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High, low or somewhere in the middle? Where to pitch realistic charge-out rates is a common question facing trades, service and professional businesses. 

In fact it's probably one of the most difficult areas of business. You have to be careful not to underprice as this will reduce profits, but at the same time, overpricing could turn customers away. 

Setting charge out rates is just as important as marketing and delivering a fantastic service. You can do these two things excellently and then undo the lot by setting charge out rates too low or too high. This means pricing is a complex strategy that should be carefully undertaken and reviewed.

Read more here

Save Money - Get Your Rates Back

Do you wonder sometimes why your Council rates are so high and what they do with all the money? Especially when you see Council workers (as hard working as I'm sure they are) using leaf blowers on the Havelock North to Hastings cycle path? 

Finding the money to pay your rates is hard enough as it is, but when you're in business and you have a bad year it's even harder, so did you know you can get a rates rebate if your income drops below a minimum threshold? The threshold level varies depending on your income and situation, but for example, a household with an income of $30,000 and one or two kids could get a $600 rates rebate. And then, even better, you can take the kids to Splash Planet and get in cheaply with a copy of your rates bill! 

For further details click here, or email Nick for help if you're not sure what to do next.

ACC Costs and Fatal Benefits

n previous blogs we've talked about cutting ACC costs by switching to ACC Cover Plus Extra. However, you need to make sure that if you reduce the level of your ACC cover, that you have adequate life cover in the event of your untimely demise. This is because ACC pay out Fatal Death Benefits, the amount of which depends on your income for ACC purposes and the amount of the ACC payout can be very substantial. 

A spouse is entitled to 60% of the 80% ACC entitlement for 5 years whilst children (via the spouse) will receive the benefits until they turn 18 at 20% each up to 40% in total. Take, for example, an earner on $80,000 income who dies an accidental death with a spouse and two children of 4 and 7. Collectively they will receive benefits of $1,049,600. If, on the other hand, the earner had reduced his ACC income to $22,464 the benefits would reduce to $368,410, a very substantial reduction indeed! 

So, if you want to reduce your ACC premiums by switching to ACC Cover Plus Extra, you have three options:

  1. Take care not to die accidentally!
  2. Get adequate life cover
  3. Stay single without any dependants!
If you need help with ACC, contact me at Accountancy + Business Advise Centre.

 

The availability of your annual financials is a wonderful opportunity to review your business performance. You can discover how to improve your business as well as refresh your enthusiasm and drive in the business.

Click here to read seven ways you can use your annual financials to improve your business.

Interim accounts - a vital business tool

Your annual financial statements have their uses, but by their very nature, they are far too historical to be of any use in managing or improving your business. The most valuable financial accounts you can get your hands on are interim accounts prepared periodically - monthly for larger businesses or quarterly or bi-monthly for smaller businesses in line with your GST return periods. There is a strong correlation between the availability of interim accounts and business survival. 

Find out here what having interim accounts to hand means for you

Can't pay your taxes?

Business owners not being able to pay their tax is an all too often occurrence, but hey, it may not be as disastrous as you think. The worst thing you can do in these circumstances is to do nothing.  Yes, I know that getting credit from the IRD is all too easy, but it will cost you plenty because not only will the IRD charge you interest and hefty penalties as well that keep on coming like a steam train.  Over a longer period the addition of penalties and interest can nearly double the amount you owe.

These are the four most common courses of action you can take if you can't pay your tax:

Temporary Bank Facilities
This needs a good track record, sufficient security to secure the borrowings and good systems i.e. to be able to supply up-to-date and interim financials. This works best if you already have a borrowing facility with everything already in place. However, this strategy has a high failure rate because bank managers are not usually impressed by urgent last-minute requests for finance, which normally indicates a lack of planning and forethought! 

