Are storm clouds on the horizon?
IF YOU see black clouds on the business horizon, now is the time to prepare for a storm.
Hopefully, it will never come, but there is no better time than now to prepare for the possibility.
A major cause of financial distress is too much
borrowing. Calculate the percentage of your
borrowed money to the true
or slightly reduced
worth of what you own. Be like the punter on the
sharemarket and knock something off the
calculated value of your assets, just in case. If bad
times come and revenue falls, consider how you
would be placed.Control
To steer your business through rough seas, it
helps to know where you are going. Some costs vary with sales. An accountant’s biggest variable cost is wages, but many tradesmen with a small business, for example, will find it is mostly materials. You can monitor your business by adding up your sales, deducting your variable costs and arriving at, what we term, gross profit.
sales falls. We call this the gross profit percentage.
You will find most of the costs of running your
Monitor your gross profit percentage regularly
business are pretty well out of your control.
and set yourself realistic targets, so you can
Examples include rent, telephone costs, insurance
discipline yourself not to give too much away.
and so on. We call these the fixed costs of the
This article has been written not because we are
If the fixed costs of your business are going to be
pessimists, but to alert you to the power of
$20,000 per year, add what you need to take out of
accountancy. We have many measures of business
the business for living costs, then you’ll know how
performance and we can help you to keep control
much gross profit you will have to make.
of your business and its profitability. Implement
You can also calculate the cost of the materials
your systems and get used to using them – and if
you use as a percentage of your sales. If you are
the storm never breaks you will still be better off.
running a shop you will need to take account of the
Remember, when politicians talk of a technical
change in your stock level. In difficult times you
recession, there is a fair chance the outcome will be
will be under pressure to cut your profit margin in
more than merely “technical”. When the 1918 flu
an attempt to increase sales. This means the
epidemic was rampant, the authorities deliberately
amount of gross profit expressed as a percentage of
Low gear preferred for economic speed bumps
exercise. If the ratio of borrowed money to the
money you have invested is high, we say the
If so, have a look at the ratio of the money you
have borrowed to the total value of your business.
High gearing is fine for good times, but can be a
If business deteriorates you will have to maintain
disaster when things are not so brilliant. Should
you be looking at changing gears? In bad times
If you own several rental properties, do the same
Deposit can help cash flow
AS A builder, plumber, electrician or any other
Why should I take the risk of your business
skilled trades person who buys large amounts of
material, are you in the habit of asking your clients
You can check out my credit worthiness.
Here is a list of references. Please feel free to
Hopefully, the answer is “yes”, because a deposit
can help your cashflow. In our experience most
I do not wish to pay you directly, but I would
trades people get deposits ranging up to 50 percent.
If your business is in any trouble, be careful about
solicitor’s trust account on the basis it would
accepting a deposit and then using some of it for
be paid to you when I have confirmed the job
your personal costs. If your business fails, you will be liable for the debts to your customers.
If you are a limited liability company, you have
If you are getting some building done and, for
protection only if you had first checked, before
example, your kitchen joinery supplier wants
accepting any deposit (each time), to make sure
a deposit, try getting the bill charged through
your business was technically solvent. If you do
the builder’s account. This often works as the
not keep documentation to show the company was
solvent at the time you received a deposit, the
Try a token deposit as a compromise, with the
directors of the company can be personally liable
balance of the deposit payable when goods
for the debt to the customer, regardless of limited
If you are wearing the hat of a customer, avoid
If you pay a deposit and the supplier goes broke,
giving a deposit. Some suggested points to raise
you rank as an ordinary creditor and might never
Government proposes to
reduce compliance costs
THE Government plans to introduce measures to reduce the costs of tax compliance as part of its 2008 Budget.
THE new GST 103H form
does not provide for signing
• Raising thresholds for bi-monthly PAYE returns and annual FBT
on the front. This is because
the back of the form has
• Increasing the threshold for 6-monthly GST returns to $500,000
parts two and three, which
for some clients will not be
• Increasing the threshold for low-value trading stock to $10,000.
It also looks as though the $50,000 threshold for shares etc in
Be careful to sign the back
foreign companies might be raised, but we have seen no
of the form even if parts two
mention of applying similar relief to family trusts.
and three do not apply to
The proposals are also silent about raising the use of money
interest threshold for companies and trusts, which at present is
An unsigned form can be
stuck at a measly $2500. The equivalent in the United
treated as not having been
Kingdom is $500,000. In view of the extraordinarily high
received and leave you
interest rate the department can charge for use of money
exposed to future risks.
interest, a more realistic threshold should be set. This is a big
Sometimes mistakes are
cost to small businesses, which are not equipped to monitor
made and perpetuated.
their profitability in the same way as major corporations. Is it a
The Inland Revenue
Department is entitled to
There is no mention of adjusting mileage rates, which have
recover unpaid tax, in these
not been reviewed since 1996. While employees have been
circumstances, for a little
given some relief, the self-employed are still stuck on the old
over four years.
