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McLEAN AND CO.
NEW CLIENTS
Interest Free Student Loans from 1 April 2006
How to Balance your Bank Account
Financial and Non-Financial Key Performance Indicators
Beating a Housing Bubble www.mcleanandco.co.nz/Page155.htm
| Koha www.mcleanandco.co.nz/Page46.htm
| Bankruptcy www.mcleanandco.co.nz/Page56.htm
| Business Legal Structures www.mcleanandco.co.nz/Page128.htm
| Taxation on Land Tranactions www.mcleanandco.co.nz/Page136.htm |
Currently your IRD and GST number is 8 digits long. From 1 April 2007 IRD will be adding another digit to all new and existing IRD and GST numbers, due to the fact that by then they would have issued all possible 8 digit combinations.
If you already have an IRD Number it'll have a zero added to the front of it e.g. 12-234-678 will become 012-345-678.
If you apply for an IRD or GST Number after 1 April 2007 you'll be automatically issued with a 9 digit number.
Currently, when you make withholding payments to a contractor who is trading as a company, you don't deduct any withholding tax. However, shortly deductions will be required from payments to certain companies working in the agricultural, horticultural and viticultural industries.
From 1 April 2006, if you hire any type of contractor (individual, partnership, trust or company) for services or work related to the pruning or thinning of fruit trees or vines, or the picking or packing of fruit or grapes, you must deduct withholding tax at the rate of 15 cents in the dollar, unless the contractor has a certificate of exemption or a special tax code certificate authorising deductions at a lower rate.
The changes to the rules are being made to reduce tax evasion prevalent in the fruit picking industry. Some contractors are evading tax which makes it difficult for honest contractors to compete. Deductions of withholding tax should help "level the playing field".
A further change is that all payments for these activities will need to be recorded on the payer's employer monthly schedule, whether they deduct withholding tax or not. The requirement to notify IRD of the details of the payments only relates to payments made for the specific work mentioned.
If you are currently not an employer and you are a grower hiring a contractor or a contractor hiring a subcontractor you will need to register with IRD as an employer by 1 April 2006.
You can apply for a certificate of exemption online by following the link:
Apply for certificate of exemption online >
CHANGES TO FAMILY ASSISTANCE
You can check out the IRD 2007 family assistance entitlement chart - this shows the income limits for each type of family assistance payment from 1 April 2006.
You can also estimate your family assistance for the 2007 financial year by using the IRD calculator, and register for family assistance by either using the new IRD online family assistance registration form, or downloading and completing a Family assistance registration form 2007 (FS1).
You can choose whether to receive your family assistance payments weekly or fortnightly based on your estimated income or as a single lump sum after 31 March based on your actual income.
If you are already receiving family assistance and you want to change to weekly payments (instead of fortnightly) just give IRD a call on 0800 257 700.
INCOME THRESHOLDS FOR REPAYMENT OF STUDENT LOANS
The income threshold at which borrowers must begin repaying their student
loans will rise from $16,588 to $17,160 a year from 1 April, 2006. The
increase is in line with annual movement in the September Consumer Price index
of 3.36%..
INTEREST FREE STUDENT LOANS FROM 1 APRIL 2006
Interest free student loans will be delivered by an interest write-off. Your Inland Revenue and StudyLink student loan statements will show interest being charged but if you are eligible, this interest will be written off after the end of each tax year (31 March). The first interest write-offs under interest free student loans will occur in April 2007.
Only the interest charged from 1 April 2006 will be written off. The interest free student loan change does not cover interest charged before this time.
If you have met the 183-day requirement then leave New Zealand for 184 or more consecutive days, you may still be entitled to an interest write-off for the period up and including the date of your departure from New Zealand. Any entitlement will be credited to your loan account after the end of the tax year (31 March).
All the interest you are charged while you are eligible to the interest free loan will be written off.
Inland Revenue will write off the interest charged from 1 April 2006, including any interest charged by StudyLink for the period you are eligible. This write-off will happen after the end of the tax year (31 March).
If you have requested a refund from your student loan account on or after 30 November 2005 (and the reason for your request was not due to significant financial hardship - see below for an explanation), you may not be entitled to have all of your interest written off. This only applies to refunds for the 2005 and 2006 tax years. Over-payments relating to tax years prior to 2005 can no longer be refunded. (An overpayment is an amount paid in excess of a repayment obligation.)
However, you may still qualify to have all or part of this interest written off under one of the other interest write-offs.
