The Good News Blog

Putting your business’ systems and procedures into a written manual will give your business a far better chance of being successful. The time and effort it takes to draft a written systems manual will be well worth it because when problems arise, (e.g. a key member of staff is sick), management and staff can refer to the systems manual to get guidance on what should be done in a particular situation.

Your system manuals might include instructions on how to produce key information including:

• Daily bank balances
• Sales
• Number of customers
• Weekly performance reports
• Staff productivity
• Monthly debtors' aged analysis
• Creditors' aged analysis
• Cashflow position
• Departmentalised financial accounts compared to budgets
• Key performance indicator data for the business

The systems manual might also summarise business records to be maintained including:

• Procedures relating to opening an account with suppliers
• Use of purchase orders
• Checking suppliers' tax invoices against delivery
• Payment of tax invoices
• Cheque preparation
• Substantiation of expenditure record
• Bank account operation
• General ledger postings
• Checking of cash register tapes
• Stock purchases issued/balance on hand records
• Employee wage records
• Capital expenditure
• Research and development expenditure
• Insurance covers
• Updating of budgets and cashflow forecasts
• Establishment of appropriate control of commerce and internet banking transactions

As part of the systems review, a periodical review of the filing system being utilised by the business is advisable. Does your filing system produce all the information you require? Does your computer system ensure all business emails are correctly filed and easily located if required in a dispute with a customer or a court case?

We would be happy to conduct a detailed review of your systems including your systems manual, business records and filing systems.

Recently the New Zealand Institute of Chartered Accountants and Tax Management New Zealand released a discussion document Simplifying the Taxation of Small Business in New Zealand. The recommendations and issues this covers are very interesting, and the stance is quite different to the status quo. And I must say as a Chartered Accountant I think they’ve done a good job of simplifying things.

The document suggests small businesses suffer under a weight of compliance requirements, which is virtually the same requirement for big business. Inevitably the cost of compliance is not only too high but an unreasonable burden for small businesses. Having helped lots of people who have owner managed businesses we know this to be true and I‘m hugely supportive of any initiative that makes compliance less onerous.

It seems the document’s purpose is to be a “constructive think piece to raise awareness and promote thought and discussion on some fresh approaches to tackling the ever wearisome tax compliance burden for small business.” It further states: “The purpose of this paper is to help determine whether there is a mood with both policy makers and small business owners to tackle tax compliance costs: because we believe our proposals could help cut income tax costs for small businesses by approximately a quarter to a third.”

Two very interesting suggestions:

• For micro-businesses (with earning under $60,000 with no employees), a flat 15% tax is paid on turnover including ACC levies. The business is not required to make careful deductions for expenses, which are generally 50% of the revenue.
• For a small business (turnover less than $1.2 million and registered for GST) the suggestion is treat all business structure types (Companies, Partnerships and Trusts) as if they were sole traders, removing dividends and salaries to owners and removing the requirement to keep an imputation credit account.

Income tax is paid with GST and there is no requirement to pay provisional tax. (Yippeeee!!) This does not mean a small business will pay less tax, in fact the proposals suggest about the same tax would still be paid. What it does mean, is that it would make it much simpler to calculate income tax for small businesses. This would help the accounting community to move to the business coach type model we have always wanted, as opposed to being tax calculators and minimisers.

The potential impact on the NZ small business community is massive. Some 90% of all businesses in NZ employ fewer than five people and 60% of all NZ businesses are owner operators employing nobody else. The writers have asked for feedback and have included a number of specific questions at the back of the document. For those of you inclined I strongly suggest you take a look.

There are many attributes to creating a successful long-term business. No one attribute makes a successful business, but a combination of attributes will significantly contribute to long-term successful business performance.

These include listening to team members, customers and suppliers; learning from their comments and making changes if necessary. Virtually every week something is changing in business. To be successful, you need to keep on top of the ever-changing business climate. Business operators need to encourage loyalty from their team members, suppliers and customers. These people will also expect loyalty from management, directors and owners.

The use of marketing tools such as the following all help management get important feedback on their products / services:

• Databases on customers
• Surveying customers on what they like and don't like about your business
• Keeping webpages up to date
• Testing the market for reaction to new products and services

Most successful businesses create strategic alliances with other people in their industry, either suppliers, similar businesses in other geographical areas that are not direct competitors, or allied organisations. Strategic alliances can significantly contribute to your knowledge base on what is happening in business.

But all these attributes fade into insignificance if there is no culture within the organisation. Culture affects every aspect of the business, shareholders, directors, management, team members, customers and suppliers. Culture is the hidden success: the icing on the cake, the attitude of team members going that extra distance to satisfy customers' requirements. It’s a supplier making an extra late delivery to you when you need those supplies. It’s customers who might be prepared to overlook a late delivery because of their overall satisfaction in dealing with your business.

