Mike said: 

'At Smith and Boyle we have carefully developed our customer service culture to go above and beyond what people expect. Our attention to detail and high standard of workmanship is what keeps our customers coming back.'

As a client of WHK since he purchased the business in 2003, Mike says that WHK gave his business valuable advice from day one:

'Michelle Malcolm and the WHK team gave us the right advice to help us achieve consistent growth over the last 8 years. We have built a true business relationship with WHK: they have acted as a sounding board and have given us the advice we need to constantly move the business forward.' 

Mike also attributes his businesses success to the team of very committed staff at Smith and Boyle:

'I also need to acknowledge our dedicated team from management, repairers and refinishers to apprentices and valet groomer. They all perform to a high standard of workmanship and contribute to the excellent customer service for which Smith & Boyle is renowned.'

Smith and Boyle has manufacturer approvals from many of the major car companies including Toyota and Daihatsu is one of only 12 approved repair centres for Audi, Volkswagen and Skoda New Zealand wide.

Looking to the future Smith and Boyle's aim is to be the best repairer in the Bay of Plenty. And they will definitely continue to focus on customer service as their key point of difference.

For more information on Smith and Boyle please call 07 578 8105. 

To find out more about how the WHK Business Advisory team can help your business grow please call 0800 494 569.

'I can't emphasise enough that those businesses who spend the time with a plan seem to be the highest achievers, have the happiest people who show the least signs of stress in this environment, and are most financially successful.'

So what is planning all about? Let's look at the three basic steps:

1. Get very clear on where your business is now (the current situation)

2. Work out where you want the business to get to (the'goals' which should be aligned with your personal vision)

3. Determine how you are going to get there (what needs to be done, by whom, by when and how you will track and manage progress)

If you need inspiration to get motivated, start with some background reading. We recommend Napoleon Hill's 'Think and Grow Rich', originally published in 1937. Or, if you want a more modern edge, the WHK website also has a range of excellent articles to help you.

Secondly, get some training through a seminar - topics such as 'Business Planning' and 'Succession Planning' will teach you the key things you need to know.

Thirdly, talk to your adviser. This can be a surprisingly cost effective way of achieving a significant step forward for your business, mainly because we already know your business.

One of our clients, Cooper Webley, is a good example of the benefits of strategic planning. They knew that they were good at making and designing high quality kitchens and they had the right staff, but they were lacking the direction needed to improve.

Firstly, they took a good honest look at their business, determining what they were doing well and what could be improved. Then they set some clear goals for the business, along with an action plan. Their WHK Principal was actively involved as business mentor and sounding board, throughout the journey.

'WHK not only helped us to be more accountable, but ensured we were staying on track by attending regular monthly meetings. They helped us realise the benefit of pursuing and concentrating our energies on the right opportunities, and thus having a true focus.'   Noel and Sharyn Tait of Cooper Webley, Nelson.

Their outcome has been significant, achieving a major turnaround in the company's return, profitability and overall direction. Noel says 'The true value has been in knowing what to concentrate on, and where not to waste our time and effort. Also, being able to improve how we do things instead of just investing in more marketing campaigns and ignoring what really needed to be done, made a big difference.'

One piece of advice they would like to share with other businesses is 'to focus and do the things you are good at and get the experts to deal with the rest. If you are going to invest in advice make sure you act on it, it is only then that it becomes beneficial.'

Visit www.whk.co.nz/nelson/news to read the full Cooper Webley story.

WHK's Quick Tips for Planning

Tip 1: Take stock of your business by measuring it. Use financial indicators like profit, turnover and salary, plus other key aspects - customers, staff, products and services, buildings and equipment, and intangibles like knowledge and culture.

Tip 2: Ask the hard questions. How are you going? What's working? What's not? Stand apart from your business and look at it critically - use an external party to help achieve this if you can.

Tip 3: The key to achieving your goals is believing that you can, so pick goals that are both motivating and achievable. You do this through both internal and external analysis - such as using a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats).

Tip 4: If you invest in expert advice make sure you act on it, that's when you see results!

Tip 5: Once you've started implementing your plan, develop a KPI report to measure the overall performance of your business such as a 'Balanced Scorecard'. This will help you track your success, and act quickly on the areas that are not going as planned.

There is no time like the present. Grab the opportunity that the New Year brings and get planning!

For more information please contact the WHK team on 0800 494 569

Tax audits can be very stressful. Often lots of time is involved and there are emotional and financial costs, even if Inland Revenue doesn't make any adjustments.

