Archives for August 2010

System implications of GST increase

The upcoming increase in GST rate means some action for most businesses on the software front. Typically if you’re using the latest version of your software, any upgrade to manage the change in GST will be reasonably painless. But where you’re using an older version, you may find yourself needing to upgrade to the latest version before any patches or updates for the GST changes will work.

Here is a summary of what will be required for users of the more common software packages used by owner-managed Kiwi businesses.

MYOB

If you’re not using the most recent version of MYOB, you’ll need to upgrade. Dig out your software serial number and key it into the box on the MYOB website >>> to check whether you need to upgrade. MYOB will soon release a patch to registered users of the latest version which will create a new GST rate code and update debtors, creditors and recurring transactions. It will also generate a transitional GST return and a new 101 GST return report.

Xero

As Xero is delivered as a service on a subscription basis and accessed online, there are no upgrades required at your end. You have already paid for any upgrades at the Xero end as part of your monthly subscription. Look out for the usual notification box when you log in explaining any changes Xero may make to the interface in response to the GST changes.

MoneyWorks

MoneyWorks already has a facility allowing a change in the GST rate from a particular date, so no upgrade is necessary – even if you are using a very old version of the software. Users will need to change the GST rate in the MoneyWorks Tax Table in their software – and to set the appropriate date of 1 October and the software will automatically take effect on the date. Step by step instructions are available on the Cognito Software website here >>>.

BankLink

BankLink also already allows for a change in the GST rate in “Other Functions”, “GST Setup”. You can enter the new GST rate now along with the date (1 October) for the new rate to take effect. Also expect a free patch to amend the 101 GST return report. BankLink are running free 30 minute webinars to help users through this if they are having difficulties. Upcoming webinar times are on their website here >>>.

QuickBooks

If you haven’t already done so, you’ll need to upgrade to the latest version (2010/11) or QuickBooks Online. The distributors, Quicken, will release a patch on 24 September for these two versions only. The patch will automatically change the “S” tax item to 15%. You will be able to select the appropriate GST code after 1 October, while historical data will remain unchanged. Instructions will be posted on the Quickbooks website here >>> on 24 September – and they will detail the checks and action you will need to take. Disks will also be made available on 1 October.

If you’re running the 2008 / 09 version, it appears possible to bypass the 2010/11 upgrade and the upcoming patch by manually changing the GST rate – although we don’t recommend it. If you want to go down that path, please do not manually change the S rate from 12.5% to 15%. Rather create a new tax code and tax item for GST for the 15% rate which will report through to the Tax reports and the GST 101 report.

CashManager

Users will need to upgrade to CashManager 2010 if you haven’t already done so. This latest version will allow the new GST rate to be entered and utilised throughout the package. Instructions on how to change the GST rate in CashManager 2010 are on the Accomplish website here >>>.

Although some earlier versions of these packages allow you to manually change the GST rate in the setup menus – and it may seem tempting to stick with your existing version of the software if it is only couple of years old, we don’t recommend this. The time, energy and cost of unravelling errors later will likely far exceed the cost of upgrading now to stay with the latest fully supported version of your software.

If you have any concerns or problems, just call us.

Admitting New Shareholders with an eye to Succession (Albany)

The mechanics of passing the baton to new shareholders is a process that will concern most business owners at some point of their journey. The outcome will be better for all if the process is carried out in a planned and orderly manner.

This Business Owners Forum event is entitled “Admitting New Shareholders with an Eye to Succession” – and will be held for the first time in the new BNZ Partners venue >>> on Constellation Drive, Albany.

Business Owners Forums have been a popular event in Whangarei and in Auckland ‘South of the bridge’ since June 2009. They will now also be a regular bi-monthly event on the North Shore – supported on the Shore by BNZ Partners, Waterstone Insolvency, The Bottom Line Expense Reduction Limited – and Elevate CA Limited.

