Hot Topics
To register for website updates please click here
During August, tax legislation will pass through the final stages of the Parliamentary process. With amendments under titles such as “controlled foreign companies”, “thin capitalisation”, “deductible foreign equity” – it would seem at face value to be something that most New Zealand exporters and SME's could ignore as applying only to the corporates. That would be a mistake. A privately owned New Zealand business that might have a subsidiary in - say, the Pacific Islands – is now subject to the full might of New Zealand 's international tax regime and might not get a tax deduction for all of its funding costs.
Clever Companies: Managing in a downturn
When a downturn threatens, you need to take decisive steps to understand the situation and what it means for the future survival of your business. Planning for a downturn helps you to maximise opportunities and prepare your business to survive and thrive in all circumstances.
- Manage your cost base
An economic downturn forces companies to re-evaluate their relationship between cost and profits. Although some have been doing this for a while, many others are responding late in the day. Few have managed to reduce their cost base in a long-term sustainable fashion whilst successfully maximising profitability. - Act decisively
It’s easy to jump to conclusions when under pressure to protect profits through a downturn. Many businesses will be tempted to freeze infrastructure investments, mothball new growth projects and defer integrating the latest acquisition. Advertising and recruiting investments are easily cut, as are loyalty programs for customers and staff. - Focus on what really matters
Through a downturn, businesses must ensure their customers remain their number one priority. Those that support their customers through these challenging times will gain respect and benefit from mutual advantages. - Plan for different scenarios
In these fast changing and challenging times, businesses are facing an uncertain future and conventional business models may no longer be viable. Many management teams will need to re-assess their operations and consider a number of possible scenarios. - Recognise the value of your people
There is no escaping the fact that market conditions are more challenging. Many companies may find it difficult to motivate employees and maintain productivity levels during these times. Whether you are struggling to deliver business as usual, or are managing a targeted restructure, a critical first step is to identify the talent that cannot be lost. - Analyse and act
As businesses are affected by greater challenges in the marketplace, management teams have an ever greater need for reliable information in order to make timely decisions. - Take a closer look
It is easy to jump to conclusions when under pressure to protect profits through a downturn. Many businesses will be tempted to freeze infrastructure investments, mothball new growth projects and defer integrating the latest acquisition. Advertising and recruiting investments are easily cut, as are loyalty programs for customers and staff. - Leading for Success
Anyone can manage a company through good times, but now, more than ever, it’s important to take the time to step back from your daily tasks and ask yourself whether you’re equipped to lead your team to success through challenges and uncertainty. Managing in a downturn may be difficult for many of today's business leaders, who have built their careers through years of economic growth. Natural attrition may have removed experienced managers from your business. - Be Prepared
Nobody holds the crystal ball for the future. Clever companies plan ahead for likely scenarios. When a downturn threatens, businesses need to take decisive steps to understand the situation and what it means for their future survival. Planning for a downturn maximises the opportunities available, enabling the best prepared businesses to come through the bad times reenergised and fit for the future. - Seek the Opportunities
Economic downturns present opportunities for companies prepared to look. One study indicated that during the last recession, more than a fifth of companies in the lower quartile in their industries jumped to the upper quartile. Recessions reshuffle the decks more than boom times and research shows that gains made during challenging times tend to endure. - Clear Communication
Managing Stakeholders for long-term success - managing your stakeholders effectively in challenging times is crucial to executing a winning strategy. Good communication is critical. Don’t keep secrets and don’t spring surprises. - Streamline Operations
Flexibility is critical in improving your operational position in a downturn. Now is probably not the time to save money by cutting back your marketing budget, but it is the time to make some hard-nosed decisions about what it is you are going to spend that money on. - Keep control of your cash
When times are hard, cash is king. Commentators suggest that the companies who emerged from the last recession as sector leaders typically had an average net debt-to-equity ratio of about half that of their less successful competitors before the downturn hit. The winners also held more cash on their balance sheet than the companies that were hit hardest.
Cash is King
Media hype and some genuine areas of our business community have indicated that there may be economic downturn. It is important to ensure that your business remains liquid and has plenty of cash available to avoid any setbacks. It is also important to remember that being profitable does not necessarily mean being liquid. A business can fail because of a shortage of cash, even while profitable. The following solutions will help you free up as much cash as possible during this time.
Clever Company Check-up
The principles of sound business management are always relevant, regardless of whether the economy is growing or in recession. However, the need for improvement or change is usually only highlighted when adverse factors impact on business performance. The world-wide economic slowdown, high domestic interest rates and a strong New Zealand dollar have focused media attention on an ‘impending’ market downturn. The extent of this downturn in the short to medium term is unknown.
Organic Growth for Small Business
Organic growth is achievable for any small business. The art is to know where you extract value in your business and understand what your customers value. If you can correlate these two aspects of your operation you will succeed both in growing existing customers and winning new ones. If you know the type of people that make you money and know precisely what it is they value then you have the recipe for becoming more profitable.
The practical side of Succession Planning
Increasingly succession planning is on the minds of business owners. It’s a wide ranging and sometimes daunting topic. Below we discuss some key aspects – generating options, building in flexibility, maintaining perspective and aligning interests.
