Tuesday, 17 November 2015

Technology and your accountant could be the difference between success and failure

Want to succeed as a small business owner? Have a mentor or an accountant. 

Xero's recent Make or Break? report shows that asking for help from mentors and advisors, and having a good relationship with your accountant, means you have a leg up. The research was timed to coincide with Global Entrepreneurship Week which kicks-off today.

Surveying 2,000 small business owners across the US and the UK, we found that those owners who collaborate with an accountant or bookkeeper, 42% of survivors describe that relationship as "excellent," compared to 27% of those whose company failed.

This statistic shows just how important accountants are to the ongoing success of the small businesses they serve.

Those who succeed also invest in technology for increased productivity in finance. It was also found that they dedicate funds to marketing and customer service. Nearly six in 10 survivors (58%) use software to manage their finances vs. a marginal 14% of failures. Plus just shy of a third (31%) allocate resources to improving customer service, versus 20% of those in the failed camp.

Of those owners who listed a business issue as a reason for failure, a whopping 65% blamed financial problems like cashflow or access to capital. It highlights just how important the relationship between a small business and their accountant is. Their livelihood actually depends on it.

The Xero effect

Lifting survival rates and helping small businesses thrive is our business. The Make or Break? report found US and UK businesses that use Xero are markedly more likely to succeed. In the US, 95% of Xero customers survive their first year vs. 79% for the average. In the UK 97% of Xero customers make it that far compared to an average rate of 91%.

The pattern becomes even more distinct over longer timeframes. At the five-year point, 85% of Xero customers in the US are still up and running, while the industry average is 50%. In the UK the difference is greater still, with 88% of Xero customers operating after five years, compared to an industry average of just 41%.

With technology automating many of the admin tasks which previously sucked up accountant's time, they're able to act more like an advisor to their customers.

The flexibility provided by cloud-based software coupled with mobile is transforming how accountants help their customers. It's also eliminating a lot of the guess work, especially when it comes to forecasting.

Sometimes small business owners just need a little help from their number-orientated friends.

Working with a mentor

Running a small business can be a lonely job. Having access to a friendly ear to brainstorm strategy or get advice can go a long way towards ensuring the future stability and viability of your company.

Xero's research also revealed that a third of successful entrepreneurs have reached out to a mentor or advisor compared to just 14% of respondents who ran businesses that had to shutter.

Read the full Make or Break? report.

The post Technology and your accountant could be the difference between success and failure appeared first on Xero Blog.

Friday, 6 November 2015

Fringe benefit tax: Private use of vehicles

Is your employee about to use a work vehicle for their Christmas holiday road trip? Such a perk is known as a fringe benefit – and is taxed.

Businesses often provide perks for employees in addition to their salary or wages. One example is having a vehicle available for private use by employees.

The most important point to remember is you’ll have to pay FBT, whether or not your employees actually use the vehicle. Just having the vehicle available for their private use makes it a fringe benefit. You will need to register with Inland Revenue for FBT and file FBT returns.

What is ‘private use’?

Private use includes travel by an employee from or to their home, and any other travel that involves a personal or domestic element.

If you’re a sole trader or partner in a partnership and you use a business vehicle privately, you don’t have to pay FBT. But you will need to account for the private use by making an adjustment in your income tax and GST returns. Use a logbook to keep track of your business use.

Keep records

If you allow private use of a work vehicle by an employee, you must keep records that:
  • identify the vehicle, including make, model and registration
  • support the market value or cost price
  • show how you’ve calculated the liable and exempt days, with supporting documents for any exempt days
  • keep copies of any private use restriction (usually a letter or notice to the employee)
  • show how any employees’ contributions for each quarter were calculated, with supporting documents.

Employee contribution

If the employee pays towards having the fringe benefit, that amount is deducted from the benefit received when working out its taxable value. And it must be recorded as income for both GST and income tax purposes. 

CASE STUDY:

Michael’s employer gives him unlimited use of a company vehicle. He decides to visit his relatives in Taupo for Christmas. The petrol costs $170 for the trip and he pays for this himself.
He gives the receipt to his employer, as it’s needed to work out the taxable value of the benefit. His employer can’t claim the GST on the petrol or include the amount as an expense against income.
When working out the taxable value of the benefit, Michael’s contribution, ie the petrol money, is deducted. If Michael’s employer reimburses him in full for the $170, that amount will not be deducted.