Format for the 21 October event will be a panel discussion, and the content will cover:

Some of the issues and fish-hooks in admitting new shareholders to a business as a way to bring in new blood and pave the way towards succession.

Ways the purchase of shares by an incoming shareholder can be structured to protect the interests of both parties.

Some of the issues that can result in a mismatch of expectations and agendas between the parties – and ways these can be mitigated.

Ways the purchase of shares by an incoming shareholder can be financed where that person has the desired attributes but not necessarily the means to purchase outright.

On the panel for this event will be

Richard Blamey. Richard is a Senior Partner at the BNZ in Constellation Drive, Albany. One of the big challenges with dealing with incoming shareholders is often that the new shareholder finding the means to fund the purchase and to contribute to working capital. Richard will discuss some of the ways incoming shareholders can be financed so the deal works for all parties.

Fraser Hurrell. Fraser is a director of Elevate CA Limited. He has worked through the process of succession and admitting new shareholders with many clients large and small. He has seen first hand what works and what doesn’t work – and will share some enlightening war stories along with best practice on how to plan well ahead to make sure the process stands the best possible chance of success.

Damien Grant. Damien is a director of Waterstone Insolvency Limited, and he sees every day the results of getting major business purchases wrong. He will share some of his insights on managing the share sale and purchase process in a way that minimses the risk of the company later coming to his attention in a professional capacity.

As always, Business Owners Forum events are targeted to owners of businesses in the $1 million plus turnover bracket – although all business owners are very welcome. These events are free of charge to attend – and along with the other supporters, we also put on liquid refreshments and pizzas to lubricate quality discussion.

If you’d like to be invited to this – or any other Business Owners Forum event, just contact Fraser Hurrell by email.

Advisory Boards

“Advisory boards – What are they and do you need one?” That was the question posed to the panel at yesterday’s Business Owners Forum – and here are some of the points emerging from yesterday’s event:

An advisory board is a forum to challenge, stretch, support and test your ideas with people you trust. These could be your advisors – or people from your network. Bruce Sheppard put it bluntly when he said: “Boards that are overly focussed on ticking the boxes are worse than useless.”

An advisory board is distinct from a real board of directors in that directors have statutory obligations and potentially liabilities under the Companies Act and other legislation. An advisory board should be a discussion forum rather than a decision making forum – or they run the risk of being deemed to be directors under the Companies Act.

In a more corporate environment, the roles of owner, director and manager are quite separate. The directors form strategies that the owners are prepared to fund – and the managers are prepared to implement.

But in owner managed businesses, there are often murky boundaries between these roles. An advisory board can help the business owners wear these different hats.

Business owners are often consumed with doing the operational things that are urgent – and advisory boards can help provide the discipline to rise above this. To get the most of your advisory board, provide them with regular crisp reports of your business’ performance against its KPIs well ahead of each meeting.

An Advisory Board needs a mix of skills – probably including financial and marketing skills. Industry knowledge is not essential – remember that businesses are 98% the same, just like the DNA of a mouse and a human. These people will most likely come from within your own network – or through recommendations from your network. An Advisory Board does need a good chair to keep meetings focussed.

An Advisory Board may meet as frequently as monthly – or as infrequently as quarterly, depending on the needs of the business.

This is my quick summary of the points from last night’s event – but free to add comments or observations below.

A big thank you to Bruce Sheppard, Jacqui Bensemann and Mike Ashby for your role on the panel of last night’s event. Details of the next Business Owners Forum on 16 September are here >>>.

What is FourSquare – and do you need to be on it?

Foursquare is a mobile application that allows users to connect with friends and update their location. Users can post 140 character twitter-style tips or comments about the locations or venues they check into. Users can choose to have their check-ins posted on their accounts on Twitter, Facebook or both.

I would liken FourSquare to a location based Twitter. And like Twitter, it is free to join and free to use.

Sounds pointless, right?

