Spring is the perfect time to pause and look at how your business is performing against the targets you set at the start of the year. With five months before the end of the financial year there is plenty of time to work on any underperforming areas and make the most of the things that are going great, maybe even lifting your expectations.
Here are Johnston Associates South’s top tips for helping ensure you move into Summer in the best possible shape, and with a plan that is going to enable you to deliver the end of year results you are looking for.
• Review your year-to-date and business plan
Now is the perfect time to review your year-to-date results against your budget and key performance indicators. How have you performed and what are the reasons for any variances? Clarity around your business’s current performance will really help you plan the next five months, minimising any underperforming areas and maximising on opportunities for growth.
• Plan your cashflow
Cash is king so we suggest you take some time to plan your cashflow for the rest of the year. What are your remaining costs and where might you experience shortfalls?
• Review your tax obligations
By reviewing your tax obligations based on your actual year-to-date result, and projections for the rest of the year, you can make sure that tax is not being under or over paid, and also keep an eye on upcoming tax payment dates.
• Insurance cover
Take time to look over your insurance cover. Is your business well protected based on how it’s currently operating? Are you paying too much? Have you met all your obligations to your insurer such as letting it know about any changes of circumstance or significant new clients?
• Health and Safety at work
Your business needs to carry out frequent health and safety audits and make sure information about health and safety is shared with workers. Have you identified any safety hazards and risks in the last six months? If you have what steps have you taken to stop them happening? Now is a good time to hold a health and safety training session so all workers are engaged and understand the role they play.
• Accounting system check
Making sure your accounting system is accurate and up-to-date is very worthwhile, enabling you to rely on the information it generates for planning purposes and to save you time at year end.
• Make an appointment with your business advisor/accountant
If it’s been more than three months since you had a meeting with us then it’s time for a catch-up. The Johnston Associates South team is here to help. We are always interested in hearing about how your business is performing and discussing ways we can help you achieve your goals. Changes in your personal circumstances can also impact on your business.
To lease or to buy, that is the question
Is your current business vehicle looking a bit tired?
Are you unsure whether to lease or buy a replacement vehicle?
Here is what we consider when advising our clients what the best choice for them is.
WHAT SHOULD YOU CONSIDER WHEN COMPARING LEASE OR BUY OPTIONS?
Considering your business capabilities and your vision for the business answer these questions?
- What is more important asset ownership or low upfront costs?
- Do you really need a new vehicle now but lack funds for a deposit?
- Is paying off debt and maintaining low debt a priority for you even if it means higher payments now?
- Can your business carry a large extra expense if the vehicle requires extensive maintenance?
If asset ownership is a priority, you have the available funds, and you wish to pay off debt quickly buying a vehicle is a good option for you. However, if you need low upfront costs as you do not have the funds for a deposit leasing is the better option as long as you have good cash flow. In addition, if you are willing to pay a higher monthly payment you can avoid any surprise extra maintenance costs.
BUYING A VEHICLE
If you buy a vehicle for your business you must pay all the on-road costs plus associated interest and/or finance charges. For most small businesses a hire purchase agreement is done and the first payment is due one month after signing the contract.
Once you have paid for the vehicle in full your business then owns the asset which can be used as equity if you wish to upgrade the vehicle, but if you sell the vehicle before the payments are complete you are still liable to pay the outstanding amount.
As it is an asset it will depreciate in value according to the set IRD rates, this is generally 30% DV (diminishing value). The depreciation value can be obtained with the calculator on the IRD website – IRD Depreciation Calculator
NB: There can be confusion over the difference between a lease and hire purchase agreement; essentially they are two different ways of financing a vehicle
- Leasing is when a person uses but does not own a vehicle and may or may not purchase it at the end of the lease.
- Hire purchase is when at the end of the payments the vehicle is acquired by the business/person.
LEASING A VEHICLE
There are two types of lease:
Operating lease
- A contract to use a vehicle for a fixed period, up to 46 months
- At the end of the lease period, you hand the car back.
- Assuming mileage is within the range set out in the contract there will be no further payments required from the lessee (you).
- The arrangement can either include full maintenance or not. A full maintenance option could mean significantly higher monthly payments.
Finance lease
- Also a contract to use a vehicle for a fixed period, except that a finance lease also accounts for the likely value of the car at end of the lease period (the “residual value”) after depreciation.
