McLEAN AND CO. Chartered Accountants

Accounting          Taxation         Business Advice and Development Assistance           Audits                             

 P.O. Box 10 , Clive         133 Main Rd, Clive           Tel. (06) 8700952          Fax. (06) 8700955 

Email murray@mcleanandco.co.nz                                  Website www.mcleanandco.co.nz

 
 
EMAIL NEWSLETTER  FEBRUARY 2009
 
 

Welcome again to the McLean and Co. Newsletter in which we discuss current taxation and business matters. We trust you find it informative.  

 

NEW CLIENTS

We are happy to accept new clients.  We would be happy to assist colleagues and acquaintances as new clients.

 

INDEX

  1. Tax Changes Announced 4/2/2009

  2. Make Sure you Indicate the Correct Details if Paying Online

  3. Increasing the Gross Profit Ratio

 

 

 

TAX CHANGES ANNOUNCED 4/2/2009

  • Provisional Tax uplift rates will be reduced for the 2008/09 and 2009/10 income years, reducing the size of provisional tax payments that businesses have to make. The 105% rate goes down to 100% and the 110% rate to 105%. For transitional provisional taxpayers the rates go down from 100% to 95% and from 95% to 90%.

 

  • Use of money interest (UOMI) rate for underpayments of tax will be reduced from 14.24% to 9.73%. The rate for overpayments will reduce from 6.66 to 4.23%.

 

  • The GST payments basis threshold will be raised from $1.3 million to $2 million, allowing more businesses to enjoy the cash flow advantages of only having to account for GST when payment from invoices is actually received.

 

 

 

 

 

 

 

 

 

When do these changes start?

The changes that involve law changes will be included in a taxation bill to be introduced in February 2009 for application generally from 1 April 2009, or from the 2009/10 income year where appropriate. The new use of money interest rates will apply from 1 March 2009, and the new FBT rate on low-interest, employment-related loans will apply from 1 January 2009.

 

MAKE SURE YOU INDICATE THE CORRECT DETAILS IF PAYING TAXES ONLINE

IRD forward Income Tax Statements of Accounts for clients to ourselves and  we pass these on to clients. We note on these instances where it clearly appears that clients have advised the wrong year or period to IRD when they pay the amount.  In such cases (and obviously we can't identify all wrong periods) we contact IRD on behalf of clients and get the payments transferred to the  correct period. We have also assisted  to re-allocate incorrect procwessing for other tax types.

For example, we have noted the following common errors:

In respect to Income Tax we provide Payment Slips to Clients once their tax year affairs are finalised which clearly indicate the year for which a payment is due.  It is important to process these particular years when paying by internet, and if paying by cheque to provide these Payment Slips with your payment.

Any wrong allocation causes much extra work and no doubt confusion and frustration to you as clients when you know you have paid an account but IRD are saying you still owe the money.   

The Internet Bill Payment template for payments to IRD  asks clearly what tax types are being paid and asks clearly the period to which the payment relates to.  

Be extra careful to process the correct information for the payment.  Otherwise there will be the scenarios as described above. 

 

INCREASING THE GROSS PROFIT RATIO

The current economic times are as good a time as any to monitor your Gross Profit Ratio

How can you boost gross profit -in dollars and the GP margin?


Option 1 - Increase Dollars of Gross Profit by Increasing Total Sales

* make sure your advertising is effective - monitor each programme and either keep  it as-is, refine it, or drop it. Don't just change it for its own sake, if it works!

* make use of in-store displays and demonstrations

* make sure the exterior appearance and identification of the business is clean,  professional and helps customers find your store

* employ effective, hard-working sales staff (and train and motivate all people to stay  that way!)

* seek referrals from existing customers

* seek referrals from related businesses

* use staff incentives and competitions to encourage up-selling or sales of  companion lines - you can even use this to promote sales of older stock items or  slow-moving stock

* measure the conversion rates in your business. For every 100 prospective  customers, how many ask for a quote? Of those, how many ask for a  demonstration? then how many eventually buy? Increasing the effectiveness of the  sales process can lead to rapid increase in sales, without any additional cost or  time.