Arrangements with the IRD
If the arrangements will be for less than two years the IRD are reasonably accommodating in agreeing arrangements to pay in instalments unless you have a very bad track record of tax paid late or failing to adhere to previous arrangements. Even here it's possible to agree to a temporary arrangement which, if you stick to it, can be turned into a permanent one. 

The advantage of an arrangement is that the IRD only charge you the late payment interest which isn't too bad (currently 9 percent odd) and not the nasty 1 percent and 4 percent penalties. The downside is that it won't be long until the next tax payment date comes around so that it all concertinas together before you've paid off the instalments for the previous tax bill. 

Tax Pooling
Tax pooling is a service allowed by the IRD that allows tax payers to reduce their exposure to interest and penalty costs - what a surprise, considering they're only too keen normally to pile them on! 

As the name suggests taxpayers place their provisional tax payments in a pool account held at the IRD. Amounts in this pool are held on trust by an independent trustee and the company that operates the tax pool is called a Tax Pool Intermediary. When it's time to file their tax return, taxpayers who have made payments into the tax pool transfer what they need for themselves from their tax pool deposits and any surplus amounts are then able to be traded with other tax payers for improved interest returns. Other taxpayers acquire those credits because buying someone else's surplus provisional tax extinguishes their liability to the IRD and does this at a lower cost than the IRD's interest rates. 

For those who can't pay their tax, tax pooling has two advantages, firstly the interest charged by the tax pool intermediary is less than that charged by the IRD, and secondly no penalties are charged because the tax is treated as being paid on the date it fell due. 

So basically, using tax pooling, in return for a very reasonable rate of interest you can pay your tax late without incurring any penalties. How good is that?

Tax Remission

If the amount you owe to the IRD has grown to a level that is out of control and you possess little or no assets, it is possible to get the IRD to write the tax off as uncollectible. It's not easy to get the IRD interested and it's a long process with no guarantee of a successful outcome, but if successful it sure beats bankruptcy and paying off the tax for the rest of your life!

Deeper Issues

Beyond these four areas, if not being able to pay your tax is becoming a regular event, obviously your business has some problems, whether excess drawings, no budgeting, or no tax planning or not saving sensibly for the tax. 

Often I find the problem is not being able to pay the tax, it's the fact that the tax wasn't anticipated or that nothing has been saved towards it. This could mean you don't listen to your accountant or perhaps you need a new one!

If you struggle to pay your tax, seek advice, there may be a solution, we are more than happy to discuss your options with you, and share our expert knowledge.<

Protecting your business name

If, like many business owners, you've put a lot of thought and effort into your business name it makes sense to try and protect it from being copied, whether inadvertently (by someone who had never heard of you) or deliberately, by another, especially if you've linked this to a great domain name. Unfortunately, it's not easy to protect your business name in New Zealand as unlike elsewhere in the world, there is no register of Business Names. Yes they have introduced Business Numbers in New Zealand, but that won't help. Here are the options: Read more…

How to succeed with cash flow forecasts

Preparing an annual cash flow forecast can tell you a lot about your business.  It can warn you with plenty of time to spare that you're not going to have enough cash to survive the next year without getting additional working capital - which is vitally important to know.  Or it could be the wake-up call you need to make some changes in your business. You might need to make a tweak or two, like increasing prices or shedding ineffective staff, or you could discover something more serious, such as you're in a twilight business and it's time to move on.


Read more on how to prepare and read your forecast here.

Just how much do you know about your business?  No, not about what you sell, or how you make or deliver your products and services, I mean the really important things that determine whether you're going to make it through to retirement or maybe even successfully selling your business.


These are my top eight favourite things each and every one of us business owners should know about our businesses.

Simple Business Systems

I've said this before (and no doubt I'll say it again) but I'm always surprised at the lack of simple systems utilised in owner-managed businesses. Using the word "systems" can be off-putting because people immediately think it's going to be too complex, too costly or too time consuming but a system can be very, very simple.

Using systems makes a huge difference to the way a business operate, read more here.