- A finance lease with a residual value tends to have a lower monthly payment than an operating lease.
- The lessee can also usually buy the vehicle for the residual value at the end of the lease period.
- If the lessee’s vehicle use is greater than the agreed maximum use there is a chance the vehicle will be worth less than its predicted residual value. This will usually trigger an extra cost.
When you lease you have the option of not paying a deposit and monthly payments are fully claimable as an expense. You make your first payment at the time you sign the lease, and monthly thereafter. If your business has good cash flow but cannot produce a large deposit up front this is a good method or acquiring a new vehicle.
NB: Leases involve complex tax requirements under the Financial Arrangement rules and GST requirements for installments this is most often a task for us, the tax experts.
WHAT IS THE BEST CHOICE?
This is really situational to your unique business and vision, consider the questions above and if an investment in a new vehicle will create a return you desire. You can talk to us about whether this is a good decision for your business as we are available to you whenever you need us.
Kelvin Scoble
Business Advisory-Nelson & Marlborough
If you’re an entrepreneur or starting out in business in Nelson and Marlborough, you could find things are a little lonely as you take your first steps. But the great news is you don’t need to take those steps alone, you can receive the help and guidance you need from a business advisory board.
A committed business advisory board can be a real boon for your business, here are 5 key benefits:
- You’ll gain clarity – A well selected advisory board will challenge you to take a step back from your business occasionally, encouraging you to think clearly and objectively.
- You’ll be inspired – Select the correct mix for your advisory board and you’re guaranteed a creative think tank on tap. Board members will offer new perspectives, opportunities and solutions that can help propel you to profitability.
- You’ll build your reputation – When you’re not going it alone, you’ll be surprised how your company’s reputation and credibility in the market place will grow.
- Your bank will ❤️ you for it – Financial institutions are often reassured by the presence of an advisory board, especially if you’re looking for business financing.
- You’ll meet the right people – Networking is a huge advantage to any business; and you’ll be able to tap into your advisor’s connections… Now that’s great value!
If even the idea of building your business advisory board sounds daunting, we have 3 tips to ensure you get it right!
- Fill your knowledge gaps – Find people who who have the experience you need. If you’ve never owned or built your own business before, find people who have. If your business can’t accommodate a full time Chief Financial Officer, find someone who can offer sound financial advice. If you’re changing direction in business, find an advisor who has experience in that sector. At Johnston Associates South many of our Chartered Accountants have real commercial experience in various business sectors, it’s why our business consulting division works so well for our clients.
- Don’t rely on the yes men and women – Friends and family can only give you so much advice. Firstly they may not have the expertise you need, and secondly they might not want to tell you when an idea or plan is, for want of a better word… Pants! At Johnston Associates South, we want your business to succeed, so if you decide to work with us as your business advisory team, you can rest assured we will always be honest, open and frank.
- Get the most out of your meetings – You’ve invested in an advisory board, now make sure you get a great return on your investment. Prepare for meetings well in advance. Choose a site that is comfortable and free from distraction. Experience has shown us that many start up businesses in Nelson and Marlborough, aren’t always equipped to conduct meetings, that’s why we are. We provide you, our clients, with the board room and all the equipment to ensure you get the most from your business advisory meetings.
#finsup – The boys are back, and we’re proud to have their backs!
This Sunday sees the first match of the Tasman Makos 2016 Mitre 10 Cup draw, at Lansdowne Park in Blenheim when our boys take on Waikato.
We’ll be there to spur the fellas on, and we’re proud to continue as a brand sponsor of the Tasman Rugby Union, you’ll see our Johnston Associates South logo sits proudly on the back of the jersey.
There have been some changes during the off season. Head coach Kieran Keane has been replaced by Leon MacDonald, who’s made his mark as assistant coach since 2010. There have been some player departures too, but the squad still boasts a host of seasoned Makos who are ready to begin their national provincial championship premiership campaign.
Here at Johnston Associates South Chartered Accountants we’ve often likened business success to sporting success, and it comes as no surprise that preparation for a premiership campaign is similar to the preparation you need to do to grow your business and take it to the next level.
