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Dec 23

Entertainment Expenses

Posted by James Burn on Wednesday, December 23, 2015

We often get asked,  "Are meals and drinks for myself and staff tax deductible?"
Here are some general guidelines on what would be a tax deductible expense and a link to the Inland Revenue information on Entertainment Expenses 
Generally, for the cost of the meal and the drink to be tax deductible, there must be a connection between incurring the expense and helping produce business income.  If the expenditure is incurred for yourself, having  a meal or a drink that would normally be private, than even if the cost is charged to the business account, this would still be private and not tax deductible.  
Here are some examples where the expenditure is 100% tax deductible:
  • Food and drinks are consumed while travelling away on business the expenditure unless the  travel is primarily for entertainment purposes, or the entertainment consumed at a social function.
  • Food and drink where the employee works overtime
  • Food and drink provided as morning or afternoon tea
  • Food and drink at a conference, training or event which lasts for at least 4 hours 
  • Entertainment provided to the public for charitable purposes
Here are some examples where the expenditure is 50% tax deductible:
  • Business lunch with client at restaurant
  • Gifts for clients
  • Friday night drinks for staff at work premises
  • Light working lunches provided to staff at work premises
  • End of year Christmas party for staff
If you are unsure, please contact us





Mar 22

Tax Tips:Areas you can review before 31 March 2015

Posted by James Burn on Saturday, March 22, 2014

Tax Tips: Areas you can review before 31 March 2015 updated

1. Consider pre-paying business expenditure  
 

Some expenses can be prepaid in March and claimed as a tax deduction in the 2015 tax year, regardless of their amount. These include stationery, postage and courier charges, vehicle registration and road user charges, rates, newspaper subscriptions, and even accounting fees!   Other expenses have limits on the extent to which they can be claimed if prepaid. These include rent, consumables (materials used in the manufacture of a product or service), insurance premiums, professional or trade subscriptions, travel, and advertising. The rules around prepayments can be quite complex, so if you’re planning this type of expenditure, please contact me.

2. Stock (excluding livestock) must be valued at the lower of cost or market value. General adjustments for obsolete stock are not acceptable to Inland Revenue.  It’s important to perform a physical stock take at 31 March 2015 and actually dispose of any obsolete lines or alternatively write down to market value after deduction of selling costs (net realisable value).  Clients with an annual sales of less than $1.3m may value their closing stock at the opening stock value, but only where closing stock is less than $10,000.

3.   Write off any bad debts from your debtors balance (people who owe you money)
To claim a deduction for a bad debt you need to physically write the debt off in your debtors record  before 31 March 2015. There should also be evidence that you have taken reasonable steps to recover the debt prior to writing it off.

4.   Employee expenses
Any amounts owing to employees at year end (such as holiday pay, bonuses, long service leave, redundancy payments) can be claimed for tax purposes in the 2015 tax year as long as they are paid within 63 days of 31 March 2015.

5.    Review your  Fixed Asset Schedule
The book value of assets can be written off for tax purposes if the asset is no longer in use by the business, the business has no intention of using that asset in the future and the cost of disposing that asset is expected to be greater than the proceeds from its sale. Actually, it’s simpler than that. Scan your asset schedule from last year’s accounts and you’ll probably notice assets that no longer exist (for example the mobile phone that you dropped on your driveway and drove over it), or simply don’t work

Feb 11

Working in Real Time

Posted by James Burn on Tuesday, February 11, 2014

Facebook celebrated its 10 year birthday last week.  Probably what many people want to know is will Facebook be around after another 10 years?  In business, if you don't keep abreast of trends and changes in your industry you're actually going backwards and could be left behind!

I was recently talking with a gym owner, and he remarked how people are keeping fit is changing.  He noticed that not only were more gyms opening up in his city, but that a number of smaller fitness businesses offering Zumba, Crossfit and Personal training were starting to have an effect on memberships not only in his gym but around the country.  His business needed to review its business model and make changes and he was open to suggestions for improvement to his business.  

Bringing  this closer to home, many business owners have accounting systems that were set up when they first went into business and became a client of XYZ Accountants.  At the time this made perfect sense as their accountant was their first point of contact with sorting their taxes out and balancing annual accounts.  However, the accounting systems they use have not kept up with the pace of change and the information provided by their accountant is out of date or late.  The business owner doesn’t really understand the numbers; the information is  used only for tax purposes, and too late to be of any use.

Technology has advanced, the cost of a new accounting system has decreased, and some accounting systems are easier to learn than others.  You don’t need to be a technical wizard to use the latest accounting system on your computer, mobile phone or tablet.  The information also isn’t stuck on a computer in the back office..  Today you can check who owes you money, what profit you made last month and whether you met your sales target all at the press of a button on your mobile device.

Business owners want clear, up-to-date information to help them make better informed decisions, and not have to wait till the books are done by their accountant.  With some, that might require a 3-4 month wait.

At James Burn & Associates we use the latest technology to provide business solutions for our clients.  We use the world’s easiest accounting system, Xero, in our practice and work alongside our clients to provide solutions to everyday problems.  