* increase the average sales size:
sell higher quality or enhanced features
use merchandising and display to group related products together or to promote  seasonal lines
stock displayed at close to eye-level generally sells better
using more lineal space for a product generally promotes sales of that product (ie  allowing twice the shelfspace will generally lift sales of that product)
look at your stock and sales mix to ensure that they closely match each other
sell accessories or add-on products: either have your staff do this at point-of-sale,  or use signs and 'deals' in the store to encourage purchase of additional, related  items

* increase repeat trade from customers:
through positive, friendly and helpful staff
sales staff members' ability to understand customer needs - promoting only the   products of genuine value to the customer
business image/appearance/housekeeping
provide regular follow-up
create 'clubs' for groups of customers; use newletters or email or letters to tell them  about relevant products; run special events just for regular customers etc; add  promotional pieces into (eg) your mailings of monthly statements
provide high quality service

Option 2 - Manage The Margin

These pointers largely influence the 'cost' aspect of 'Cost of Goods Sold'. Improvements to gross margins can be achieved here without the firm's customers even realising what is going on.

Avoid the factors that reduce your closing stock:

* eliminate shoplifting of minor items with: vigilant staff; well-located cash registers; use of mirrors etc to provide good supervision of all areas

* eliminate staff pilferage of minor items, through suitable penalties, training, etc

* eliminate or minimise damage to stock while it is in storage or on display - place it in suitable locations and use display units to protect it

* make sure that all stock received is checked against delivery dockets or invoices, so that you only pay for what is actually received in good order and condition

* make sure damaged stock is returned to supplier for replacement or credit

Eliminate or minimise high-cost purchases:

* avoid placing too many small orders with high freight costs

* avoid dealing with too many suppliers - you'll lose quantity discounts

* avoid carrying too wide a range of stock (again, losing the scope for volume  discounts)

* take advantage of settlement discounts where they are worthwhile

* plan purchases according to likely demand or seasonal factors

Eliminate 'Depressed Sales Values' from the level of stock sold:

* check your pricing practices (inaccurate cost prices lead to incorrect sales prices)

* make sure you re-price stock (e.g. on old lines, or after a promotion)

* make sure your sales mix blends sales of the low-margin items with sales of higher  margin lines

* improve merchandising and display to encourage customers to buy products they  reasonably need

* eliminate excessive discounting (e.g. 'mates rates') by your staff

* minimise the extent of heavily-discounted 'end of season clearance sales'

Option 3 - Look at Your Prices

Check your pricing:

* adjust your markups so that your prices are not out of line with competitors' prices

* price some stock lines to keep customers coming back, then set a suitable margin  on the related product sales

* make sure all stock on hand is priced consistently (don't let customers pick the  cheapest from amongst identical items on the shelves)

* use technology to make price changes quicker and easier; or to create price tags  etc

 

 

 

McLEAN AND CO KNOWLEDGE CENTRE AND ARTICLES ABOUT TAXATION AND BUSINESS IN GENERAL PRESS HERE FOR BUSINESS STARTUP KNOWLEDGE CENTRE PRESS HERE
FOR INFORMATION ABOUT COMPANY INCORPORATION PRESS HERE FOR PREVIOUS MONTH EMAIL NEWSLETTERS PRESS HERE

FOR PROPERTY INVESTMENT AND TAX INFORMATION PRESS HERE

FOR FRANCHISE INVESTMENT AND TAX INFORMATION PRESS HERE


The information provided in this email newsletter is for informational purposes only.   McLean and Co. accept no responsibility for the opinions and information expressed in the information provided and it is provided "as is" without warranty of any kind.    The user assumes the entire risk as to the accuracy and use of this document.   Readers are asked to seek professional advice pertaining to their own circumstances.    The McLean and Co. email newsletter may be copied and distributed subject to the following conditions:
  • All text must be copied without modification and all pages must be included.
  • This document must not be distributed for profit.    

 

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