Here are three ways you can prep like the Tasman Makos:
- Get training – Just like the Tasman Makos your business should be investing time in training and professional development. You need your staff at peak performance to succeed. Johnston Associates South can help you with that, we are an approved service provider under the NZTE Capability Development Voucher Scheme, which means you may be eligible for up to 50% discount on our training courses through the NZTE Capability Scheme. Visit www.nzte.govt.nz to find out more about your Regional Business Partner and how they can assist you. Find out more about our courses and the knowledge we can share with you HERE.
- Get fit – In terms of business we’re talking financially fit. Talk to our specialist business consulting division we can help you with accounting systems evaluation and implementation, debt management, business analysis and forecasting, compliance and tax reporting. All of this will help you reach peak financial performance.
- Gather your team – You should regularly review your internal team members and your external partners; to find out how we can help as part of your team, contact us HERE.
The 3 Cs to consider when pricing your product or service.
When you start out in business one of the keys to your growth and success is knowing how much to charge for your product or service. If your prices are too high you could put off prospective customers; if they are too low you may find it difficult to make a profit.
Here are 3 Cs you need to consider when pricing your product or service.
Customer – Who is your customer? Have you done your market research to determine how much they would be willing to pay for your product or service? Which customers do you want to attract? Is your product or service aimed at a smaller group of customers willing to pay a higher price for a premium offering? Or does it have mass appeal? In which case you might be looking more at budget pricing.
Competition – You need to analyse your competition; and their pricing structure. Because you can bet your bottom dollar that’s exactly what your potential customers will be doing. That’s not to say you should always price match; indeed this can be a risky policy for small businesses as competitive pricing results in a narrower profit margin, making your business vulnerable if costs rise. As a smaller business think about value pricing, what are you offering that your competitors are not?
Costs – A fundamental consideration in pricing is that you need to cover your costs and make a profit. After all, we’re all in business to make money. How much does your product cost you? Don’t forget that the cost of a product is more than the actual cost of an item, you’ll need to factor in your overheads. Here at Johnston Associates South we can help you determine the prices you should be setting for your product or service by ensuring you have a fuller understanding of your costs and overheads.
Pricing structure is not just important for those of you starting out in business, it’s something you need to review on a regular basis, contact us to find out how our business consulting division can help you with this.
Teamwork makes the dream work… 3 professionals to have on your side.
Here at Johnston Associates South, your chartered accountants in Nelson and Marlborough we believe that great teamwork is key to success in business.
When you hire a new team member at your organisation, we’ve no doubt that you have the correct HR processes in place to ensure that they’re going to be a great fit for your business. But it’s worth remembering that team work is not just about your staff and employees, it’s also about key third-party professionals who are going to help your company succeed and grow.
Many entrepreneurs and business leaders have been known to say, “Surround yourself with people who are smarter than you”, and we couldn’t agree more. Whether you’re starting out in business, going through a growth phase or implementing your exit strategy you’ll always need a sound group of business advisors around you.
Here are a few professionals to consider as part of your team…
Business banking advisor – Whichever financial institution you choose to bank with, you’ll likely be offered an opportunity to meet with a professional from their business banking team. Shop around to find out which bank is offering the right deals for your business. Consider account charges, interest rates and any other extras that would be valuable to your business. As an example, some banks offer conference facilities and meeting rooms for their business clients; if you’re just starting out and don’t have these facilities in your work space, this might be important for you.
Lawyer – You may have used a lawyer for personal legal matters before, but you will need completely different legal advise when you’re running a business so consider wisely. The New Zealand Law Society has lots of information on how to choose a lawyer. Discover it HERE. Your key third-party professionals will often have to collaborate on business matters, here at Johnston Associates South we’re proud to have good working relationships with numerous legal practices throughout Nelson and Marlborough.
Chartered Accountant – That’s where we come in… We forge strong relationships with our clients, and these are developed through a truly personal service. We offer advice and information on corporate governance, company structure and strategy, accounting systems evaluation and implementation and debt management. We also have a specialist Business Consulting Division, offering clients the services of a Virtual Chief Executive Officer and Virtual Chief Financial Officer on a part-time basis; behind these roles we offer support in the form of business analysis and forecasting, and also ensure all compliance and tax reporting is up to date and current. Overall we provide a 360-degree approach to business consulting. You are welcome to interview us… Just give us a call!