The great advantage is that what our clients see on their mobile phones or tablets is what we see.  When we see something in the numbers that doesn’t quite make sense we can have a friendly chat with our client and immediately make changes if necessary rather than finding out about it 6 months later!  We work in Real Time!

Contact us for a free chat to find how we can help.

Dec 15

Spring clean your business

Posted by James Burn on Sunday, December 15, 2013

Spring Clean your business

10 Areas of your business you can review right now to improve it.

Cashflow Management (Working Capital)

1. Review your business stock levels and identify slow moving stock or obsolete stock.  Have a stock clearance sale to convert slow moving stock into cash that can be reinvested into your business. A large inventory level can tie up valuable cash or working capital.  Ideally, stock should be turned over regularly and kept to a minimum to lower the level of cash tied up in stock.  You can measure how many times your stock turnsover using a simple calculation:

Cost of Goods Sold divided by Average Stock. 

Cost of Goods = Opening Stock + Purchases - Closing Stock

Average Stock = (Opening Stock + Closing Stock) divided by 2.

The higher this number is shows your stock is turning over regularly and for a retail business it is a good sign of a healthy business. However, there are some businesses who sell only a few items of stock a year and other financial calculations may be more appropriate for service based businesses, for example Gross Profit as a % of Sales.

2. Review your work in progress (jobs). How long on average does it take to complete a job? Do I have a workflow management system?  

A workflow management system can help you manage your jobs so the work is spread out over the whole year and doesn't all fall due at the same time.  It also enables you to highlight which jobs are on track and which ones are falling behind and require further work.

How long does it take me to bill the customer?  What are the roadblocks or obstacles that prevent me from being able to bill promptly?  A workflow management system can take all of your job information and invoice out of this system straight to the customer.  Talk to James about Workflowmax, a job management system that integrates and works well with Xero. 

3. Review my accounts receivable (people who owe you money). Are any of the unpaid accounts unlikely to be paid?  If the answer is "yes", they need to be written off as bad debts now in your current business year.  Check your payment terms. Is there a "gap" between when you receive money from your customers and when you pay out the money to your employees, suppliers and Inland Revenue.  Download our free tip sheet on payment terms to see how reducing your payment terms can help you get paid sooner and help you reduce the "gap".

Business Goals

4. Review your business goals set this year for your business. For example, you may have a sales goal as a target. What sales target did you set for your business? Has this been achieved?  Why or why not?  What marketing tools or techniques have you used to help develop customers and increase sales to your business?  Are you able to measure the success of your marketing campaign?

Being able to measure your marketing campaigns will help you to target your marketing or advertising budget effectively and lead to campaigns that give you the best bang for buck.  A good exercise is to work out how much sales income a customer will bring over the lifetime of the relationship.

Owner's investment and Capital

5. How much money has been invested by you,  in my business this year? What return have you received from your investment? These questions determine if the money you have invested in the business would be better invested elsewhere or help identify what level of return your business needs to achieve to maintain or grow the business.  We can help you to maximise your business investment or assist you with selling the business.

6. Are my business cash withdrawals (or drawings) more than the business can sustain?  Do you have a personal budget?  If you take out more cash than the business can sustain, it is likely you will starve your business of the cash (or lifeblood) that is needed to help maintain or grow the business.

7. Are my business fixed assets (for example: motor vehicle, computer, plant and equipment) capable of meeting all of my current and future business needs?  Are there some surplus assets that are no longer used by the business that could be sold to return valuable working capital to the business?  When a business has more fixed assets than it needs there is an over investment and this may result in cash being tied up in assets that are not adding value to the business. 

Business Systemisation

8If you were unable to work tomorrow could the business operate without you?  What steps are you taking to enable the business to operate without you? Having a business plan., business operating procedure manuals and trained staff will enable a business to operate without its business owner and allow you time to spend on strategies to boost sales, increase profits and grow your business.

Sales

9. Who are your top ten customers?  What % of sales does this represent?  How can you sell more or repeat business to these customers?  Pareto found that 20% of resources employed produced 80% of the income.  What is the % in your business?

Profitability

10. Review your business expenditure. Are there any business expenses that are not adding value to the business?  Are there any products or services that you offer that actually cost you money?  Using Xero's Dashboard watchlist you can monitor any income or expenditure items to see how they are tracking in relation to a budget.

If you need help with any of the issues I have discussed today please contact me for a free one hour chat to see how we can add value to your business.


Aug 07

A tale of two customer experiences

Posted by James Burn on Wednesday, August 07, 2013



I had two customer experiences today that I  would like to share.

My first one concerned a local professional who I will call Mr X. I wrote to Mr X about two weeks ago to answer a simple request about a client who had decided to approach our business for help.

Two weeks later I was still waiting for an answer. I rang him  and basically was told he was busy. So I left a message asking him to contact me. I was annoyed by the lack of response. 

Please Note: As a footnote he did make email contact today and i am happy to say that I got a satisfactory response.

The second customer experience concerns a local Stihl shop I have been dealing with.  I'll never forget the experience and I highly recommend them. Our lawnmower had died and I was dreading having to replace it.

