cIntyre Flannery Tait - Autumn 2011 Newsletter

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2011 is well and truly with us, in fact it’s almost 25% gone already. Apart from cleaning up the stragglers from last year in a usually unsuccessful attempt to have 100% of our returns filed by the 31^st of March we are also busy with our housekeeping changes for the new year. 2011 brings with it a number of changes not only within the office but also with tax rules changing.

You may have read in our last newsletter that I was going to start a 4 day working week this year. I can report that it has started, and once I get used to the fact that I shouldn’t make a list of things I am going to do on my day off it will be very enjoyable. Usually a Wednesday, but there will be the odd long weekend when family calls in Christchurch.

I also mentioned the transfer of responsibility for the compliance work of some clients. These letters with luck will be out close to the end of March if not sooner. LAQC companies have been high on our priorities and all those clients who have one of these should have received a client alert on the subject, and will also be getting a letter from us letting you know what action we think you need to take. Mark Tait is running this project, so if you haven’t heard and think you should have give him a ring or email mark@mftca.co.nz .

Mark becomes a Director of the Practice effective from 1 April, hence the change in email address. It is wonderful to be able to reduce it down from our old one. We expect to save heaps of typing time!! We will be holding a function to mark (excuse the pun) this auspicious occasion later in April when all the paperwork gets completed.

Our information gathering for your 2011 Financial Statements has begun. Many of you will have received instructions in relation to stock-taking if we felt that was appropriate. We
have also distributed some handy end of year procedures to all those business clients that we expect to be completing financial statements for on the 31^st of March. If you haven’t got either of these documents ring Holly or email holly@mftca.co.nz

Just a reminder that we are scheduling your work based on the month that we have usually processed your information in previous years. These information requests will be spread over the next 4 to 5 months so if you are ready to have your work done and have not received an information request from us, ring Sandra Waitoa or email her at sandra@mftca.co.nz

Business Management Workshops

In the next few weeks a number of our clients will be receiving information about a trial set of Business Management Workshops. These discussion groups have been run by some of our associates and have proved popular with many of their clients. The trial ones will be free of charge.

We will be sending out some background information and an opportunity to participate. If you would like some information contact hugh@mftca.co.nz

Risk and Reward

Employment Law Changes 1 April 2011

Changes to both the Holidays Act and the Employment Relations Act will come into force on 1 April 2011.

These changes are intended to reduce compliance costs, increase business confidence in recruiting new staff as well as speed up the resolution of workplace disputes. The main changes include:

Employees will be able to cash in one week of their four weeks’ leave

Employees who have irregular working hours and pay will now have their holiday, sick and bereavement leave calculated on an average daily pay basis

Employers and employees will be able to agree to transfer taking a public holiday to another working day

The minimum wage will increase from $12.75 to $13.00 from 1 April, while the training and new entrants’ minimum wage will rise from $10.20 to $10.40, effective as of the same date

The 90-day trial period is being extended to all employers (currently limited to those with less than 20 employees). From 1 April employers and employees can enter into an employment agreement which provides for a trial period of 90 days or less. During the trial period the employer can dismiss the employee without risking a personal grievance claim

Employers will have to keep detailed personal files for each employee. These files must contain signed copies of employment agreements, other terms and conditions, handbooks, as well as any intended agreements (even where these have not been agreed to by the employee). These documents must be available to employees on request. Employers have until 1 July to get their files up to the new standard. We estimate that a good number of our clients will have some work to do here! Keep an eye out for our upcoming Wilco Alert on this very subject. We’ll be providing you with an Employee Personal File Checklist, to help you meet the new standards

Union representatives will need an employer’s permission to enter the workplace

Employers will be able to communicate with employees during collective bargaining

Minimum requirements establishing a fair and reasonable dismissal process will be set out in the Act and employers will have a much clearer process to follow. This is great news for our employer clients, who can be fearful of dismissal processes being scrutinised for minor defects

We have been encouraging our clients who employ staff to ensure that they have agreements with all of their employees. Every year we have cases where our own clients get caught by the rules,and every time the employer with no agreements loses it costs them money. An agreement not signed by the employee is better than no agreement at all.