Audit Shield insurance is now available to New Zealand businesses to help reduce the financial cost.

Audit Shield covers professional fees incurred in relation to tax audits. For example a business with annual sales of between $1m and $3m could have up to $20,000 of audit related professional fees paid for by Audit Shield.

Please contact your WHK adviser to discuss whether Audit Shield is a good idea for you.

IRD using debt collectors

Inland Revenue has started referring outstanding tax to debt collectors. Owing tax could adversely affect your credit rating.

Inland Revenue is currently letting you know before this happens so there is an opportunity to make arrangements to pay the tax.

If Inland Revenue or a debt collector contacts you about outstanding tax please contact your WHK adviser.

GST and land

We continue to see confusion about GST and land transactions. There's no reason why this transaction should be difficult; problems are usually a result of vendors not wanting to pay GST to IRD, purchasers wanting to get a refund and the parties not being clear with each other.

In addition, on 1 April 2011 there were changes to GST zero rating, nominations and apportionment rules, all of which need to be considered for land transactions.

If you're buying or selling land please talk to your WHK adviser before you enter into a contract. You don't want to be the party that's 15% out of pocket.

Gifts

Gift duty was abolished from 1 October 2011. You can now gift to trusts, family or friends without the previous $27,000 a year limit.

There are many reasons why gifting, particularly giving all your assets to a trust, isn't a good idea. Examples include access to rest home subsidies, relationship property difficulties, creditors being able to claim against trusts, income tax on debt forgiveness and being able to access your assets when you want to.

It's critical to seek advice before you give assets away, even if it's to your own trust. Please speak to your WHK adviser before giving.

Penny and Hooper - market salaries?

Penny and Hooper were surgeons who traded through companies and trusts. They paid themselves salaries below their market rates, saving tax as the company and trust income tax rates were less than their own. The Supreme Court said the arrangements were tax avoidance.

Inland Revenue has indicated its focus will be on situations where business income relies on individual exertion and where personal income is less than 80% of the profits.

Unfortunately there remains lots of uncertainty. We recommend you seek advice, particularly if:

Inland Revenue has contacted you about a review or audit; or

You're a medical practitioner or have a business which is highly reliant on your personal effort; and

You operate your business using a company and/or trust; and

You have paid yourself a salary of less than 80% of the profits.

You need to understand if you're at risk of an Inland Revenue audit and identify what action you could take now to reduce that risk.

For more information please call the WHK tax team on 0800 494 569.

Only 46% of businesses employing five or fewer staff made it into 2010.

So why is it that such a large percentage of small businesses failed?

The bottom line is they were surprised by events they had not considered. This normally happens in two ways, either they hadn't planned well enough or they didn't know how they were going until it was too late.

The easiest way to address both situations is by creating a budget for your business. A budget is like a building plan. It gives you a picture of the end position, and identifies all the actions needed to deliver the final desired result. The key is to commit these actions to writing and put numbers on everything. Your budget should tell you what income you can expect, and what your costs will be. Your budget doesn't have to be complex. The key is to have one and to monitor your actual results against that budget.

A good budget will also give you an opportunity to do some 'what if' scenarios to check how fragile the business would be if sales were not at the level you expect, or expenses were higher. What if my sales are slower than I expect? What if my costs go up? What if interest rates go up?

Once you have your budget, the numbers should then be broken down month by month, so you can continually react to changes or unexpected events. If costs are going up, you can quickly identify where you can trim back expenses or if prices need to be raised. Either way, you will be actively managing your business and improving your chances of achieving your business goals.

Your budget is made up of information from the following three reports:

Income Statement.   Shows your sales, expenses and most importantly your profit.

Cash Flow Report. Shows money in and money out of the bank account. Profit is great but cash is better. Even if your sales are booming, will all of this be tied up in stock and with customers who owe you money? Will you need an overdraft? A Cash Flow report helps you answer these questions.

Balance Sheet.  Shows your assets and liabilities. If you are going to be as profitable as you expect, and people pay you as you anticipate, your assets and liabilities will reflect this.

If you are looking to start or buy a business, make sure you have a good budget in place first. This will give you the confidence to continue or walk away before you have made any costly mistakes.

Once in business, make sure you monitor how you are going compared to your expectations and make sure there will be money in the bank. Once again, profit is good, cash is better.