Exemptions

These can apply when the employee stores a work-related vehicle at home but isn’t allowed to use it privately.

Not all business vehicles are work-related vehicles for FBT purposes. To qualify the vehicle will generally have to be a ute, van or a truck that isn’t principally designed to carry passengers.

To qualify for work-related vehicle FBT exemptions you have to meet four requirements. Check Inland Revenue’s  Fringe benefit guide (IR409) for details.

Partial exemption

If you let an employee use the vehicle on certain days, such as Saturdays, Sundays and statutory holidays you may be entitled to a partial rather than a full exemption from FBT. This means you only pay FBT for the days the vehicle is available for private use.

Daily exemption

Even if an employee can privately use a vehicle, it may still be exempt from FBT on certain days due to:
  • emergency calls
  • out-of-town travel
  • unavailability of the vehicle, eg when it’s being repaired.
For more information on FBT rates, calculating FBT and completing FBT returns, read Inland Revenue’s  Fringe benefit tax guide (IR409).

Article first appeared on the business.govt.nz website.

Holiday pay and entitlements: How to calculate

The holiday season is a chance to relax with family and friends. Take the time to calculate and pay your staff what they’re entitled to, and everyone will have a merry Christmas.

Public holidays, annual closedowns, different pay rates – there are many considerations in the run-up to Christmas apart from buying presents.

Employees are entitled to a paid day off on a public holiday if it would otherwise be a working day.
Many businesses have an annual closedown over the Christmas period, when staff have to take time off, even if they don’t have any annual leave.

If public holidays fall inside your annual closedown period, you must pay employees for them if they're on days they’d usually work.

This Christmas season two public holidays – Boxing Day and January 2 – fall on a Saturday, so this has implications for employees.

For staff who don’t work weekends, the first workday after these dates will be treated as their public holidays – so they won’t have to work on Monday 28 December 2015 and Monday 4 January 2016.
If your employees usually work weekends, then there are two options:
  • They can get the Saturdays as paid days off.
  • If they work on those Saturdays, you must pay them time and a half and allow them to take a paid day off later. Read about days in lieu in Business.govt.nz’s Holidays and leave section.

Less than a year employed?

If you have an employee who has been in the job for less than 12 months, they still have to take time off during an annual shutdown.

Here’s what you should do for these new employees:
  • Step 1. Pay them 8% of their gross salary earned up to the shutdown start date, less any annual leave already taken.
  • Step 2. Change the date they become entitled to annual leave to one year on from the start of the shutdown.
  • Step 3. Let them take paid annual leave in advance (you both have to agree to this).
  • Step 4. Don’t forget to allow for paid public holidays if these fall on a day they usually work.
You must give employees 14 days’ notice of the closedown.

Calculator

With the right systems in place, you shouldn’t have too much trouble working out what to pay your employees when they take leave. It’s important to:
  • Keep all time and wage records up to date and accurate.
  • Understand what your employees are entitled to – especially those who work irregular or part-time hours.
Get your calculations right by using the holiday pay tool on the Ministry of Business, Innovation and Employment’s website.

Public holidays over Christmas 2015/New Year 2016

  • Friday 25 December – Christmas Day
  • Saturday 26 December or Monday 28 December – Boxing Day
  • Friday 1 January – New Year's Day
  • Saturday 2 January or Monday 4 January – Day after New Year's Day
There’s more information on leave during an annual closedown on Business.govt.nz, and also information on public holidays, including transferring days.

Article first appeared on the business.govt.nz website.

Tax on Christmas parties and presents

It’s coming up to that time of year when you might be planning a staff Christmas party. It's great for morale and a chance to mark the end of the year. But what are the tax considerations?

You may be able to claim as business expenses events such as Christmas functions or giving gifts to employees.

However, you may not be able to claim all of the costs, and they may also be subject to fringe benefit tax (FBT). FBT is a tax paid on benefits that workers receive as a result of their employment.

You may be able to claim 50% of your party expenses in your GST and income tax returns if the expenses are related to your business. But there’s also a significant private element.
Party expenses you can claim 50% of can include:
  • venue hire
  • food and drink
  • entertainment
You can generally claim 100% of the cost of gifts, such as food baskets or event tickets, as a business expense. But you may need to pay FBT on such gifts.