Foursquare launched in 2009 with functionality in 100 cities worldwide. In January 2010, it expanded to allow check-ins from any location worldwide. In March 2010, users had grown to 500,000 – and by last week it was reported that FourSquare had grown to 2,540,800 users with 28% growth in the month of July alone.

Although penetration is still quite low in New Zealand compared to say the USA, this thing is growing faster than Twitter ever did!

New York based FourSquare was co-founded by Dennis Crowley, who has been named one of the “Top 35 Innovators Under 35” by MIT Technology Review magazine. FourSquare has 27 employees – and has just attracted venture capital investment of US$20 million giving it a pre-money valuation of US$95 million. Not bad just one year after launch!

So do you need to get your business onto FourSquare?

If you’re in the business to business space, I’d say probably not.

But if you’re providing goods or services to the public, yes – get yourself onto FourSquare. Particularly if you’re involved in leisure, entertainment, hospitality or the like. And I’d say definitely get involved if your target market includes overseas visitors.

There may also be opportunities to use FourSquare to promote loyalty or advertising campaigns. We haven’t yet figured out how we’re going to harness FourSquare other than by being seen to be there, but here >>> is the Elevate CA venue on FourSquare.

This may only be a fad – and FourSquare users may only ever amount to being a subset of Twitter users, but the number of people using FourSquare is exploding, so why not stake your claim. Even if the only benefit is being seen by your community to be an early adopter of new tools.

GST Rate Change

The rate of GST goes up to 15% on 1 October. Are you ready? Here is a quick summary of what you need to know.

The IRD will send you the relevant GST 101 form and calculation sheet for your business. For most businesses, this return is likely to take longer to complete than usual so you should get onto it as early as possible in October. Just give us a call if you have any queries – or if you’d like us to take care of filing your transitional GST return.

Here is a quick questionnaire to find out what you need to do to correctly file your transitional GST return.

For Invoice Basis Filing

1. Is your return Period to 30 September 2010?

No – go to question 2.

Yes – the good news is that you don’t have to do anything – just file your September GST return as usual using the old 12.5% rate, and your future GST returns using the new 15% rate. Easy.

2. Is your return Period to 31 October 2010?

Yes – You will need to complete a transitional GST return which identifies your activity to September at the old GST rate of 12.5% – and all activity from 1 October 2010 at the new GST rate of 15%.

For Payments Basis Filing

1. Is your GST Return period to 30 September 2010?

No – go to question 2

Yes – You will need to prepare a debtors and creditors* list as at 30 September 2010 – and adjust for these amounts in your GST return. This will ensure the transactions that relate to the old GST rate are still taxed at 12.5%. See below for the calculation.

2. Is your GST Return period to 31 October 2010?

Yes – You will need to prepare a debtors and creditors* list as at 30 September 2010 and adjust for these amounts on the transitional GST return which identifies your activity to September at the old GST rate of 12.5% – and all activity from 1 October 2010 at the new GST rate of 15%. See below for the calculation.

*Debtors are all amounts still owing to you by your customers for invoices dated up to and including 30 September 2010.

*Creditors are all amounts still owing by you to your suppliers as at 30 September for goods and services with an invoice date on or before 30 September 2010.

Here is the calculation for Debtors and Creditors that you will need to complete if you are on payments basis. The IRD will send you the calculation sheet, so you just need to work your way through it. There will be no need to file the calculation sheet with your GST return, but you will need to keep it on file in case of audit.

Once you have completed your debtors and creditors as at 30 September 2010, you will need to complete the following calculation – and then to add or subtract the balance from box 9A.

(Total Creditors $xx Minus Total Debtors $xx) divided by 51.75

ie say Total Creditors at 30 September is $15,000 – and Total Debtors are $8,500

so – $15,000 – $8,500 = $6,500

$6,500 / 51.75 = $125.60.

Add (or subtract if the amount is negative) this amount (in this case $125.60) from box 9A.

For some businesses, this will be very easy – and for others it could take some time. If you have any problems just give us a call.