What is inflation?

Inflation is the term used to describe an increase in the average prices for goods and services through the economy.  Inflation is a loss of purchasing power over time – it means your dollar will not go as far tomorrow as it did today.  It is measured as the rate of change of those prices. Typically, prices rise over time, but prices can also fall (a situation called deflation).  

The most well-known indicator of inflation is the Consumer Price Index (CPI), which measures the percentage change in the price of a basket of goods and services consumed by households. Inflation is typically expressed as the annual change in prices for that basket of goods and services.  The annual rate of inflation is the price of the total basket in a given month compared with its price in the same month one year previously.  

Every household has different spending habits.  For measuring inflation, all goods and services that households consume are taken into account, including:  

  • everyday items (food and petrol);  
  • durable goods (clothing, mobile phones and washing machines); and  
  • services (hairdressing, insurance and rented housing).  

When calculating the average increase in prices, the prices of products we spend more on – such as electricity – are given a greater weight than the prices of products we spend less on – for example, sugar.  The average spending habits of all households together determine how much weight the different products and services have in the measurement of inflation.  

The usual underlying cause of inflation is that too much money is available to purchase too few goods and services, or that demand in the economy outpaces supply.  In general, this situation occurs when an economy is so buoyant that there are widespread shortages of labour and materials.  People can charge higher prices for the same goods or services.  Limited oil production can make gas expensive.  Supply chain problems can keep goods in short supply, pushing up prices; or companies may choose to charge more because they realize they can raise prices and improve their profits without losing customers.  

Inflation is high due to factors like pandemic disruptions, supply-chain issues and monetary stimulus. COVID-19 has caused manufacturers/factories to shut down and has clogged shipping routes, helping to limit the supply of cars and couches, and pushing prices higher.  Airfares and rates for hotel rooms have rebounded after dropping in the depths of the pandemic.  Petrol prices have also contributed to heady gains recently.  

But it is also the case that consumers, who collectively built up big savings thanks to months in lockdown, are spending robustly and their demand is driving part of inflation.  They are continuing to buy even as costs for exercise equipment or spa pools rise, and they are shouldering increases in rent and home prices.  The indefatigable shopping is helping to keep price increases brisk.  

The Reserve Bank tries to keep inflation at a sustainable level by increasing the official cash rate (OCR). Banks then follow and react to high inflation by raising their interest rates.  This, in turn, slows the economy and puts a brake on inflation.  If you’re a business owner, you’ll see this reflected in a higher cost of borrowing and if you have a home loan, this will be true as well.  

Inflation can be very damaging for a number of reasons.  First, people may be left worse off if prices rise faster than their incomes.  Second, inflation can reduce the value of an investment if the returns prove insufficient to compensate them for inflation.  Third, since bouts of inflation often go hand in hand with an overheated economy, they can accentuate boom-bust cycles in the economy.  

Sustained inflation also has longer-term effects.  If money is losing its value, businesses and investors are less likely to make long-term contracts.  This discourages long-term investment in the nation’s productive capacity.  The flip-side of inflation is deflation.  This occurs when average prices are falling, and can also result in various economic effects. For example, people will put off spending if they expect prices to fall.  Sustained deflation can cause a rapid economic slow-down.  The Reserve Bank is as concerned about deflation as it is about inflation. In New Zealand, however, it has historically been more usual for prices to rise – there have only been brief periods of deflation in the past 150-odd years, and these have been associated with economic depressions.  

5 signs you’re undercharging

Are you undercharging for your services? It can be hard to tell, particularly if you’re in a niche industry, or you’re a contractor. Costs have been rising due to inflation and the pandemic, so it may be time to rethink your own pricing. 

Here are five signs that you might be undercharging: 

  1. Nobody ever questions your quotes - Do all your new clients accept your quotes or charges without asking any questions, requesting a breakdown, or wanting a discount? It’s possible they’re delighted to be getting such a great deal. 
  1. You run off your feet but you can’t afford to get help - When you’re working yourself to the bone, but there’s not enough money left over to employ someone to help you, your prices are too low –something needs to change. 
  1. Your prices have been the same for two years or more - In most industries, prices increase slightly each year. Leave your prices flat for too long, and you’re not keeping up with the market.  Make sure you review your fees annually. 
  1. You’re overbooked - When business is booming and there’s no room for new clients, it’s time to raise your prices. 
  1. Clients don’t treat you as well as they should - When clients think they’re paying peanuts, they’ll often take you for granted. They don’t see your time as valuable, so they feel free to mess you around. 