Value of Financial Statement Analysis
Most business owners and managers receive annual and monthly financial statements, yet we find financial statement analysis is often overlooked or not carried out on a systematic basis so as to obtain timely insight into the financial performance of the business.
Staff development for small companies
Great products and services can take a company only so far. People shape the long-term success of every business, making investment in their development more important than ever before. But for smaller businesses with less time and fewer resources, staff development has become essential.
What hat have you got on? - Governance in the privately owned business
Essentially one of the harder things to adapt to when you have started from scratch and built your business is to allow someone into your inner sanctum. Sound governance in the right environment where shareholder expectations are clear, will add value to stakeholders. There is a cost associated with implementing a sound governance structure, however, more important is an acceptance by the shareholders that the appointment of independent directors is in the company’s best interest. Sound governance is underpinned by a clear definition of the role of the shareholder, of the directors and of the management team.
Estate planning gives security
Standard partnerships and sole traders are disappearing as growing litigation and liability exposure mean owners are choosing to trade through companies or other entities to minimise the risks to their personal wealth. In reality, a proprietary company provides scant protection for personal assets and a more sophisticated strategy is required to safeguard wealth. For asset protection, structuring businesses and personal investments correctly can minimise the financial impact of a business failure. It can also improve the operation of a business, minimise tax and protect it from some of life’s pitfalls.
Motor vehicle ownership options
You have decided to change your vehicle. To work out the most viable option, you are likely to consider whether to purchase (outright, by standard hire purchase, or hybrid hire purchase) or whether to lease (finance lease or operating lease) and the most effective ownership option (business ownership, private ownership, or a hybrid option).
Foreign Exchange Management
Any company involved in importing or exporting products or services needs to fully understand their foreign exchange risk to ensure it is effectively managed. Put simply, foreign exchange risk refers to the chance that a fluctuation in an exchange rate will result in a gain or loss for a company.
Goods and Services Tax Warrant of Fitness
The shortfall penalties and use of money interest regimes came into effect in 1996. Since then it has been our experience that taxpayers who have Goods and Services Tax (GST) errors are incurring a significant penalty and interest exposure and, even where the Inland Revenue Department’s efforts to impose penalties are successfully rebutted, a significant amount of management and professional advisor time cost is incurred. The Inland Revenue Department (IRD) addresses the penalty issue in every situation where there is a shortfall, and even in circumstances where errors result in GST being overpaid by the taxpayer, there is often difficulty in obtaining redress.
When not to invest in your own company
Business owners face a unique investment dilemma. To what degree should they invest their capital back into their own business, and to what degree should they invest in other assets?
Choosing a Business Structure
There are a number of alternative structures through which a business activity can be conducted. Choosing the most appropriate structure for your business requires careful thought. Below we overview some of the most commonly asked questions and key matters to be considered.
Clever Companies - Here's how you can perform a health check-up.
Internal controls are an essential part of keeping a business fighting fit. They help maintain productivity and efficiency, and optimise resources and capital. Businesses without controls risk slow leakage of financial resources that can bleed them dry. They increase their vulnerability to sudden failure from shocks, such as running out of money due to inadequate monitoring of cash, misappropriation of assets or outright fraud. The likelihood of errors in the financial statements increases, and this damages shareholder and investor/lender confidence. For companies that intend to make a public share listing in the future, tight controls are essential to get the best price.
Managing the Stages of Business Growth
This simple diagnostic chart can help you locate your company on the growth curve so you can identify and then address potential business pitfalls that may be lurking just ahead.The chart will direct your attention to issues such as cash management, asset management, marketing, organisational behaviour, management reporting and information systems / internet solutions.
Directors Responsibilities
The need for directors and executives to understand fully their duties and responsibilities may seem obvious. However, evidence brought before our Courts continues to highlight that many are not aware of the duties and responsibilities their position carries.
Strictly Private – Your Family Business
Exit planning: Your family business may be your most valuable asset and possibly the biggest contribution you will make to future generations, but statistics show the odds are against you for long term family succession. There is a maxim - “The first generation founds the business, the second generation builds it and the third generation ruins it.” So how do you ensure that your family business will be successful in the long term?
Exit Options
Exit planning: Once your business has been groomed and your strategic business plan is in place, you can consider the options you have for exiting from the business. There are three major exit options available to the owners of private companies:
Writing a Business Plan
A business plan is a fundamental requirement for all start-up and rapidly growing businesses. As every business is different there is no such thing as a standard business plan. And, as most businesses operate in dynamic markets, a business plan should not be static.
Employee Share Schemes
Schemes generally provide a positive incentive for employee involvement in running a company, can ensure an employee's long term commitment to the company and provide a financial incentive by sharing in growth in company value.
Structuring a Transfer Pricing Policy
Transfer pricing is an issue which has been referred to by various revenue authorities as the most important tax issue facing multi-national organisations today. This is evidenced by the fact that global revenue authorities have in general become much more aggressive in the Transfer Pricing arena in recent years.