For any help or advice on how to set up a budget, systems to use or monitoring your budget, talk to your WHK adviser.

*Source: 2011 'SMEs in New Zealand Structure and Dynamics' Report

For more information please contact the WHK on 0800 494 569

Strategy

You need to review your strategy annually and ensure it is still current in today's environment. When forming a strategy some important questions need to be considered. What is the market doing? What are your competitors doing? Where do you make your money?

I had a client recently who a year ago decided to divest their strategy. They started focusing on another area of the business that was complimentary to what they were currently doing. This area has now become approximately 25% of their business and at a margin that is twice the other part of their business. They are also in a far better position if anything happened to the initial business. This wasn't an accident; the directors reviewed the strategy a year ago and started looking for other opportunities.

The old saying failing to plan is planning to fail is especially true in today's environment.

Cashflow and Budgets

Your cashflow and budgets plans need to be reviewed and compared to actual situation on at least an annual basis. Cashflow and budgets show you a whole range of things, from your anticipated profit to when you will need cash in your business. Banks are far more likely to provide credit to your business when you don't require it.

One client recently was finding that they were approaching the bank almost monthly to increase their overdraft. The client was in a growth phase so was perplexed at why the bank wasn't willing to constantly increase the overdraft or provide loans to them. When we prepared cashflow plans and budgets for the client for the next year, this clearly showed the growth in the business, and also when the extra cash would be required. The client was then able to approach the bank again with a clear picture of exactly how much they required and for how long they required it for.

What if Scenarios

Strategic planning, cashflow and budgets are all fantastic until things don't go according to plan. Part of the planning process should include what if scenarios and sensitivity analysis. For example, what if our sales drop, what if our debtors take 30 days longer to pay us etc.

One client applied this what if scenario and looked at what would happen if they better managed their debtors for the coming year. This drove several initiatives which resulted in a much improved cashflow for their business.

For more information please contact Amanda Watt, Associate Principal - Business Advisory on 09 300 5784.

For more information about public holidays and what to pay for a public holiday visit our website.

* If the day that the public holiday is taken on is not an otherwise working day for that employee then the employee observes that public holiday as an unpaid public holiday.

While this may sound a bit geeky, you are probably already using cloud based applications in some way: gmail, skype and internet banking are all cloud based applications.

Software providers, like Xero, are making the most of cloud computing by providing user friendly accounting solutions for clients. This technology can simplify accounting work, making the process simpler for both the client and the accountant!

Cloud computing is affecting the way individuals and everyday New Zealand businesses from every sector operate and is seen as the future of computing.

Here are some of the benefits of moving your computing needs to a cloud:

• Cost effectiveness: cloud technology can, in some cases, deliver considerable savings on software, hardware, power and support expenses. Since cloud is a 'pay as you go' subscription based service, it is also easy to increase and decrease capacity based on demand. For example, if you hire 50 new staff for 2 months of the year to cover peak times, then you only pay for capacity for those 50 during those two months.
• Easy to use: cloud technology is generally user friendly and usually just requires a computer, browser and internet connection, resulting in very few maintenance requirements.
• Accessibility: one of the major benefits of cloud technology is that it can be accessed anytime and anywhere, making work a lot easier for employees who work remotely.
• Security: many people have security concerns when it comes to cloud technology; however, with proper physical security, anti-virus software, and firewall protection your data is just as safe as it would be using traditional technology.
• Disaster recovery: using cloud technology to backup data in an alternative location allows crucial information to be recovered quickly and business operations to return to normal as soon as possible.
• Sustainability: cloud technologies can be better for the environment due to reduced paper and energy requirements.
• Upgrade time: cloud providers generally have the newest version of applications built into subscription cost, reducing upgrade requirements. For example, Microsoft's Office 365 is Office 2010 in the cloud.

As with anything that's new and a bit techie it is normal for businesses to have some concerns when thinking about implementing this technology. Unsurprisingly security, availability and performance are the top concerns cited by everyday business owners when contemplating making the move to cloud computing.

These are valid concerns as security breaches, problems with accessing data and reduced performance have been widely reported in the media. However, experts have described these issues as being 'like airplane disasters' in that they happen very infrequently: there are trillions of transactions a day but you only hear about the very few that go wrong!

For an easy move to the cloud and to make the most of what this new technology has to offer, ensure that you get sufficient support and advice from trained IT professionals.

