May 2023 - Inside this issue
Xero Online Training - Invoices & Bills
After the success of the last online training, we are continuing our Xero training focusing this time on Invoices and Bills in Xero.
We will be looking at how we can use Xero to better manage our cashflow both collecting debtors and paying creditors.
The training will be held online using Microsoft Teams, Tuesday 23rd May at 10am. Training will last approximately an hour and a half.
Please register your interest to attend by clicking on the link below.
You will then be sent an online meeting link the week of the training.
Where has all the money gone?
My Accountant has advised that I have made a profit and need to pay more tax, but I don’t have the money in my bank to pay this tax along with my GST.
How can I make a profit and have no money?
Cash flow is the net amount of cash that an entity receives and disburses during a period of time. While profit is an accounting concept that measures the difference between revenues and expenses, cash flow reflects the actual movement of cash in and out of the business.
There are many reasons why a business can show a profit for income tax purposes yet have negative cashflow, e.g. running in overdraft or having no funds in the business bank account. The reasons include but are not limited to:
- You have purchased fixed assets using funds in the bank account. Fixed assets are long-term resources, such as plant, equipment, and buildings. An adjustment for the aging of fixed assets is made based on periodic charges called depreciation.
- You have paid off loans or hire purchases (HP’s), only the interest portion of any loan repayment is deductible for income tax purposes.
- You have large amounts of funds owed to you in Debtors/Accounts Receivable. You have invoiced out to clients but have not yet been paid.
- You have increased your stock levels; this has come straight from your cashflow as stock held at the end of the period is adjusted for and does not reduce your profit.
- Lastly, Drawings – you are withdrawing all the cash from the business to live on personally. This can be seen in your management accounts that we provide, the last page in this report shows you how much you are withdrawing from the company.
For example, if your accounts say that you have made a profit of $100,000, then the company would have tax to pay of $28,000 (based on the company tax rate of 28%). If your stock levels have increased by $50,000 and you have taken $50,000 out of the business, then you have no cash to pay the tax.
So what can you do to prevent this happening in the future?
- Ensure you are putting aside enough money each month into your tax savings account. Depending on your circumstances we recommend between 30-45% of your sales.
- Optimize working capital by speeding up collections, negotiating better payment terms, and managing inventory levels.
- Monitor cash flow and budgets regularly and prepare cash flow forecasts to anticipate any shortfalls or surpluses.
- Reduce expenses and increase revenues to improve profitability and cash flow margins.
- Seek external financing sources, such as loans, equity, or grants, to cover any funding gaps or to support growth opportunities.
So if you find yourself in the position of not being able to pay your taxes as they fall due, reach out to us for help. Or better yet, reach out before it becomes an issue for you! We provide budget and cashflow advice through our Strategy Planning meetings.
If would like to know more or organise a meeting, click to contact us below.
Contact us to arrange a meeting
Kidney Kids Fundraiser Morning Tea
We are hosting a morning tea June 30th at 10am to raise funds for a deserving charity Kidney Kids.
Kidney Kids NZ is in much need of all our support to raise more funds to support kids growing up with kidney disease. We want to raise their profile and awareness amongst the community and hopefully collect a donation or two for them.
So please, come along to the morning tea and show your support we would love to catch up with you too. Please register to attend by clicking the link below.
Increase in Xero Prices
A reminder the Xero fees for cashbook clients have increase from 15 March 2023:
- Non-GST Cashbook plans will increase by $1 - from $13+GST to $14+GST
- GST Cashbook plans will increase by $2 - from $20+GST to $22+GST
Please be aware that your Xero invoice has increased to reflect the above increases.
If you have an Automatic Payment (AP) set up with your bank you will need to increase it to reflect the changes.
If you have not already increased your AP for April and May, please ensure you cover the payment shortfall.
Those on a Monthly Instalment Arrangement (MIA) will also need to check their AP is set up to the new 2024 MIA amount.
Companies Office Register
As per the Company Office Act, all Limited Companies must provide addresses for the registered office, service and correspondence. The registered office is the address where your company records (permanent file & minute book) are usually held. If we are maintaining the company records, we will update our address there. However, if you are maintaining the company records this needs to be your address.
If we are to maintain your company records, we are required to add the service to our engagement letter as well as have a signed Company Office Authority form. Once we have the signed authority, we will then update the registered office address.
Please do not add the TAEL address to any Limited Company if you are updating or incorporating a new company yourself.
We will update the address upon receipt of the signed authority.
How to get the most out of your accounting fees
Here at TAEL Solutions Ltd Chartered Accountants, we believe that your annual accounting fees should cost as little as possible and that your accounting budget should be spent on useful advice and resolving issues in your business. The following are just a few pointers to help you reduce your annual compliance accounting fees:
- Ensure your records are tidy and well organised.
- Ensure you provide all the information at the beginning.
- Check that your accounting software is really working for you and is correct.
- Provide copies of bank statements and loan documents.
- Write notes about any unusual transactions that have occurred during the year – e.g. new loans, HP’s etc. We help with this process by providing clients with folders of dividers detailing everything that we need to ensure we can complete your accounts as efficiently and effectively as possible.
- Make use of the free meetings that are offered to you – annual sign off meetings, drop off meetings etc
- Come to the free trainings offered to ensure that you are providing the right information in the right format to prevent rework.
If you would like to discuss your options please contact us here
If you have any questions or concerns for us, please don’t hesitate to get in touch with us.
THE TAEL SOLUTIONS TEAM