these discussions, with people who work across the EU and benefit in one way or another from the common market, I am not at all surprised by the outcome. One such discussion centered on the frustration of farmers being told by the EU bureaucrats what shape and size of hay bales they could use to feed their stock. With many having made the same switch as New Zealand farmers to the larger and more efficient round bales, they will be forced to spend millions converting back to the smaller and less efficient conventional bales. The financial impact of this and similar rulings will put additional pressure on a once proud and profitable industry already feeling the squeeze under continued EU regulation on every facet of their businesses and livelihoods.

There is real anxiety among the people of the UK regarding the impact the EU is having on their country and the ability of their elected officials to have any real influence with the bureaucrats in Brussels. The EU has failed the people of the UK.

New Zealand and the EU

For decades the EU and the EEC has had a massive impact on New Zealand, our economic and social policies in particular. When Britain first joined the EEC we were in a similar position to that facing the UK today. We had only a couple of short years to completely cut the apron strings and pivot away from mother England to develop new economic ties and secure or national prosperity. This forced successive governments to make some very tough decisions and we may still be dealing with the fallout from the resulting social policy and economic changes implemented in the turbulent decade or so that followed but we eventually thrived under the pressure to change tac and are in a more economically diversified and overall stronger position for it. I have no doubt that as the process of 'Brexit' moves forward the benefits will come into sharper focus for all, including New Zealand. There will be short term upheaval but the UK will undoubtedly be more prosperous down the road once out from under the shadow of the EU.

The EU is one of the most protectionist and heavily regulated markets on the planet. The suggestion by some that the decision for the UK to leave is a backward step in global free trade couldn't be further from the truth. The UK now has the freedom to pursue market access on its own terms, to source products and talent from wherever it wants on terms that best serve its consumers and producers. It will be a nation reborn, capable of expanding its global influence while pursuing all possible opportunities for its national growth and prosperity without being chained to the backward anchor states of the EU.

Looking Forward

The UK and the European Commission will soon have to start proceedings under Article 50 of the Treaty on the European Union. This gives the UK, the EC and its remaining 27 member states up to two years to come to some agreement as to how the departing member will continue to interact with the EU. The scaremongers would refer to this as a volatile period of uncertainty. The reality is that all EU Treaties currently applicable to the UK will continue in force until the new agreement is put into force. If no agreement is reached by the end of the two year negotiating period (which can be extended if the negotiators feel like dragging it out longer), the UK leaves with no agreement to replace the Treaties. However, it is in the political and economic interest of all of the parties for there to be an agreement at the end of the negotiating period or as soon as bureaucratically possible.

Once out of the EU, the United Kingdom is set to be the fifth largest economy on the planet, the power of such a position can not be understated. They may no longer have preferential access to the EU markets but they have gained the freedom to negotiate with whomever they wish, including former key trading partners, such as New Zealand. The impending volatility is an opportune time for New Zealand and all our local producers to break into trillion dollar market with tens of millions of consumers with billions to spend on our products and services.

I look forward to the opportunities for the UK and New Zealand with great anticipation. This is an opportunity to improve the global economy into one with greater choice and prosperity for all. All economies around the world are stronger with more opportunity, not less.

The EU has stifled the UK for long enough. Its time for the lion to wake and define a new era in global opportunity and prosperity.

Any views expressed in this post are strictly those of the individual writer named above and may not necessarily reflect the views of Mercer Business Partners Limited, the MBP Group, its Shareholders or Directors. Because market and economic conditions are subject to rapid change, comments, opinions and analyses are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy.

The entire accounting, tax and financial reporting industry is in a period where there are constant waves of change. It is important that any professional you engage is looking forward to these future waves rather than staring at the shoreline waiting to be swamped.

There are opportunities for both clients and accountants with each wave of change. Being able to see what is coming and ride the change rather than fight it is key to maximising the benefit for small and medium sized businesses. It is important to spot if your accountant is moving with the times or is stuck in the sand. Here are a few things to look out for:

OUTDATED SERVICE, OUTDATED RESULTS?

Does your accountant have the ability to be aware and adaptable to emerging trends and innovations that could save you time and money? Or have they simply continued to process you through the same old way every year? Your accountant should be bringing the many important changes effecting you to your attention, if they aren't ask them or have a talk to someone who is more engaged with both their client base and the trends.

DEVELOPING CAPACITY FOR CHANGE

Taking time in the present to allow for productive change in the future is key. A future ready accountant will be more than willing to help you up skill on your existing systems so that any additions in future will be able to be implemeted in an optimal environment. Firms like MBP offer free assistance to their clients on cloud based systems such as Xero so that they are confident in their use of the software and are able to maximise the benefit from the base system and any appropriate add-ons.

STRATEGIC THINKING

When was the last time your accountant or advisor had a discussion with you about the performance and future plans for your business? In this constantly changing environment it is important to have a collaborative approach to solve problems, to innovate, and to future-proof your operations. Regular communication is important and is the base of any good accounting and advisory service.