What should you be charging? 

Finding your pricing sweet spot could take a little time. You’ll need to do some research, maybe ask around a little, and find out where your competitors are pitching their rates. 

If you’re not sure about your pricing, we can help – give us a call or an email. 

5 apps to help you run your small business

If you’re a small-medium business owner, you’re more than likely good at being a bit of a jack of all trades – but there are some apps to help you handle a few of the day-to-day tasks. Here are five of the best types of apps for small businesses: 

Time tracking 

Automatically track how much time you’re spending on each customer, including tasks, research, phone calls, and emails. Time tracking apps use artificial intelligence to make it as effortless as possible to track your time. It can produce a timesheet automatically so you can manage your time more effectively. 

One to try: Timely (by Memory AI) 

Mileage logging 

When you’re driving around meeting with customers or suppliers, it’s important to keep track of your mileage. Paper logbooks have long been superseded by vehicle logging apps, which are so easy to use and inexpensive. Create an electronic logbook on your phone that records your mileage. 

One to try: Logmate (NZTA approved) 

Online payments 

Making it easy for your customers to give you money is just an all-round excellent strategy. An app can provide you with a way to accept payments online, and in person, from anywhere in the world. It can also manage subscriptions, or even run off a terminal. Most will use a pay-as-you-go pricing system, so you only pay when customers use it. 

One to try: Stripe 

Stock tracking 

For retailers, spend less time on stock tracking and more time on strategising with point-of-sale software. A POS platform allows customers to buy from your store, or online, and lets you manage inventory seamlessly. You’re collecting information as you go, giving you valuable insights into your business. 

One to try: Vend 


A CRM is a customer relationship management app or software. If you’re not using a CRM software already, you’ll have snippets of conversation in emails, spreadsheets, on post-it notes, and it can lead to iinconsistent interactions with customers. A CRM may be the key to helping you manage workflow, client relationships, and organisation. It can store a multitude of customer data, including their contact, sales, and length of time they’ve been a customer (even some personal details like birthdays, if that’s useful). It’s a great way to improve the quality and consistency with customers – both potential and existing. 

One to try: Zoho 

Talk to us – we are here to help 

We have clients across a wide range of industries, using all types of technology – we might know the perfect app for you. Get in touch if you’re looking for fresh ideas! 

Get prompt payments by creating an accounts receivable process

Accounts receivable is about getting paid for the work you do.  In business, it doesn’t get much more important than that. The process covers every part of the payment lifecycle – finding customers, communicating expectations, billing correctly, and following up on late invoices. 

If you’re struggling with late payments here are some simple tips to try. 

  • Pick the right clients - Before you take on new customers, run credit checks and have them sign written terms, including billing timeframes, and late payment penalties.  
  • Quick, effective invoicing - Your customer can’t pay until you’ve invoiced them, so make sure you send your bill promptly. Sending invoices straight after work is completed, gets the payment ball rolling. 
  • Make it easy for your customers to pay you - Offer options like debit, credit, or direct debit to make it as easy as possible. Make sure your invoice has all the right information, including your bank account details, a description of the work or product, the date it was delivered, and any customer requirements such as a purchase order number. Some customers have very specific requirements so ask what they need to see on the invoice. Make the due date clear too. 
  • Keep a close eye on your unpaid invoices - Check for payment frequently. If an unpaid invoice is past its due date, have a process to follow up – this could include email reminders, statements, phone calls and possibly debt collectors. 
  • Talk to your customers - A friendly phone call allows you to ask when you can expect payment. This may also uncover any issues you need to resolve. 
  • Review your clients -If you have clients that frequently pay their invoices late, think about changing their terms – they may need to pay half upfront or use another payment method. In some cases, it might make sense to let them go. 

Consistency is key 

Having an accounts receivable plan is the first step – the next is following it, every time! From selecting clients to clear policies, prompt billing and thorough follow-ups, it’s all about consistency. That way, you won’t have unpaid bills and rogue clients slipping through the cracks. 