If you would like input from WHK on how to move your accounting requirements to a cloud based service, like Xero, please contact call Amy Tyrell on 09 968 8528 or email amy.tyrrell@whk.co.nz  

WHK CEO Gay Rankin said:

'WHK feel that it is important to be part of and support our community organisations and we are delighted to support the Westpac Rescue Helicopter. The helicopter provides an invaluable service to the people of Auckland and we are pleased to be able to contribute to this by sponsoring one rescue per year.'

The Auckland Westpac Rescue Helicopter covers a catchment area from Waihi in the south to Wellsford in the north, with over 1.7 million people in the area. Since the charity was founded, the helicopters have completed 14,000 accident free missions. 2011 promises to be the services busiest year to date, with a projected 800 rescues.

For more information on the Auckland Westpac Rescue Helicopter please visit www.rescuehelicopter.org.nz

Background

Gift duty has been applied in New Zealand since 1885.  Its original purpose was to protect the estate duty base by discouraging the gifting of assets prior to death and to raise revenue.  Gift duty was retained after estate duty was abolished, in 1992, as an interim measure to protect against income tax avoidance and social assistance targeting.  It has since been seen to provide some protection to creditors.  From 1 October 2011 gift duty will be repealed.

Potential asset transfers

Debtors and potential debtors need to understand the reasons why they are looking to transfer assets to trusts before doing so. 

The repeal of gift duty shouldn't in itself be a reason for divesting assets as this was possible without a tax cost when gift duty was in place, albeit there was the need to enter a gifting programme. 

If debtors are looking at safeguarding assets from future creditor claims, transferring assets to a trust can assist.  Assets owned personally will always be at risk from personal creditors whilst assets held in a trust are only potentially exposed.  However transferring assets to trusts does not guarantee protection as there are a number of creditor protection measures which allow gifted assets to be clawed back. 

Some of these creditor protection measures have time limits. For example, sections 204 and 205 of the Insolvency Act 2006 allow the Official Assignee to automatically cancel gifts made within two years before adjudication and, if the bankrupt cannot show solvency at the time the gift was made, five years before adjudication.  By transferring assets sooner rather than later the opportunity for creditors to use this, and other measures with time limits, diminishes.

However, subpart 6 of the Property Law Act 2007, which allows property dispositions to be set aside by the Courts where there was an intention to prejudice the interests of a creditor-applicant, does not have a time limit.  This creditor protection measure could be applied more often if gifting increases.

Excluding these specific measures the security provided by transferring assets into a trust can be limited.  Future creditors may require the trustees to guarantee loans where the debtor is unable to provide sufficient security themselves.  Such guarantees could expose all of a trust's assets to future claims by that creditor and, therefore, it may be preferable to leave some assets outside of a trust.

Asset security is also achieved through the use of alternative structures, such as companies for business operations, as long as the directors or shareholders are not providing personal guarantees.

The debtor should consider whether they want to retain some control of the asset, as once transferred trustee approval will be required to deal with the asset.

Other issues the debtor needs to consider are income needs, consistency with their will and any family succession objectives.

Gifting programme already in place

Under a gifting programme the person transferring the asset received an interest-free repayable on demand debt equal to the market value of the asset transferred.  This was typically forgiven at a rate of $27,000 every twelve months.

Individuals who have a gifting programme in place will have already considered the implications of transferring assets and determined that this is the best option for them at the time the trust was established or assets transferred. 

The repeal of gift duty will enable the outstanding debt to be gifted in full for no tax cost.  The sooner this is done, the fewer opportunities there are for creditors to make future claims under specific creditor protection measures.

However, immediate gifting of a significant asset can have implications on the ability of the individual to claim certain benefits, whereas annual gifts of a lesser amount may be excluded.  For example the Residential Care Subsidy allows gifts of up to $6,000 per annum in the five years prior to application and up to $27,000 per annum in earlier years.

Immediate gifting will also reduce the amount of control the individual has over the asset and it may be appropriate to leave a debt outstanding so they can access funds on demand without tax implications.

Summary

The repeal of gift duty should make no difference to the overall decision process.  If gifting wasn't a sensible option before the repeal of gift duty it won't be after.

Debtors and potential debtors should consider their reasons and the implications of transferring assets or gifting outstanding debts before doing so.  Debtors should obtain advice relating to their particular circumstances before transferring assets or gifting outstanding loans. 

For more information please contact Sandra Edwards, WHK Senior Tax Adviser on 04 5699069 or email Sandra on sandra.edwards@whk.co.nz