again to the McLean and Co. Newsletter in which we discuss
current taxation and business matters. We trust you find it informative.
Any feedback would be welcomed.
and Co. is a home based chartered accountancy practice based in Clive,
Hawkes Bay. Readers are invited to peruse the practice website
which lists services provided, gives contact details and indicates how to become
a client, contains an extensive base of articles on business and taxation
matters, and has links to other websites that may assist your business.
Being a small firm itself, McLean and Co.
strives to provide a personal and professional service largely to a self
employed person and small business client base. Enquiries are
and Education Fees not Eligible for Tax Rebate
of Taxpayer Calls are Answered Correctly
Tools for winning Customer Loyalty
Property Partnerships that Derive a Loss
BUSINESS AND TAXATION ARTICLES
McLean and Co. website contains an extensive number of articles prepared by
McLean and Co. relating to taxation and business matters. Here
are a selection that will be of interest:
TUITION AND EDUCATION FEES NOT ELIGIBLE FOR TAX
claiming your donations rebate you are reminded that tuition and
education fees cannot be claimed as a rebate.
"There have been
cases where students have claimed a rebate from Inland Revenue for fees paid to
their education or training institution," says Bruce Thompson, General
Manager Service Delivery, IRD.
"It is important
that all students know that they cannot claim money back from Inland Revenue for
primary and secondary schools are sometimes called 'school fees' and these may
be claimed, but this does not apply to tuition and education fees.
think they may have incorrectly claimed a donation rebate for fees are
encouraged to talk to Inland Revenue," says Mr Thompson.
Students can call Inland Revenue on
0800 377 774 between 8 am and 8 pm weekdays and 9 am and 1 pm on Saturday.
Remember to have your IRD number handy.
99% OF TAXPAYER CALLS ARE ANSWERED CORRECTLY
Mr Bruce Thompson,
General Manger Service Delivery, IRD said, "the Dominion Post
(24 August 2002) statement that one in four of the 80,000 calls each week to
Inland Revenue are given the wrong information is incorrect."
The department has
worked hard to improve its call centre capability. Increasingly we are getting
compliments for our customer service:
Customer satisfaction results in
2002 were up to 85% compared with 63% in 2000.
Tax agent call satisfaction rate was
93% in 2002.
The average speed for answering a
call this year was 1 minute and 30 compared with 3 minutes and 30
seconds in 2000.
Our call centres take
a large variety of calls of which 99% were measured as answered correctly.
About 60% of calls received are business calls. Each of our call centre staff
are specialised for the type of calls they receive. We monitor over 40,000
actual client calls a year, always seeking to improve our systems and the skills
of our people.
normally has 150,000 counter interviews in a year. It is true these are by
appointment, this is to ensure people don't have to queue. 98% of those
appointments are conducted within one day.
Mr Brent Gilchrist is
quoted in the Dominion Post as saying that "it is a tremendous battle to
make an appointment and it can take a good number of weeks."
"This is simply
incorrect," said Mr Thompson.
In addition to
interviews we conduct 2500 Heartlands interviews. Heartlands is an
inter-Government agency initiative that brings government services to more
remote rural towns and provides a one-stop-shop for the community and an
NINE TOOLS FOR WINNING CUSTOMER LOYALTY
Dont let customers go after one sale.
Win them back with a follow- up programme
- Thank-you notes: This is a
no-brainer, but you'd be surprised at how many entrepreneurs neglect to
write thank-you notes--especially when they get really busy. Take the time
to show your customers that you genuinely appreciate their business.
They'll remember your thoughtfulness because most of your competition
won't send out thank-you notes.
- Postcard mailings: If you target
consumers, send out monthly mailings that make good refrigerator fodder,
such as "Quote of the Month," "Recipe of the Month" or
useful tips on such topics as time-management, gardening or anything else
that interests the bulk of your customers. Avoid being too promotional
here. Just provide the kind of information that customers will want to
hang on their frig. The added benefit to you is that whenever guests visit
your customers' homes, they'll see your name, potentially leading to
conversations about your business.
- E-mail updates: Think of your
e-mail update as a press release that you send to your customers.
Providing them with regular product, service and customer updates via
e-mail at least once per month will convey a sense of positive momentum.
This keeps customers in the loop and, over time, gets them excited to be
involved with you and motivates them to pass on referrals.
- Getting together over coffee or
lunch: Try to spend face time in a nonsales environment with your
customers. Ask about their family, hobbies, personal goals and so forth.
When you show customers that you really care about them on a personal
level, they're yours for life.
- Birthdays, anniversaries and other
special occasions: These occasions are very important to your customers
and their families and friends. Be among the few who actually remember a
customer's special days, and that customer will never forget you!
- Follow up on well-being: For
example, if you find that a customer's wife has been sick, call
periodically just to find out how she's recovering
- Pass referrals: One of the most
powerful ways to encourage loyalty in customers is to pass them referrals.