Ready to create an effective payment process? Our expert accounting team can help. 

What’s the value of cashflow forecasting?

Everyone’s talking about cash flow forecasting and you know it’s important but how does cash flow forecasting actually help your business?  

Forecasting your cash flow pipeline allows you to navigate the future path of your cash flow – so you can map out what the financial position of the business will look like over the coming months. It can help you identify when you’ll need to take appropriate action to safeguard your cash position. 

It also allows you to scenario-plan, search for cost-savings, and look for strategies that will preserve your cash flow position. 

How to get more from your forecasting 

  • Run regular forecasts – The financial landscape of your business will change on a daily basis due to external factors and variables. That makes it vital that you run frequent forecasts and react swiftly to any projected cash issues as they become apparent.  
  • Use the latest cash flow forecasting apps – there are various cash flow forecasting apps that integrate with online accounting systems. These give you a more detailed view of how your cash inflows and outflows will look over the coming months – information that will inform and justify the decisions you make.  
  • Explore the right revenue streams – most sectors will have seen sales affected due to staff being away sick, and other pandemic related restrictions. Now’s the time to explore other revenue streams, such as selling online, and new opportunities for income. The idea is to find ways to increase the money that’s coming in the door and balance out your unavoidable expenses.  
  • Get proactive with cost-cutting – if you can reduce cash outflows to a minimum, that will have a real impact on the health of your future cash flow. Pare back your operations and aim to reduce things like unnecessary software subscriptions, or over-ordering of basic supplies. Negotiating cheaper rates with suppliers, if possible, will also help.  
  • Review your staffing needs – assess your staffing needs to minimise the costs of staffing and resourcing. Consider changing working hours for some staff, redeploying staff in different roles, and work-from-home/hybrid options.  
  • Run a variety of scenarios – changing the financial drivers in your forecast model allows you to scenario-plan different strategies and options. Scenario-planning lets you answer questions and will give you some hard evidence on which to base your decision-making and strategic outlook over the coming months.  
  • Look at various ways to access funding – if forecasts show a cash flow issue coming up, we can assist your business to investigate how to minimise expenses and what funding opportunities are available.  

Talk to us about setting up cash flow forecasting 

Forecasting is an important step to give you the business intelligence to support your decision making. 

Get in touch to improve your control over cash flow. 

Should I focus on profits or cash flow?

Profits or cash flow?

Everyone knows how important turning a profit is for the successful running of a business. However, if you’re looking to create a stable, long-term business, what else should you be focusing on other than profit?  

Cash flow is the beating heart of your business as without an even and predictable flow of cash into the company, you can’t cover your overheads, you can’t pay your employees, and you can’t run your day-to-day operations – let alone think about expanding and growing the business.

What’s needed is a healthy cash flow position AND a focus on driving profits.

Keeping on top of the financial management of your business can be hard work, but if you’re going to be in control of your financial destiny then it’s important to get your head around the important process of cash flow management. This is especially true in the current business landscape, where revenue may be less buoyant, cash can be tight, and the market is going through a challenging time.

Let’s look at some of the key things to understand about your finances:

  • Profit is a by-product of a successful business – you want to make profits, but profitability isn’t the only goal. A business can easily be profitable, but also be highly unstable in the longer term. What you want is stable and consistent revenue.
  • Cash flow is the blood that keeps your business alive – a good level of revenue brings cash into the business, which you need to cover your operating expenses. In this instance, cash really is king!
  • Know your cost base and overheads – the flipside of your cash flow position is your costs. In an ideal world, you want more cash inflows than cash outflows, so it’s important to know your expenses and costs, and to manage them carefully.
  • Be proactive about spend management and easing expenditure – if you can take action that reduces your spending, that is hugely positive for your cash flow position. Choose cheaper suppliers, negotiate better deals, and bring that cost base down.
  • Drive more revenue, through increased sales and marketing activity – if you can increase your revenues, you also boost your cash flow. So, it’s important to be proactive about running targeted sales and marketing campaigns to increase your sales.
  • Keep the cash flowing and the profits take care of themselves – if you achieve the ideal cash flow position, the business sits on solid financial foundations, the cash is there for investment, and the business can grow. It’s that simple.

