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WELCOME TO THE ALLIOTT REPORT - JUNE 2010 In this edition..... BUDGET 2010 YOUR ANNUAL FINANCIAL ACCOUNTS WHY DO YOU NEED ANNUAL ACCOUNTS? WISE BUSINESS STRATEGIES PAYING YOUR ALLIOTT'S ACCOUNT PRICING NEW ALLIOTT APPOINTMENTS THE IMPLICATIONS OF BUDGET 2010 Most of you will have received the budget summary sent out after the May 20 budget – we have published it on our website www.alliott.co.nz along with the comprehensive budget report provided by Brookers. As always, please contact us if we can help with any queries as to how the budget changes will affect you. YOUR ANNUAL FINANCIAL ACCOUNTS At this time of year most business owners are thinking about their annual financial statements and the cost of having them prepared. From a client's point of view the cost of accounting fees is important but cheaper is not always better and a cheap deal may end up more expensive in the long run. It is what is incorrectly completed or even missed out in your annual accounts that finishes up costing you more. This can be because you pay more tax than you need to or, if your accounts have been prepared incorrectly, it results in you having to pay penalties and interest to the IRD. It is essential to engage a chartered accountant who is experienced, completely up to date with the latest tax and financial regulations and who provides quality information and advice that you can trust. Sadly, every year, Alliott NZ receives business from new clients who have issues with the IRD because their annual financial statements have been prepared by accountants whose work was not up to standard. A cautionary tale.... A new client approached Alliott NZ with a significant tax problem. Their current accountant had completed three years worth of tax returns and had filed them with the Inland Revenue Department. This accountant advised that, based on the tax returns they had prepared, the client had a large amount of tax to pay, the IRD would charge penalties and interest on the tax owed and that the amount of tax outstanding was a whopping $75,000. The clients could not understand why their tax bill was so high given that their income level was not and they asked Alliott NZ to review the tax returns that had been completed and filed by their current accountant. After investigation, we found that, not only had their accountant returned their salary as income but also that they had treated drawings as taxable when they are not. We advised the client that, after correcting these basic accounting errors, their real tax bill was closer to $10 000 instead of the original $75 000. We then had to make a special submission to the IRD on behalf of the client to have their tax returns refiled and reassessed. We were concerned because reassessment is not an automatic right – tax returns are only reopened at the IRD’s discretion but after negotiation, the IRD agreed to allow refiling and reassessment. The client disclosed that they had chosen their previous accountant based on price – they engaged the one who had provided the cheapest quote. Unfortunately, this turned out to be a far more expensive exercise than anticipated in terms of the money, time and stress it cost the client. It is important to engage a chartered accountant who has a reputation for quality, who is experienced and knowledgeable and who can offer ideas and sound advice on how to improve your financial situation. THE BENEFIT OF ANNUAL ACCOUNTS At Alliott NZ we believe that you should focus on getting the best value, service and advice from your accountant and have listed below the ways the high quality, well-prepared annual accounts that we produce can help you and your business. Annual accounts can Help you pay the correct amount and, in most cases, less tax Highlight the ways your business profits can increase Identify the areas of your business that need improving Provide a sound basis for making informed management decisions Be used as support documents in bank reviews, when applying for loans and in dealing with the bank Provide a benchmark of your business’ current and past performance Be an integral part of the sales process if you are planning to sell your business WISE BUSINESS STRATEGIES In these changeable economic times it is a good idea to consider - Cash flow and debtor management The tightly controlled management of your cash flow and debtors is extremely important if you are to succeed. It is prudent to monitor your debtors’ payment times and bring slow payers back in line with your normal trading terms. Consider whether your debtor management system is as stringent as it should be. Or are you still using the same old debtor management system you had before the recession tightened cash flow? Keep an eye on the cost of your borrowing If you have borrowed money the impact of rising interest rates will affect your business – this should be factored in to your business plans. Monitor your stock and WIP Monitor your stock turn by regularly reviewing and comparing actual versus budget. If your stock turn is too low take action to ensure the desired stock turn is achieved. Monitor your investment in work in progress (if you have any) to ensure it is well controlled. Staff Investing in the right staff will be important in ensuring your business has a sound future in the recovering economic climate. Have you recruited and retained the right mix of staff and are you conducting regular staff training? Innovation and opportunities Businesses can grow through the innovation and development of new products and services. Are there any opportunities or R and D projects appropriate for your business? Export opportunities Is there an opportunity to export your products and services or license your technology and business expertise internationally? The New Zealand Trade and Enterprise website www.nzte.govt.nz has strategies on how to successfully export and deal in overseas markets. If you would like further advice on any of the above or assistance in planning specific strategies for your business please contact Greg or Vanessa to discuss how Alliott’s can help. PAY YOUR POWER BILL, PAY YOUR PHONE BILL - DON'T FORGET TO PAY YOUR ACCOUNTANT! Astute cash flow management is essential for operating a successful business and, like you, cash flow is Alliott NZ's lifeblood. When we aren’t paid on time it has a significant impact on our business. When you become an Alliott NZ client our terms of engagement clearly state that the payment terms are "the 20th of the month following the invoice date". We as much as anyone dislike having to follow clients up for payment but unfortunately at times we need to do so. We are here to help you and if you are having difficulty in paying us in full then please contact us - we won't get mad we promise! We understand that the recent economic climate has put pressure on a lot of businesses and in today’s challenging environment many businesses prefer to pay their professional fees through out the year rather than paying in a single lump sum. One option available for spreading your payments across the year is feeSmart which is a monthly payment system for those clients who prefer to fund their professional fees over a six or twelve month period. feeSmart is also a great way to finance extra work or one-off projects that you may not be able to afford to pay in one lump sum. If you wish to explore feeSmart as a way to manage your Alliott's account please contact us for more details. And to those clients who do pay us on time, a big thank you - we do appreciate it. PRICING To provide you with certainty as to the cost of your annual financial statements we have a policy of pricing upfront for as much of our annual compliance work as possible. We have found that providing our clients with a price upfront means that There is certainty as to how much the work is going to cost You are able to plan for the cost of your annual accounts and talk to us about ways we can spread your payments There is clarity as to the timing, nature and scope of the work we are doing Any delays in producing your annual accounts are minimised as we have an incentive to provide a fast and efficient job turn around Once your annual work has been completed there are no surprises when you receive your final bill A written quote will be provided for any additional work or projects that we do for you. NEW ALLIOTT APPOINTMENTS We are always pleased to welcome new members to Alliott NZ team and have pleasure in introducing - Natalie Gilberd who has joined Vanessa’s team of accountants and Brooke Nisbett as our new receptionist. VISIT OUR WEBSITE | CONTACT US 109 CARLTON GORE ROAD P.O. BOX 99 841 NEWMARKET AUCKLAND 1149 Tel (09) 520 9200 Contact us by email Directors Greg Millar CA (pp) Vanessa Williams B Com, CA (pp) |
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