When you get a chance, scroll through your customer database and think
through people you know who might add value to your customers.
- Entertaining at your home: Throw a
party for your best customers. You'll be amazed at how much rapport and
goodwill you can build with people when you get them in your home
environment. Your guests will also find value in your party as a
networking opportunity for them.
- Post-sale feedback: Demonstrate
that you care about the quality of your service. Call customers and ask
them questions like:
|Are you pleased with the service you
|What did you like most about working
|What would you like to see improved?|
Without this invaluable
information, you'll have a hard time improving your products and services.
Besides, when you ask customers for feedback and implement their comments, they
feel a sense of ownership in what you're doing and thus become more loyal to
your products and services.
PROPERTY PARTNERSHIPS THAT DERIVE A LOSS
use of partnerships as a tax-planning tool in the family context is well
known. IRD have been active in reviewing taxpayer treatment of
profits in family partnerships.
Commissioner has the ability to reallocate profits (or losses) of a
partnership. This ability only applies to partnerships involving
allocation of rental property losses between a husband and a wife was considered
in Case S2 (1995) NZTC 7.102. The husband set off the losses against
his income. IRD wanted to share the losses equally.
TRA found that the property was equally owned by the husband and the wife as
joint owners. The Judge considered that it was commercially unrealistic to
suggest that all losses should be allocated to the husband. As the
division of profits was subject to review by the Commissioner and under
general tax avoidance provisions the approach of IRD was upheld.
has only one function in business- to increase sales. If by
offering credit, your sales do not increase, then there is no point in granting
credit. It would be logical to ask every customer to pay up front if no
sales would be lost
three components of credit risk:
gain i.e. extra sales
loss i.e. bad debts and costly recoveries
aim of a business should be to generate a lot of extra sales, minimise the
potential loss by having a small number of bad debts, both in quatity and value,
and also the collection of debts with minimum cost and effort.
a business would like the credit risk to be low. The risk is low if the
mark up is high. This is because the cost of goods sold is low
relative to the value of the sale.
the credit risk is high if the margins are low. In this case the cost of
goods sold is high and is much closer to the value of the sale.
a business services just one or a small number of customers
the credit risk is high as a major customer could collapse
financially and cause similar financial problems to that business.
It is therefore a better situation to have a large number of customers
when credit is provided.
should assess the customer you are planning to grant credit to. Do a financial
analysis. Does this customer depend on one main business for his
sales? Does this customer sell only one product?
Is this customer well diversified- i.e. amongst its customer base and the
products or services it sells? What is the payment record of the
is still possible to make a profit out of high risk companies by setting a
reasonably low credit limit. Your aim here is for your profit
generated from earlier sales to exceed the loss caused by bad debts in the
future. You can take a gamble on granting credit to high risk companies
provided you don't have too many of them, and have systems in place to check
that they are staying within their credit limit.
of the time, you are looking to grant credit since the potential gain is usually
higher than the potential loss. The exception is where a customer's
failure would threaten your survival.
is the cash purchase of your sales invoices at a discount by another party (the
rate of discount varies between factors and the services included.
The factor advances you up to say 80% of the value of your invoices and
takes over the collection of your accounts from your customers.
are two factoring types:
The 20% balance, less the factoring fee, is paid to you when the factor
receives the customerís remittance.
You are still responsible for bad debts.
The factor company carries the bad debt risk.
No further fee is paid
can be some difficulties with factoring.
For example, the link between you and your customer can be broken through
the factor handling statements and cash receipts, so look for a factor that
provides a confidential service.
Also, the factor may impose tighter credit controls than you would
normally adopt, leading to a loss of sales.
So make sure that the factor does not interfere with your credit policy.
is one way that businesses can improve their cash flow and maximise the use of
their working capital.
services are available from finance companies an factoring companies.
is a method of distribution or marketing in which a business (the franchisor)
grants a contract to an individual or business (the franchisee) the right to
carry on a business in a prescribed way in a particular territory for a
|Rapid penetration of market|
|Use of other peopleís money and
energy to expand business.|
|Economies of scale.|
|Ideas from other franchisees and
|Loss of control.|
|Giving away profits and ideas.|
|Failure of franchisees to follow
|One bad franchisee contaminates all.|
|Bulk buying power.|
|Planning permission already
|Market studies already carried out.|
|Pooled resources to allow greater
|Shorter learning curve.|
|Lower capital outlay.|
|Assistance from franchisor for
administration, marketing techniques etc|
|Help when unwell.|
|Pay royalties when not making
|The franchisor may go bust.|
|Poor business activity of another
franchisee or franchisor may refect on them|
|May be forced to buy product
supplied by franchisor which may not be cheapest.|
|Lack of flexibility- business
methods dictated by franchisor.|