If you provide other types of goodies, like accommodation in a holiday home, use of a corporate yacht or lunch at a restaurant, then these come under entertainment expenses – and are 50% deductible as long as they’re business expenses.

Business entertainment rules are outlined in the Inland Revenue’s Entertainment expenses guide (IR268).

If you give your employees some sort of entertainment – like a voucher to use at any time – you may need to pay FBT.

There are detailed  rules about FBT, including for entertainment expenses. There are some thresholds, so you may not always have to pay FBT if you only provide minimal fringe benefits. Check Inland Revenue’s  Fringe benefit guide (IR409) to be sure.

If you provide Christmas food and drinks at a local venue, the cost is not subject to FBT – because employees can’t choose when and where to enjoy the benefit. However, the rules for entertainment expenses will apply. Inland Revenue’s  Entertainment expenses guide (IR268) will help.

If you give employees vouchers for entertainment, meals or gifts and the employee can choose when or where to enjoy the benefit – and you’re not giving the benefit as a necessary part of their work duties – then these are subject to FBT.

Check out Business.govt.nz’s new tax and finance section for more on FBT.

Charity at Christmas

Are you thinking about some Christmas charity? You can deduct 100% of the cost of entertainment you give to the general public for charitable purposes. For example, if your company donates food for a Christmas party at a children’s hospital, that expense is 100% deductible.

And if you or an employee plans to use a business vehicle for a private trip over the festive period, check to see if you have to pay FBT on this benefit.

Article first appeared on the business.govt.nz website.

Tuesday, 23 June 2015

More detail in NZ Companies Office annual returns

From 1 July, annual returns to the Companies Office must include extra information about company directors.

Filing an annual return will remain a quick and easy process, but you will need to take the time to gather the following details:
  1. Date and place of birth for each director of the company you’re filing the annual return for (don’t worry – this information will not be publicly available).
  2. Details of an ultimate holding company, if applicable, including where the holding company is registered. (If you’re unsure what an ultimate holding company is, check the shares and shareholders section of the Companies Office website.)
If this information is missing, the annual return will not be accepted and the company may be removed from the register.

Remember, by 28 October 2015, all New Zealand incorporated companies must have at least one director who lives in New Zealand, or a director who lives in Australia and who is also a director of an Australian incorporated company.

See Companies Act: what to do and when to do it for more information and case studies.

Thursday, 16 April 2015

Business.Govt.NZ - Compliance Matters

The business.govt.nz website has now added a compliance section – Compliance Matters.

business.govt.nz/compliancematters
The purpose is to have all the related information in one place easily accessible to businesses.
You can search various topics (employment, business growth or closure, health and safety etc) and limit these to specific industries (e.g. construction, accommodation and food, manufacturing etc).

You can then select the items/topics that are applicable to you and make an "action list".

Payroll Legislation Financial year changes

Changes to payroll legislation happen every year that you need to be aware of.
Changes for the year ahead include:

  • Increase in the maximum liable earnings from $118,191 to $120,070 for the purposes of calculating the ACC Earner levy.
  • Minimum adult wage is increasing from $14.25 to $14.75 from 1 April 2015.
  • The starting-out and training hourly minimum wages will increase from $11.40 to $11.80 an hour.
  • Various amendments to the Employment Relations Act 2000 also came into force on 6 March 2015. Employers particularly need to be aware of the changes regarding Flexible Working Arrangements and Rest and meal breaks.

Tuesday, 7 April 2015

10 things you need to do before the Mondayised ANZAC Day

The Holidays (Full Recognition of Waitangi Day and ANZAC Day) Amendment Bill or, as it is more commonly known, the ‘Mondayisation Bill’, will have its first big impact on ANZAC Day.