I did a bit of research and found our local Stihl shop owner Fred very knowledgeable about lawnmowers. We talked about size of lawn v size of engine, getting one that my wife could start easily, mulching v catching. Fred said the mulcher lawnmowers were excellent. Fred also took our old dead lawnmower off our hands and $50 off the purchase price of the new one.

A
fter discussing the options with my wife we settled on a mower that could catch and mulch. My wife was skeptical about the mulching and that our kids would bring the mulched grass back into the house.

Well today I picked up our new lawnmower which came all set up to go with a tank of petrol and oil. The first thing we noticed was the lawnmower powered through the work and took less time to mow the lawns! 

My wife was totally amazed and kept asking me where was all the grass? 
With our old mower we would have had about 3 fadges of grass and this would have cost between $5 and $7 plus the cost of going to the transfer station to dispose.

Which brings me to my point. Being responsive to your customers (or ex customers) is vital to the existence of your business. When your business has no customers you go out of business. 
When you respond to your customers and wow them the result is not only in $$$ in your pocket  but also in hundreds of referrals of excellent customer service and, hey, isn't it nice to give someone a reason to feel good about you!

Aug 01

Dreams Part 3: From walking to running

Posted by James Burn on Thursday, August 01, 2013

Last week I wrote about going from crawling to walking and related it to my daughter Joanna. If you want to read my earlier writings you can find them on my website at www.bizadvice4you.co.nz/blog

Today in Dreams part 3, I talk about going from walking to the running stage and what that means in business and once again I'll use Joanna's experience as an example.  My daughter Joanna became confident about walking and the walking became running especially when she didn't want to miss out being the first to the letterbox to collect the mail.

Joanna's mission in life is the mission we all have: to master any challenge she faces. She does this by becoming confident at anything she puts her mind to.  At an early age she learnt to climb up on a chair and stand high above everything else.

Joanna achieves this by practicing and making mistakes and then applying what the mistakes teach her, and never giving up. She has a support network that enables her to succeed and that is her parents, grand parents, teachers and aunts and uncles.

In business our mission statement could be to deliver excellent service to our customers. This supports the vision of being a world class customer centered business.

One of the objectives might be that we acknowledge and follow up on customer enquiries within a set time period.

But mission statements and objectives are no good unless they are connected to business systems.  The business systems put wings on our dreams.  Business systems are the support network for business that enable a business to crawl, walk and eventually run and fly.  Without any organised business systems in place, the business is likely to fall over, literally and  catastrophically, or become stuck in the crawl stage.

Typically there are at least 4 major systems that keep businesses running: sales, marketing, operations, and finance/admin.

I will look at each of these in the next series on building a successful and profitable business one system at a time.

Thanks for reading

Jul 23

Dreams Part 2 : Taking baby steps from crawling to walking

Posted by James Burn on Tuesday, July 23, 2013

I remember when my daughter Joanna was about 9 months and took her first baby steps. At first she would crawl over to the furniture, and pull herself up. She would often fall but she was so determined to walk that she would try, and try again and she would never give up.

 Businesses are a lot like small babies too. Often early on we make mistakes and fall over a bit.  Fortunately most of the mistakes we make are not life threatening.

 When I started my first business I wrongly assumed that customers would fall in love with the service I provided and all I needed was to advertise in the yellow pages,  open an office, and business would just happen.

 I learned a lot from that experience.

 Many business owners start with a fire in their belly called 'passion'. This is what ignites our dreams to start a new business.  Unfortunately it isn't enough to keep the business going and grow from the baby stage to adulthood (maturity)

 The key ingredients are having a determination to make things happen and to never give up just like my daughter, Joanna.

 This is all about never being afraid to make mistakes and see mistakes and failures as learning opportunities, stepping stones to success.

 I mentioned in my last blog about putting feet on the dreams.

 In my first business experience although I had a dream of owning my own business I lacked a plan of making it happen. I was waiting for things to happen.

 Things don't just happen unless we plan and make it happen. This plan is called a business plan.  A business plan at a high level is made up of 4 components.

 The vision.  This is a picture of the business sometime in the future.

 The mission statement. This is the answer to the what question. What does the business need to do to achieve the vision?

 The objectives. These provide the answer to "How do I make things happen?"

 The values. These are what are is important to the business and shape the actions and behaviour of the business

 Without the answers to these key questions, the business will struggle to grow. It could even die.

 The next blog will look how vision, mission, objectives and values when linked to business systems provide the source of business growth and success.

Jul 05

It starts with a dream ...

Posted by James Burn on Friday, July 05, 2013

The birth of a new business is an exciting time.  I can remember when we were expecting our first child.  It was a time of great joy and excitement.  Our family and friends were really supportive and encouraging.  It is also a step into the unknown.  I think that is what makes it exciting.  James Burn & Associates was birthed about 10 years ago.  For many years it was just an idea, a dream of owning my own business that would help other people in business reach their full potential.  Dreams remain just that, dreams, until we start to put feet on them.  In the next few blogs, I'll talk about how the dream became a reality for meand how you can apply this to your dreams and seek success in your business.