A TALE OF TWO BUSINESSESS
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Articles by John Heaslip
For most clients, 1 April signals the start of the new year for business and tax purposes, and the month of March brings opportunities to minimise tax and maximise cash surpluses for the coming year.
In order to implement any opportunities, first a business must be organised.
By way of comparison, if you look at the extreme ends of the scale it is easy to imagine two very different types of small business. On the one hand there is Business One, the "traditional" or "shoe-box" operation. Their records, such as cheque stubs, receipts and bank statements, will be delivered to us, their accountant, to tidy up. They may well have opted to leave everything until the end of the year. Unfortunately this lack of preparation puts pressure on us, with the probability that this will be reflected in legitimate but high fees. The whole process inflicts pain on the business proprietor who is likely to take this out on the government, the accountant or the office cat.
There is a better and smarter way to do business.
Business Two has taken control of its financial management. The first step was to install and maintain an effective bookkeeping system, such as Xero. This would involve seeking help to set up a system and coaching on how to use it, or it may involve contracting a professional bookkeeper. In either case, the vital message is to ensure that records are kept in the form which is most efficient for us as the company's accountant. With well maintained records, completing GST on a regular two or six-monthly basis is much easier, and this in turn helps to spread tax payments and relieve end of year pressure.
Another important benefit for the second business is the ability to make financial decisions based on accurate knowledge of profit, loss and cash flow. Together with their GRA accountant, this will help in determining the most cost effective time and method for capital expenditure, such as updating equipment or motor vehicle replacement. We will also be able to look at early figures to predict the likely end of year performance and to recommend minimising tax by legitimate means.
So to summarise "A Tale of Two Businesses", the smart operator of Business Two is likely to have a good professional relationship with both his bookkeeper and accountant, and a contented office cat!
If you'd like to find out more about having GRA as your accountants, we'd be very pleased to talk to you - phone +64 9 522 7955, info@gra.co.nz or via our online form.
John Heaslip
Business Advisory Director
© Gilligan Rowe & Associates LP
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Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.
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