Here are 10 simple things you can to do to make sure your business stays compliant:

  1. Know what’s new. The ‘Mondayisation Bill’ states that from now on, when Waitangi Day (6 February) or ANZAC Day (25 April) fall on a weekend, the public holiday must be treated as falling on the following Monday for employees who would not otherwise work on that Saturday or Sunday.
  2. Know what stays the same. For employees who would normally otherwise work on that Saturday or Sunday, the public holiday must still be treated as falling on that day. If you close for the holiday, you must pay these weekend workers their regular holiday pay. If your business remains open for the holiday, employees are entitled to at least time and a half pay and a whole day’s alternative holiday (day in lieu) at a later date.
  3. Get your ducks in a row. There isn’t much time to get ready. The Monday holiday will first be effective on ANZAC Day 2015 and Waitangi Day in 2016.
  4. Meet your holiday-entitlement obligations. If your employee works on a day that is designated as a public holiday for them (either the weekend day or the Monday, depending on their normal working days), they’ll receive time and a half for the hours worked and become entitled to an alternative holiday.
  5. Mind your roster. If your employee normally works on the day the holiday falls on (for example, he or she is normally rostered to work every Saturday), you can’t take them off the roster for the holiday weekend in an attempt to get out of paying them holiday wages.
  6. Don’t get caught out. Failure to recognise your employees' holiday entitlements, or taking employees off of the roster to avoid paying holiday pay, is a breach of the law. It may lead to enforcement action.
  7. Update your files. After each public holiday you must update the leave records in your employees’ personnel files. Be sure to record when the holiday was taken, if and when a day in lieu (‘alternative holiday’) was taken, if any holiday pay was paid, and when this amount was paid to the employee.
  8. Be mindful of commemorative celebrations. The celebration of Waitangi Day and ANZAC Day (i.e., parades and other commemorative activities) will still occur on the actual holiday date. Keep in mind that it could be important to some of your employees to be able to attend these events.
  9. Remember that you’ve already done this. Certain public holidays were already "Mondayised" under the Act. If Christmas Day, Boxing Day, New Year's Day or 2 January fall on either a Saturday or Sunday (and that day would not otherwise be a working day), then those public holidays have always been treated as falling on the following Monday or Tuesday.
  10. Don’t panic. This isn’t going to happen often. Waitangi and ANZAC days only fall on a weekend about twice every seven years.
Get more information about:

More detail now needed on your company annual returns

New Zealand companies will need to provide additional information to the Companies Office as a result of changes introduced by the Companies Amendment Act 2014.

The changes have been brought in to prevent the misuse of the Companies Register, and to give the Registrar of Companies extra powers. They are designed to improve the quality and integrity of the information held by the Registrar about New Zealand companies, and to assist the Registrar in holding those who misuse the register to account. While some changes are already in place, others are being phased in throughout the year to give everyone enough time to prepare and meet their compliance obligations.

The main changes

  • New Zealand incorporated companies need to have a director who either lives in New Zealand or Australia, and if they live in Australia, that individual must be a director of a company incorporated in Australia.
  • Directors must provide their date and place of birth to the Registrar - this information won’t be publically viewable.
  • Companies must publicly disclose their ultimate holding company, if they have one.
  • The Registrar will have the power to require companies to confirm that information provided to the Registrar is correct. 
  • The Registrar will have increased enforcement powers that include the ability to issue notes of inactivity or warning against companies on the register, to identify controllers of companies, and to de-register companies and prohibit persons from managing companies in certain additional circumstances.

Important dates

1 May

From this date, all applications to incorporate a New Zealand company will have to: 
  • provide all directors’ date and place of birth
  • have  at least one director that either
    • lives in New Zealand, or
    • lives in Australia and is a director of an Australian incorporated company
  • provide details of their ultimate holding company if applicable.
    New Zealand companies incorporated prior to 1 May 2015 will have until 28 October to comply with the new director requirements. 

1 July

From this date New Zealand companies incorporated prior to 1 May 2015 will now need to provide the following information when they file their annual returns:

  • the date and place of birth of every director (this information won’t be publically viewable)
  • details of their ultimate holding company information if applicable.
An annual return will not be able to be filed for a company if this information is not provided.  Failure to file an annual return may result in the Registrar removing a company from the register.

29 October

From this date New Zealand companies incorporated prior to 1 May 2015 must have at least one director who lives in New Zealand or Australia and if Australia, that individual must be a director of a company incorporated in Australia. Companies that do not comply may be removed from the register.

NZ Minimum wage rise on April 1

Workplace Relations and Safety Minister recently announced that from April 1 2015:
  • the adult minimum wage will increase from $14.25 to $14.75 an hour
  • the starting-out and training hourly minimum wages will increase from $11.40 to $11.80 an hour.
This is a good time to review your staff wages, budgets and payroll compliance.