CORE UNDERSTANDING

Are you confident that your advisor understands your core beliefs and values? The key to optimising the level of service is to have a fully engaged relationship between client and accountant, with a solid understanding of the clients core values. Many small business owners have very particular views on how they want their businesses run and how they want to progress in the future. Understanding this is key to offering the right balance of services and recommending the proper changes for your business to embrace to put your plans to best effect.

Keeping an eye on the things above can help you to ride the waves of change and ensure that you are in the best possible position to benefit from continued improvements in tax and accounting.

If you want to work alongside a future ready firm that has your best interests at heart and willwork collaboratively alongside you to achieve your goals then give the team at MBP a call toady on (07) 378 66 55. Our staff are always willing to have a free, no obligation chat with you about how we can help you in this constantly changing world and ensure you keep your head above the water.

Navigating your taxes can be a nightmare for anyone but small businesses are exceptionally vulnerable when it comes to dissecting tax issues and making optimal decisions for financial health. The best time to consider your tax position and plan for the inevitable isn't at the end of the year, or even the start - its all year long.

A few simple strategies, applied throughout the year, can help to minimise your tax headache at year-end.

TRADITIONAL TAX PLANNING

Traditional tax planning involves keeping an eye on all the comings and goings throughout the year and attempting to maximise all possible deductions and credits while deferring as much income as possible. Most small businesses are cash-basis, which means they declare income when it is received and deduct expenses when they are paid. Therefore, expediting payments for expenses while deferring chasing up debtors at year end can potentially improve your tax position.

However, if you are projecting even better financial performance in the next year it may be wise to declare as much income as possible in the current year so as to avoid any nasty surprises in the next year. It may also be wise to delay any major capital projects until the time you project greater income levels to support the added expenditure and to avoid an upset to your cashflow.

TAX IMPLICATIONS OF FRINGE BENEFITS

Fringe benefits such as a company car, meals and employee insurance packages can be great ways to attract and retain talented staff to your business. However, all of these items have special rules that relate to their taxable treatments. Understanding the tax implications of providing these sorts of benefits up front is important to avoid a shock at year-end.

Not having a clear understanding of the taxable nature of fringe benefits and any adjustments that need to be made at tax time can be a real burden on a small business and may unexpectedly increase your taxes payable.

CONSIDER DECLARING YOURSELF A SALARY

If you are self-employed and living off the drawings you take from the company, it may be wise to consider declaring yourself a salary and making the appropriate monthly PAYE payments to the IRD. This may have the dual impact of not only spreading your personal tax obligations across the full year but will also enable you to contribute towards your retirement via KiwiSaver deductions if you are a member of a KiwiSaver Scheme.

None of us can work forever, no matter how much we love our jobs. If you don't currently have any plans for your retirement it's worth having a discussion with an expert to help you navigate the options and choose the correct path that will serve both your business and personal financial health now and in the future.

THE SILVER LINING IN A LOSS

Most small businesses will make a loss during the first few years of operation. This means that the allowable deductions are greater than taxable income. Although many may think this is bad news, a loss can be used to recover any Provisional Tax payments made as well as prevent any additional tax payments at year-end. If you operate a group of companies with a common shareholding, you may also be able to use the loss from one venture to offset the taxable profit in another.

Any losses not used in the current year can be carried forward and used against future years taxable profit. It is important to correctly record any loss in your tax returns, as well as any losses you have to carry forward from previous years. Failing to record these properly may result in you losing these losses and their tax benefits will be irrecoverable.

INVEST IN YOUR BUSINESS

Tax planning shouldn't be a year-end scramble, it should involve a consistent, yearlong conversation with your accountant. It's better for your businesses continued financial health, and your personal sanity, to work with a professional who can provide meaningful advice and discuss your options with you. Establishing a strong relationship with an accountant or tax advisor will save you significantly as your business grows.

The above discussion is general in nature and may not be appropriate for you or your business. Professional advice should be taken prior to making any decisions. For a comprehensive discussion, specific to you and your business, give our team a call on (07) 378 66 55.

Mercer Business Partners (MBP) was established to provide affordable, quality accounting, advisory and tax services to a diverse range of clients. As MBP grows, our ability to translate our ambitious mission, governed by our core values, into a cogent day-to day strategy becomes essential. Truly great companies retain a deep, intimate sense of shared understanding even as they expand.

We are building a growing enterprise on the strong base of the commitment we have to our clients to deliver a better, more cost effective and engaged level of accounting and advisory.

We are here to provide the essential assistance that small businesses and individuals need while delivering true value to our clients, our staff and the community at large. Our firm and our staff are engaged members of every community that we operate in. We recognise the value in fostering strong, financially literate communities and strive in both our daily work and our various non-profit endeavors to achieve great results for everyone we work with.

As we expand and take on an ever more diverse range of clients, we pride ourselves on not hiding behind any small print. All of our services and engagements are outlined in plain English and personally explained to our clients if any clarification is required. Building a base of mutual understanding and trust is essential to fully engage with our clients and to give them the best possible service, optimised to their individual circumstances.

We take pride in what we do. Ours services are a tool for our clients to use to maximise their success and we thrive on the daily challenges that our clients throw our way.

I encourage you to drop into our office, give us a call or to send us a message and see what a difference it can make to truly engage with an accounting and advisory firm dedicated to your success.