Selecting a new accounting system
When selecting a new accounting system, a Clever Company will use a structured process to ensure the new software will work in its business. If you fail to do this, the result may be an association with a software vendor that is not only time consuming and frustrating – but also potentially very costly.
Don’t expose yourself… Be a clever lender to your company.
Do banks and financial institutions lend funds to private companies without security or some type of priority regarding payment? Absolutely not! Why then do so many private business owners do exactly that in relation to their businesses?
The challenge planning process
The problem that so many businesses face with strategic planning is not so much getting a plan down on paper, it's making sure that it's the right plan and it gets implemented. With the best will in the world, reality intervenes and new challenges and opportunities arise.
HR Best practice
Clever companies strive to create value for their businesses through their people. The challenge in doing this is that while companies usually consider people to be their greatest asset, they are also the most expensive resource to attract, maintain, motivate and retain.
International Tax
New Zealand companies with local shareholders only have to contend with one set of tax rules. However, for those companies that move outside the sheltered waters of the New Zealand tax regime, there are two new sorts of complication that need to be addressed. These are:
Planning for harmony: 10 items you should include in your shareholders’ agreement
Shareholder agreements are a time-saving tool for owners to plan retirement and exit the business, including grooming a business for sale and appointing a successor. Although the best time to implement a shareholders’ agreement is during the early days, it is possible to construct a pact around existing business structures in an established operation. The following 10 items should be included to ensure your shareholders’ agreement is legally binding
Dealing with Banks
It is often forgotten that banks are businesses like any other and focus on similar issues. Companies have far more in common with their bank than they think. They both have the same business issues, namely a competitive marketplace, a need to identify and service their customers, and a need to achieve a satisfactory return for their shareholders. Banks also operate within the same business, political and economic environments as all other businesses.
Entrepreneur Resource Centre
Our US firm has developed a comprehensive online resource centre specifically for entrepreneurs and people who own their own businesses. The centre offers you proven business plan templates, financial models and technology sector specific ratios, benchmarks and much more.
Streamlining business processes
Future proofing your business: Companies that have complete control over their business processes are able to realise the full potential of their organisation’s productivity. Focusing on making continual improvements to these processes will enable you to achieve significant productivity gains and competitive advantages in the marketplace.
A Beginners Guide to Trusts
You’ve probably heard a lot about trusts over recent years. Trusts have become an increasingly popular way to protect family assets and safeguard the financial future of dependents and can give rise to tax benefits.
Grooming Your Business for Exit
If you have ever sold a house or car, the principle of ‘grooming’ should be familiar to you. You know that a good polish, a new paint job, or replacing rusty guttering can make a big difference to the sale price. When it comes to selling a business, the process is more involved, but the same principle applies – with forethought and planning you can attract more potential purchasers and maximise the value of your business.
Facing an audit by the Inland Revenue Department
The Inland Revenue Department (IRD) will often undertake an audit to examine your financial affairs, check you have paid the correct amount of tax, and determine that you are complying with the tax laws. So, what can you do to ensure an IRD audit goes smoothly? The following notes provide practical advice on the handling of income tax investigations and audits administered by the IRD.
Fringe Benefit Tax Warrant of Fitness
There have been major changes to the Fringe Benefit Tax (FBT) rules in recent years that all employers need to be fully aware of. These changes have increased the complexity of the FBT system such that preparing and filing an FBT return has become a more complex exercise.
Understanding Your Priorities
Exit planning: Before embarking on the process of business succession, it is essential that you understand your motivations for the process and what you hope to get out of it. Without a clear view of the intended outcome and the benefits of the process, it is unlikely that your objectives will be met.
Protecting yourself from risk
What can you do to protect yourself and your family from the risks of your business? Do you need to have everything you own on the line? Do you understand the risks of your business?
2009 Annual Financial Statements/Tax Returns
With the end of the financial year approaching, it is time to consider your 2009 tax position and the information that will be required to compile your 2009 financial statements and tax returns.
Strategic planning
The ultimate goal of strategic planning is to enable effective action in a changing environment. Strategic planning requires seeing clearly both the existing situation as well as the future potential. It also requires the ability to clearly analyze potential impacts of strategic decisions.
Asset protection: Are trusts a good idea?
What good is a wealth accumulation plan if your hard earned savings and assets are at risk? Asset protection should be an integral part of your wealth management plan as your savings and assets accumulate.
Structuring Debt
A bank overdraft may not be the most appropriate way for you to structure your company’s debt, however, it still remains the preferred choice for many businesses today.
Financing growth in small and mid-sized companies
Many small and mid-size businesses are undercapitalised. This lack of long term financing is often the restricting factor in an entrepreneur's ability to continue to grow and expand his or her business.
Equity Raising
There are a number of issues that entrepreneurial companies need to consider when thinking about raising equity capital. The first question that needs to be addressed is: What do I need the capital for? It might be to enable you to grow your business (either organically or by acquisition). Alternatively it might be to provide you with a partial exit from the business or to allow you to reduce your company's debts.
.
Email to a colleague
Print-friendly version