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McLEAN AND CO.
Companies Office Announces Changes to Filing Annual Returns
Pricing for Profit
TIPS FOR PAYING YOUR MORTGAGE OFF EARLIER
The following examples are based on a $250,000 mortgage at 9% p.a. for a term of 30 years.
Pay your Mortgage fortnightly instead of monthly
Increase your regular mortgage payments
Shorten your loan term
Pay Lump Sums off your Mortgage
Keep Mortgage Payments the same if the interest rate drops
BUSINESS ACTIVITY REMUNERATION
If you are a sole trader you dont pay yourself a wage- you simply take money from the business when you need it for personal use. These takings are called "drawings". Drawings are not regarded as a business deductible expense when calculating profit. At the end of the year the full taxable profit or loss from the business is assessable to the sole trader. The sole trader can engage other opersons and pay wages (and deduct PAYE). This is a business deductible expense.
At the end of the year the net profit (without allowing for partners drawings) is shared in full between the partners. The partners then pay tax on their share of the profit in their individual tax returns. As with a sole trader, the amount the partners take as drawings can be more than their share of profit, and the drawings are not tax deductible.
A partner who works for the partnership can be paid a salary with PAYE deducted if there is a contract of service. The contract must be written and agreed by all the partners. Such wages would then be a deductible expense in the partnership Business Accounts. Partners paid in this fashion are not then eligible for the distribution of profits or losses as described above.
Companies can distribute money in three ways:
COMPANIES OFFICE ANNOUNCES CHANGES TO FILING ANNUAL RETURNS
The shift is being undertaken to enable the New Zealand business community to take advantage of the many benefits associated with online filing such as the lower cost of compliance.
The Companies Office will no longer be distributing paper annual returns to companies in their annual return filing month. However, companies that have not provided an email address will continue to receive their reminder by post.
PRICING FOR PROFIT
Some typical methods of pricing are::
competitors or the market
The problem with following competitors is that you don't always know how they calculated their price. It may be unsustainable in terms of the costs to deliver the product or service.
You may win sales from them in the short term but unless you develop a better way of pricing you are likely to go out of business eventually if the price doesn't cover costs.
They may have cash reserves to cover the shortfall between Costs and Price for a while and you may not. They may be able to ‘sit it out' until you go out of business trying to compete and collect all your customers later.
Charge a bit more than
the product or service costs
The question here is ‘how much does the product or service cost?'.
Your costs include your Cost of Goods Sold (direct product and service costs) plus your overheads such as administrative staff, advertising, stationery etc.
Break-even analysis is the practice of calculating how much Revenue you need to cover COGS and Overheads. It is important in business to know your ‘Break-even situation'.
Charge as much as you
can get away with
This is a great strategy so long as it covers your COGS and Overheads. It may work at first but if you don't keep a close eye on COGS and Overheads and they ‘creep up', it may turn out to be unprofitable in the end.
Charge what you think
Worth can mean different things to different people. What the customer thinks it's worth may be quite different to your perception. You still need to keep a close eye on costs to ensure your margin is not being eroded by increased costs.
The issues relating to Price are as follows:
In order to get the price right you need to:
Keep the Price Right
Price increase can be a very controversial subject. Many business owners fear increasing prices because they think customers will go elsewhere.
This scenario can have a positive impact on both profit and cash-flow. It is often more difficult to increase Revenue than to increase Prices. Many customers don't even notice a small increase and fully accept one to cover CPI rises. For many businesses failure to incorporate this into their price means they are absorbing increased costs and eroding margins.
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