Significant financial hardship includes significant financial difficulties that arise because of:
a borrower's inability to meet minimum borrowing expenses; or
a borrower's inability to carry out his or her usual occupation
because of his or her temporary or permanent illness, injury, or
disability; or
| a borrower's inability to meet mortgage repayments on his or her
principal family residence resulting in the mortgagee seeking to enforce
the mortgage on the residence; or
| the cost of modifying a residence to meet special needs arising from
a disability of a borrower or a borrower's dependant; or
| the cost of medical treatment for an illness or injury of a borrower
or a borrower's dependant; or
| the cost of palliative care for a borrower or a borrower's dependant;
or
| the cost of a funeral for a borrower's deceased dependant. | |
HOW TO BALANCE YOUR BANK ACCOUNT
When you enter records of money paid into and out of your bank account into the cash book, there is a delay of at least a couple of days until these transactions are cleared through the banking system and appear on your bank statement. Therefore, the bank balance according to the cash book will normally be different from that on your bank statement at any given date.
To ensure that the difference between the two balances is due merely to the time difference in entering items, you should draw up a bank reconciliation statement:
1: Bank balance per the cash book: | $ |
Balance at beginning of month (in hand) | 654.20 |
Add cash book receipts (total for month) | 3421.06 |
Less cash book payments (total for month) | (2189.70) |
Balance at end of month (in hand) | 1885.56 |
2: Bank reconciliation from the bank statement: | $ | |
Balance at end of month (from bank statement) | 2189.65 | |
Add outstanding bankings (bankings made in the last few days of the month that do not appear on the statement until after the end of the month) | 561.20 | |
2750.85 | ||
Less outstanding cheques written before the end of the month but not yet presented to the bank | ||
Cheque No. | Amount | |
001378 | 69.25 | |
001381 | 686.19 | |
001384 | 50.00 | |
001385 | 59.85 | |
(865.29) | ||
Balance at end of month: | 1885.56 |
If after your reconciliation there is still a difference between the two balances, check the cash book and bank statements in detail to find the discrepancy.
Common mistakes are:
Cheques either not recorded in the cash book or entered twice
Standing orders or direct debits not recorded
| Bankings or direct credits not recorded
| Mis-additions in the cash book
| Cheques still outstanding from the previous month | |
You should amend the cash book to agree with your bank reconciliation.
FINANCIAL AND NON-FINANCIAL KEY
PERFORMANCE INDICATORS
If you are not measuring the performance of your business, then:
you have no way of knowing how well you are doing
you can’t make improvements
| you are unlikely to spot critical trends in your business performance
that need to be corrected. | |
If things are going wrong, the sooner you can spot trouble (for example, a deteriorating profit trend or a blow-out in overhead costs) the sooner you can take corrective action. Speedy intervention can save a business. On the other hand failure to spot dangerous trends can lead to business collapse.
In every business there are key areas that need to be measured against a benchmark on a regular basis. These are known as Key Performance Indicators (KPIs). They can be divided into financial and non-financial KPIs.
Gross profit percentage. How does this percentage compare to
previous figures or to a benchmark figure for your industry?
Operating profit as a percentage of income. Is this rising or
falling?
| Debt collection period. How many days, on average, it takes you
to collect debts. The more you can improve this figure, the better your
cashflow and working capital are likely to be.
| Quick ratio -a test of whether you can pay your debts as they
fall due. | |
The return on marketing promotions. For example, coding
advertisements or including a coupon to measure the number of sales from
each advert or the returns from a direct mail campaign. Knowing the
returns will allow you to work out if the exercise is worth repeating or
whether you need to change the advert or direct marketing package.
If
you don’t measure the returns, you really have no way of knowing
whether you are wasting your time and money.
Employee turnover and the number of sick days. These two
measurements provide an indication of employee motivation and morale.
| Customer service satisfaction. One way to gauge customer
satisfaction is to use mystery shoppers.
| Customer conversion ratio (measures the number of customer
contacts or visits converted into actual sales). This measurement allows
you to work on sales skills and training (for instance, better telephone
answering skills) that result in a better conversion rate.
| Website visits (measures the number of ‘hits’ per webpage
per month, which webpages were most popular, and the ratio of visits to
actual sales). Your ISP provider should be able to provide these figures
which will enable you to fine-tune your website for better results. | |
Non-financial KPIs are often more important as they can influence the financial KPIs. For example, if you can improve the customer conversion ratio this will lead to increased sales which in turn should feed into a better operating profit.
Because there are many possible KPIs that you could measure to help you improve your business, it is more practical and realistic to focus on a critical few.
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If we can assist further, please email McLean and Co as follows: