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​Revenue is vanity, Profit is sanity, Cash flow is reality

11/4/2022

 
Managing Your Cash Flow

They often say cash flow is king and well there quite right. It’s nice to have profit but cash flow is what will make or break your business. With the Pandemic causing chaos in the business world managing your cash flow is now more important than ever.

First off, cashflow often gets confused for profit, yet it’s a little bit different.

Profit – cash left over once your expenses from your sales revenue has been taken out.
Cashflow – Cash that flows in and out of your business and not into your pocket. Cash flow is used to cover your expenses, both current and future. It’s what grows your business.
           
What’s the secret to managing your cashflow?

Books – Make sure your records are up to date. Record all your cash flow information regularly. This is a big must as you need to know if you have more expenses than income or if you have enough cashflow happening to buy supplies. Setting up your bookkeeping and taking care of it regularly means you can check your not only your cash flow but your complete financial state at any time.

Cash flow forecast – Sounds intimidating I know. Simply put this an estimation of the amount of money you expect to flow in and out of your business. By forecasting your cash flow you have the chance to identify any potential or current issues before they turn into major ones.

What a forecast can tell you:
  • Projected starting account balance
  • Predicted income
  • Estimated outgoings, e.g., bills, salaries, raw materials
  • Projected ending account balance
  • Any money left over

Don’t Forget the Tax Man – Tax sneaks up on you if you are not prepared. Make sure you work this into your forecast.
  • Opening bank balance
  • Cash receipts
  • Cash payments
  • Closing bank balance
  • Surpluses and shortfalls in receipts over payments

Customers - Useful to have for every business. Invoices, a necessary customer payment prompt. Having a strategy will help make creating and sending invoices easier. Set up a system that works for you. How? Here are a few pointers:
  • Use templates already created for invoices
  • Use an online billing software. Have a look at Xero for more info on this
  • Link invoices to quotes
  • Track all your materials and time on jobs better
  • Have a process in place for late payment. Don’t be afraid to chase these up.

Keep it separate – Don’t mix your personal and business finances together. Tempting I know. This will make it much harder to work out what your cash flow is. Also gives you a false cash flow forecast. Set up your pay properly so you can pay yourself, any excess cash can then be identified easier and used to grow your business.

Set up a cash reserve   - Is there a certain time of year where you struggle to pay bills? Save for that rainy day.  Start building up a cash reserve now, so you're prepared. Yes, it may mean cutting back a bit for now on what you may pay yourself, but it will be worth it to have that cash reserve.

Bonus too, if any unexpected events arise, for example COVID, you will have a little bit of cash to help you out. Plus watching the cash reserve grow will help build your confidence and strengthen finances.

Need an extra hand?
Business stuff can be complex, so if in doubt ask us for help that’s why we’re here.
Contact Us

Christmas Gifts, Parties & Entertainment Expenses

15/12/2021

 
Xmas time! Time to dust off that Xmas Tree and deck the halls for that end of year Xmas work party. 

Stock up on those employer Xmas gift hampers!!

Woah, hold up, before you get too excited with the festive season, do you know what entertainment expenses and Xmas gifts you can claim back on, and which ones may incur FBT.

There are 3 main types of entertainment expenses that your Xmas staff party, employee gift hamper and even client gifts can fall into.

Read More

Own A Business? Let’s Talk About Your Pay

30/6/2021

 
Your dream business is up and running, money is coming in. Problem is how do you pay yourself for all that hard work? Too much, and you won’t have enough to cover business expenses, taxes and overheads, too little and you won’t have enough to cover personal expenses…so what’s the right balance?

Read More

Record Keeping, is it really that important?

8/5/2021

 
Super important, up to date records are needed to easily determine your tax position. Good record keeping makes your business life less stressful and more efficient by saving you time and money.

Read More

COVID-19 Financial Business Support

5/5/2021

 
What's best for your business? Within the Covid levels there are a range of financial support options to get you through.
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​Resurgence Support Payment (RSP)

Available during Levels: 2, 3, 4

Does your revenue drop every time there’s a change in COVID-19 levels?

RSP is a payment available to support business or organisations that are facing a reduction in revenue created by COVID-19 alert level increases. 

Are you eligible?

If you have been in business for at least 6 months and have experienced a drop of 30% in revenue over a 7-day period after an alert level increase, not just covid in general, you may be eligible for this support payment.

What do you need to know?

RSP is not an automatic payment support, the government will decide whether to activate if the alert level increases from level 1 for at least a week. 
This payment is not a loan, so does not need to be repaid. The payment must be used to help cover business expenses such as wages and fixed costs. 
Applications will remain open for 1 month after the return to Alert Level.
RSP Revenue Calculator

Wage Subsidy Scheme

Available during Levels: 3, 4

Worried about how you are going to pay your staff when in lockdown?

Wage Subsidy March 2021 was made available to help employers pay staff and continue employment which would otherwise be impacted by February 2021 alert level changes.

Are you eligible?

If you are a business or self-employed and have experienced a 40% drop in revenue over a 14-day period between 28 February 2021 and 21 March 2021 due to the alert level increase you may be eligible.

What do you need to know?

The Wage Subsidy was made available between 4 March 2021 to 21 March 2021.
You needed to be able to show that the revenue drop was due to the change in alert level, not just COVID-19 in general.
Wage Subsidy Info
Wage Subsidy Calculator

Short-Term Absence Payment

Available during Levels: 1, 2, 3, 4

Uh, Oh, COVID-19 test downtime?

If you or your employees require a COVID-19 test and miss work or are unable to work from home while waiting for the results the Short-Term Absence Payment may be what you need. 

Are you eligible?

To be eligible, workers need to be unable to work from home and need to miss work while waiting for the test results.

What do you need to know?

Available to employers and self-employed workers, at all alert levels. Must be used to pay employees following the public health guidance for awaiting COVID-19 test result. 
How To Apply

Small business cash flow loan scheme (SBCS)

Available during Levels: 1, 2, 3, 4

Worried about your cashflow?

SBCS is a Loan provided by the government to provide cashflow support to those that have been impacted by COVID-19.  Providing assistance of up to $100,000 to small businesses, sole traders and self-employed, who employ 50 or fewer full-time employees. 

Are you eligible?

You must show at least a 30% drop in revenue due to Covid-19, measured over a 14-day period in the past 6 months

What do you need to know?

Applications have been extended and open until 31 December 2023. 
Loan is to be paid back, interest free, within two years, after this period an interest rate of 3% for a maximum term of five years.
SBCS Eligibility Tool

​Tax and ACC support

Available during Levels: 1, 2, 3, 4
​

Struggling with your tax obligations?

If due to COVID-19 you are finding it a struggle to pay your tax obligations, Inland Revenue has support schemes and options in place to help, click the link below. 

Worried about ACC payments?

ACC levy invoices for 20/21 financial year, usually sent out in July, will now be sent out in October. More information about delayed invoices and guidance to help is available below.
More Tax Info
More ACC Info

Business debt hibernation

Available during Levels: 1, 2, 3, 4

Need help managing business debt?

Business debt hibernation helps business and trusts affected by COVID-19 manage their debts. This government initiative helps you set up an arrangement to pay your creditors. While this arrangement is being set your creditors can’t enforce their debts. Effectively providing up to a month of protection.

What do you need to know?

Unfortunately, this is unavailable for Sole traders. Applications remain open until 31 October 2021.

This business debt hibernation decision tool may help you decide if it’s a good option for your business: 
Decision Tool

Business finance guarantee scheme (BFG)

Available during Levels: 1, 2, 3, 4

Are you after a loan?

Business Finance Guarantee loans that can help businesses access credit for cashflow, capital assets, and projects related from impacts caused by COVID-19. 

What do you need to know?

Due to a change in the scheme, businesses can now use the loan to modify their premises to accommodate different alert levels or meet changing demands.

As per usual loan conditions, borrows are still liable, and debt must be paid back with interest.
Learn More

Find Out More

As always there are eligibility requirements that must be meet for you to receive financial support. I’m here to help, contact me if you have any questions or want to explore your options.
​

For a general guide on each of the above head over to the Business Govt. NZ website.

April changes to IRD which businesses need to know about

26/4/2018

 
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The legislation introduced last year was designed to simplify and integrate tax processes with day-to-day business. The result is a new option for managing provisional tax through accounting software, the ‘Accounting Income Method’ (AIM), which will be available to start on April 17, 2018.

What is AIM ( Accounting Income Method)?

Accounting Income Method is a new provisional tax option for small businesses with annual turnover under $5 million.

How does it work?

MYOB, Reckon or Xero calculates the payment by using the information in your accounting software.  The system will calculate provisional tax if your business is making profit. The calculation will include basic tax adjustments for depreciation, Shareholder Salary, Private Use expenditure, Debtors and Creditors, Provisions, Trading Stock and Prior Year Losses.

Two key benefits of Accounting Income Method
  1. No exposure to Use of Money interest if you pay what your software tell you to.
  2. No Penalties , if you take reasonable care with your record keeping.

What are the other benefits of Accounting Income Method?
  1. Refunds are available throughout the year and can be transferred to other tax account ( e.g GST or PAYE)
  2. Refunds will be automatic and quick so ensure to enter your correct bank account information.

Use AIM if your business turnover is 5 million, growing and the sales are unpredictable or fluctuating.

Partnerships, Maori Authorities, Superannuation funds, Trusts and Portfolio Investment entities.

Keep up to date with tax changes. Follow us on Facebook to learn more. 

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    Author

    Cristina Canard is the principal accountant at Apex Accountancy Ltd. Cristina keeps up  to date with all the relevant tax changes in New Zealand. 

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REGISTERED TAX AGENT & TAXATION ACCOUNTANT ​

Phone Apex Accountancy Ltd on 022 076 75 77 / 027 2762 588 ​​or email Cristina Canard.
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