Anything beyond that time
Proposals to make the entertainment expenses and
cannot be recovered as long
deductibility of legal costs more taxpayer-friendly will be an
as you have been honest with
improvement. The Government is also looking at easing the
rules on FBT as it affects motor vehicles. It also proposes to
Stress relief for the
Check your KiwiSaver
A CLIENT came to see us because he was stressed. We suggested he
visit a doctor, but we also listened to his tale and offered some
He is a consultant working from home. We asked him to analyse his
time, so he wrote down what he did the previous day. It looked
- 11 am to 11.30 am moving car and looking for a park
them, and make sure all the money they and their
- 4 pm to 5 pm miscellaneous non chargeable
Consultants are usually well paid. He was one of them.
• A central city park might be expensive but would be cheaper than
wasted consultancy time looking for a park.
• Charge clients you visit a share of your travel costs.
• Scrutinise the hour 4 pm to 5 pm. It can be easily wasted. Make it
His wife also works from home and would be happy to help in any
period is in the year specified. For example, if a
• Collect the mail from the Post Office box and post mail.
• Open the mail, and keep out cheques for banking and bills to pay.
• Filter telephone calls, reducing many interruptions when he works
the employer contributions for the whole period starting
If he did not have a wife who had some spare time, he should still
pass this type of work to someone else to do. He could:
• Compile a list of work to pass on to his wife and have a meeting
First home buyers
• Use a dictating machine for noting jobs he can delegate and to save
When you work from home, you must manage your time. Set a
KiwiSaver incentives, both
monthly income target based on an acceptable number of hours of
work. For example, if you value your time at $100 per hour and
expect to produce 130 hours work per month, then you should usually
invoice at least $13,000 each month. Ultimately, it is not the hours
By reducing the non-chargeable work, you will have more spare
time – and reduce your intake of Prozac.
Learn the art of saying ‘no’
What happens if a contractor is subsequently ruled to be
FOR most of us in business, there never seems to be enough time in
the day. We are often asked to serve on committees or help in some
other way and are reluctant to say “no”. Sometimes the invitation is
made by an organisation with an inferred reward of being offered
some business. These rewards rarely materialise. Perhaps we need to
break the “yes” habit and say “no” more often. Be more selective
Source deduction payment means
FBT as an employee
ANYONE who receives source deduction payments is an employee
for Fringe Benefit Tax purposes. This can possibly include self-
employed people from whom your firm is deducting withholding tax.
Providing a vehicle to contractors can be the same, for FBT
purposes, as it would be if they were employees.
When the employee is also an owner of the company, it is wise to
have a directors’ minute agreeing to prohibit the private use of a vehicle, in addition to the standard letter from the firm to the
employee as recommended by the IRD. Get the minute signed by the
1st Instalment of 2009
The quarterly check to see the employee is not using the motor
(December balance date)
vehicle is an idea generated by the IRD. It is not backed by case law. Nevertheless, you should document enough evidence to show you have confirmed the employee is following the instructions. You could check on petrol consumption, for example.
You can have a vehicle partly owned by an employee and partly
Fringe Benefit Tax return
Based on a quarterly adjustment of 5 percent of vehicle cost, if the
employee has paid for a third of the vehicle, the fringe benefit liability
is reduced by one-third of 2.5 percent of the cost of the vehicle. So a vehicle costing $12,000 is subject to FBT for the quarter on only two-
3rd instalment 2008
thirds of 2.5 percent of the cost of the vehicle (to account for the
employee contribution), plus 2.5 percent of the cost of the vehicle.
(June balance date)
DO YOU measure your responses from Yellow Page ads? How many of
1st instalment 2009
those responses turn into sales? Yellow Page advertising is expensive. Some people advertise, get responses and never follow up. They have
more business than they can handle! So why do they pay for advertising?
(March balance date)
Examine your return on your Yellow Page advertising. Keep records. If your advertising works, that’s fine. If it doesn’t, save your money.
An opportunity to
A plumber gets caught out
be a specialist?
IF YOU find a difficult task and
– no card, no business
no one likes doing it, you have an opportunity. Learn to do
All information in this newsletter is, to the best of the author’s knowledge, true and accurate. No liability is
assumed by the author or the publisher for any losses suffered by any person relying directly or indirectly
Decreto Número 57-2008 Hoja Número 1 de 20 DECRETO NÚMERO 57-2008 EL CONGRESO DE LA REPÚBLICA DE GUATEMALA CONSIDERANDO: Que la Constitución Política de la República de Guatemala, dentro de sus fines considera la vida, la libertad y la seguridad de las personas como fines del Estado, teniendo a la persona como sujeto y fin del orden social, organizándose para que ésta
Malrotation and volvulus Information for families Great Ormond Street Hospital for Children NHS Trust This leaflet explains about malrotation and volvulus, how they can be treated, and what to expect when your child comes to Great Ormond Street Hospital. What is malrotation? Malrotation is an abnormality of the bowel, which happens Gallbladder while the baby is developing in the