Culture relates to the image that your business creates in the market place:

• How people communicate
• Is the telephone answered in a professional business manner?
• Are telephone calls replied to?
• Are emails responded to?
• Are products delivered on time and at the required workmanship?
• Is quality a major issue in the business?
• Are staff pleasant and presentable?

Culture then is one of the major attributes of a business that will help hold the business together and will give the business that extra strength and perseverance to battle through and survive harsher economic circumstances.

There are many attributes to creating a successful long-term business. No one attribute makes a successful business, but a combination of attributes will significantly contribute to long-term successful business performance.

These include listening to team members, customers and suppliers; learning from their comments and making changes if necessary. Virtually every week something is changing in business. To be successful, you need to keep on top of the ever-changing business climate. Business operators need to encourage loyalty from their team members, suppliers and customers. These people will also expect loyalty from management, directors and owners.

The use of marketing tools such as the following all help management get important feedback on their products / services:

• Databases on customers
• Surveying customers on what they like and don't like about your business
• Keeping webpages up to date
• Testing the market for reaction to new products and services

Most successful businesses create strategic alliances with other people in their industry, either suppliers, similar businesses in other geographical areas that are not direct competitors, or allied organisations. Strategic alliances can significantly contribute to your knowledge base on what is happening in business. But all these attributes fade into insignificance if there is no culture within the organisation. Culture affects every aspect of the business, shareholders, directors, management, team members, customers and suppliers. Culture is the hidden success: the icing on the cake, the attitude of team members going that extra distance to satisfy customers' requirements. It’s a supplier making an extra late delivery to you when you need those supplies. It’s customers who might be prepared to overlook a late delivery because of their overall satisfaction in dealing with your business.

Culture relates to the image that your business creates in the market place:

• How people communicate
• Is the telephone answered in a professional business manner?
• Are telephone calls replied to?
• Are emails responded to?
• Are products delivered on time and at the required workmanship?
• Is quality a major issue in the business?
• Are staff pleasant and presentable?

Culture then is one of the major attributes of a business that will help hold the business together and will give the business that extra strength and perseverance to battle through and survive harsher economic circumstances

Worried about the recession?

We are able to assist with a special Survival In Difficult Times For SMEs Workbook, containing checklists, a complete review of your business operations and development of a summary report containing agreed strategies to ensure the business’ survival during these difficult times. If this sounds like it could be helpful to you – let us know – we’d be happy to guide you through this workbook.

Financial Review

To help your business survive you should examine, in detail, all aspects of the business’ operations to ensure that the business will continue to perform throughout economic downturn.

Here are some steps you could consider when reviewing your business:

• Keep the business’ books up-to-date so that management is able to foresee any cashflow difficulties before they happen
• Prepare monthly financial accounts including calculation of key performance indicators and discuss the accounts and KPIs with managers and team members
• Brainstorm creative ways to increase revenue and reduce costs, make brainstorming part of your daily routine
• Review the accounting and computer systems to ensure that you are able to receive prompt accurate financial and business operational reports.

Market And Customer Review

• Review marketing expenditure
  
  • Is the expenditure directly targeted to achieving sales in the prevailing market?
• Review your unique selling proposition
  
  • Are you delivering outstanding service to your customers each time you deal with them?
• Review what is happening in your industry
  
  • What market opportunities are emerging from the downturn?
• Demonstrate a ‘can do’ attitude to the market. The downturn will not last forever – in some quarters, we’re already being told we’re in recovery. Can you get increased market share in a downturn?
• Analyse your market and customers
  
  • Can you offer inducements to them to increase the frequency of visits and the value of average sales?
  • Can you attract new customers?

Contact us if you would like more ideas or would like to discuss any of these steps.

Why bother with a business plan?

If you were going to go on a long trip, wouldn’t you need a map? Business plans for business people are like maps for tourists. If you don’t have a plan, and you happen to reach your destination, it will be more luck then good judgement! Business planning is simply identifying where you are now, what your goals are and how you are going to achieve them.

The key commitment is writing it down. Planning asks you to look at future developments and consider the services you offer your customers. Get staff and other key people to have their input so that they ‘own the ideas’. Planning encourages clear communication within the business. The whole business should be reviewed on at least an annual basis. Fine-tuning and updates should be made every 6 months. One of the key considerations is that undoubtedly one day you will want to sell your business and you will want to get the best possible price for it. A good business plan will promote your business to a third party audience, particularly a potential investor or financier.

Business planning forces you to consider the risks involved in the particular business operation that you are involved in. ‘What would happen if…?’ is a very good question to pose to your team on a number of issues so that you can determine appropriate strategies that are then documented to be utilised as that particular event materialises. Various studies have indicated that businesses that develop a written business plan have a greater chance of surviving then those that do not.

Business plans will assist the owner/manager to run the business by incorporating performance benchmarks that have been analysed and agreed to in the business planning process. These can be regularly measured and then action taken to determine reasons for variants from the targeted figure.