5 key questions to ask yourself:
  1. Have you updated your payroll systems and calculations to reflect the higher wage? You’ll need to start using the new minimum wages in calculations from 1 April, even if that is in the middle of a pay cycle.
  2. Do you have employees on the starting-out wage who need to be moved to the adult minimum wage? If your young employees have been with you for six months or longer, or are involved in the training or supervision of other staff, you must pay them at least the adult minimum wage.
  3. Are your employees who are receiving the training minimum wage still in training? If they are no longer in training, and have taken on a full work-load, you must start paying them at least the adult minimum wage.
  4. Have you budgeted for the increase in pay for your minimum wage employees? Use the Employee Cost Calculator to get an idea of how the increase will impact your costs. You can also use the calculator to estimate the costs of hiring a new employee.
  5. Have you recently reviewed the way you are handling wages and deductions to make sure your payroll is compliant? Use the Compliance Matters tool to discover what requirements apply to you and your business.
If you are unsure how much you should be paying your employees or you think you might be paying too little, you can contact the Ministry of Business Innovation and Employment Contract Centre on 0800 20 90 20.

Wednesday, 18 February 2015

Why my small business switched to Xero

The post Why my small business switched to Xero appeared first on Xero Blog.
From guest author David Koch a small business and finance expert, and co-host of Australian TV show Sunrise.

David Koch on online accounting for small businessI'm not a huge fan of the Super Bowl, but I love seeing the ads. They're always the highlight of the whole event for a lot of people. This year there was a great ad by BMW that showed a clip of two TODAY show hosts from 1994 who were reading an email address out loud. It was obviously the first time they'd done so. They didn't know how to pronounce an '@'. This led to the perplexed duo questioning "what is internet anyway?"

Today's rapid outpouring of technology and innovation often leaves business owners wondering "what is this?" and "do I really need it?" In a lot of cases, perhaps not. Small businesses have enough on their plate without trying to educate themselves on every single new 'life-changing' product or service. But when it comes to online accounting, it truly is a revelation. And in the world of online accounting, Xero is at the leading edge.

Making the switch to online accounting

I've been a small business owner for over 25 years now and have employed teams from five people right up to 70. Bookkeeping used to mean shelves and shelves of folders and actual books. There were days on end spent reconciling accounts, and using a ruler to scroll down pages of transactions (yes, I'm old). At the time, it was just something we had to do. But now, with the beauty of hindsight, it was a nightmare.

After a lot of research into the market, my family business, Pinstripe Media, made the switch to Xero last year. This was because we'd heard so much hype from other business owners, and our accountants, about how easy and how enjoyable it was. I was sceptical at first. How on earth could anyone make small business accounting and bookkeeping enjoyable? Fortunately, I was convinced to give it a go.

Never looked back

Nine months later, and I can tell you without any embarrassment that I love logging on and checking the accounts. I'm a control freak, and Xero's platform really is impressive. Everything is simple, intuitive, and easy to navigate. In just a few clicks, I can see how much money is owed to us compared to what we owe. I can get a P&L for any specified time period – and even just for individual jobs – to compare against other jobs. I can see bank and credit card balances, and reconcile it all straight away.

Our bank feeds come straight into the dashboard. I love the dashboard.
The best part about it is that I can do it all while sitting on the balcony at home. Because these days I'm trying to spend as little time in the office as possible. (That's why you have kids, to take over the family business isn't it?). With the footy season coming up and, a lot of trips to Adelaide and Melbourne, I can keep checking up on things from the road whenever I like. And that's the real beauty of Xero – it gives me not just peace of mind, but the freedom to have peace of mind from anywhere at any time.

So if you're still wondering what all the fuss is about, then give it a go and see for yourself how much it changes your life as a business owner. Because in a few years it won't be "what is internet" jokes playing on Super Bowl ads, it'll be "what is online accounting?" And when that day comes, you can sit back and be proud that you knew all about it. And you may even have your Xero dashboard open next to you.

As a side note, in case the sceptics are wondering, I did pay for my Xero accounting package. We made our decision to switch without contacting them.

Find out how Devine Accounting can help you get online accounting with Xero