IT IS COMPULSORY BY LAW

Family Trusts

With all the publicity in the past 12 months about family trusts, and the proposed legislation review by the Government it is very appropriate that we are commencing a programme of reviewing the trusts that we are involved in administering.

In many cases where trusts hold investments and or property consisting of a residential dwelling, we are hoping that this will not involve too much. We will be working with the trusts legal advisers to ensure that all the necessary documentation can be found in one place. This is not necessarily the case at present.

Those trusts that are trading trusts or own a number of properties may be a bit more complex and require more time to tidy up the loose ends. We will be in touch.

Tax Talk

Company tax rates dropping

The company tax rate will reduce from 30% to 28% from the 2011/2012 income year (for most companies, 1 April 2011). However, as we have said in the past, this is of little
significance to most of our clients as when the income is transferred to you as shareholders a top up to the 33% personal rate is required. A consolation is that the personal rate now has a maximum level of 33%.

Building depreciation gone

Depreciation deductions on buildings with an estimated useful life of 50 years or more disappear from the start of the 2011/2012 year (for most of you 1 April 2011). New rules have been introduced to ensure the fit-out of commercial and industrial buildings continues to be depreciable.

At last – some GST simplification
Sales of land now zero rated

In the past, whether GST should be added or not to the sale of land, has sometimes been a complex matter. From 1 April 2011 these transactions will be zero rated, as long as the following apply:

The purchaser declares in writing that the property will not be used for residence, is to be used for a GST activity, and

The purchaser is GST registered

LAQC Company Reviews

Mark Tait is leading a review of all LAQC companies to establish what their position is and what is the best option of the three available to take. Each company is being reviewed with the advisor concerned and the best course of action decided on the facts as we know them. In a number of cases he will be following up with the client direct to clarify any issues that may be unclear.

Once the option is agreed upon with the client we will complete the necessary paperwork for IRD and ensure that it is filed and any legal requirements are met.

Cash is King

Without cash it does not matter how profitable a business is, the business will fail. So let’s highlight that again – NO CASH FLOW or SLOW CASH FLOW will over time lead to failure.

Simply put, cash flow is the money coming into, and going out of, your business. You need to take into account not only the amounts of money coming in and going out, but when these movements occur. If a business is unable to pay its debts as they become due, it will not survive.

As many as 60% of businesses fail, not because of a lack of sales, but because of a cash flow shortage. The best way to ensure you have the cash flow you need is by planning and monitoring. Some good practices for all types of business whether they are in service, retail, manufacturing or any industry: -

Do not wait to send an invoice – instead of billing at the end of the month, bill as soon as a project or work is completed or when the stock leaves your business. For service businesses that carry work in progress you can also progress bill.

Deposit the cheque as soon as you receive it – many businesses only deposit once a week.

Do not wait to collect money owed – Call first and send a reminder letter on an agreed date.

Offer quicker easier ways to pay –use credit card facilities and direct deposits to help improve cash flow. Some people worry about the 1.5% they will be charged by collecting their income with credit cards. Make it easy for your customers to pay.

Monitor past due date accounts – at least once a week, generate an accounts receivable (debtors) ageing report and be pro active to collect them.

Use your lines of credit – This includes overdrafts from banks or credit from suppliers. It is a good idea to have these set up before you need them.

Collect deposits – especially for projects that have high up front expenses.

Settle customer disputes quickly – unhappy customers often will not pay until they are satisfied. Customers vote with their $$$’s, if they are unhappy they will not pay and they may even leave.

Limit spending – Discretionary spending should always be reviewed and managed.

Use leasing and hire purchase – If you are spending money on equipment you could lease or hire purchase something to maintain cash flow instead of paying for it fully from cash flow.

Constantly monitor stock levels – do not have more stock on hand than you need to. Stock sitting in your business and not going out the door is lost money. Check stock on hand and make sure you do not just order stock because your supplier thinks it’s a good idea.

Charity Golf

On Friday the 11th March we held a very successful Ambrose Golf tournament in conjunction with Spicers, Mike Pero and Crawford Lifeco. With around 50 participants and plenty of assistants providing food and drink, a great day was had by all.

We also managed to raise just over $1,000 to donate to the Christchurch Earthquake Appeal.