Talk to us about improving your cash flow management

Whether you’re new to running a business, or a seasoned owner who needs some financial support, we can give you the cash flow advice you need.

We’ll review your finances, delve down into your cash flow, and will come up with key ways for you to increase your cash income and reduce your cash expenses. It only takes a few small changes to achieve a far better cash flow position for your business – helping you maintain positive cash flow AND generate meaningful profits.

Get in touch to talk through your cash flow concerns.

Should you buy or lease your business assets?

There are certain items of equipment, machinery, and hardware that are essential to the operation of your business – whether it’s the delivery van you use to run your home-delivery food service or the high-end digital printer you use to run your print business.

When a critical business asset is required, should you buy this item outright, or should you lease the item and pay for it in handy monthly instalments?

To buy or to lease? That is the question

Buying new pieces of business equipment, plant, machinery or vehicles can be an expensive investment. So, depending on your financial situation, it’s important to weigh up the pros and cons of buying, or opting for a leasing option.

First of all, let’s look at why you might decide to buy the item…

Buying: the pros and cons:

  • Pro: It’s a tangible asset – when you buy an item, you own the item outright and it will appear on your balance sheet as one your business assets. As such, by owning these assets outright you increase the perceived capital and value of your business. You can also claim the cost of the asset against your capital allowance for tax purposes.
  • Pro: It’s yours for the life of the asset – once you own the item, you have full use of the equipment for the duration of the life of the asset. Your use of the asset isn’t reliant on you being able to keep up regular lease payments, and, if your financial circumstances change, then you can sell the asset to free up the capital.
  • Con: It’s an expensive outlay – paying for the item up-front is a large outlay for the business and will require you having the cash to cover this cost. Spending a large lump sum in this way may take cash away from other areas of the business, so you need to be 100% sure that this purchase is the right decision and a sound investment.
  • Con: You may require extra funding – if you don’t have the liquid cash available to buy the item outright, you may need to take out a loan. Asset finance is available from funding providers, but does tie you into a loan agreement that will add to your liabilities as a business – reducing you worth on the balance sheet.

Leasing: the pros and cons:

  • Pro: Leasing has a cheaper entry point – if the item you need to purchase has a large price tag, leasing allows you to make use of the asset without the cost of buying it in full. For startups, and smaller businesses with minimal capital behind them, this can make leasing a very attractive option. You may not own the asset, but you can make use of it – and this may be the difference between the success or failure of your business.
  • Pro: You can spread the cost – there is still an associated cost of leasing, but you can spread the cost over a longer period, making it easier to find the necessary liquid cash to meet your lease payments. With this money saved, you can then invest in other areas of the business, helping you to expand, grow, and bring in more customers and revenue.
  • Con: You don’t own the asset – there are different types of leasing agreement. Under a capital lease, you do own the asset (once you’ve paid if off). But if you opt for an operating lease, this is a more short-term lease and you won’t own the asset at the end of the contract. Ownership does have its advantages (including being able to sell off the asset if required), so it’s important to consider what kind of leasing agreement you’re entering into and what the advantages/disadvantages may be.
  • Con: You may pay more in the long run – most leasing agreements will attract additional costs and interest on your agreement, so you may well end up paying more than the market price for your asset in the long term. If you can cope with the higher cost, this is fine, but bear in mind that buying outright may have offered greater value.
  • Con: You may lose the use of the asset – if you can’t keep up your lease payments (for example, due to poor cashflow) then the owner of the lease agreement may recall the asset. If this item is crucial to your business model, losing this key asset can have a profound impact on your ability to operate. In this respect, leasing is more risky, but also an easier option for businesses with less cash to splash.

Talk to us about whether buying or leasing is the best way forward

Whether you opt to buy or lease your equipment isn’t always a straightforward decision to make, so it’s a good idea to consult with your accountant early on in the decision-making process.

We’ll help you review your current financial position, assess your available cashflow, and look at your regular cost base to decide whether buying or leasing is the right thing for your business.

Keeping on top of small business cash flow

Money in, money out. Cash flow is one of the most important measures of your business’s health. It’s important to keep track of but how do you monitor it?

It sounds simple – track sales on one hand and expenses on the other – then compare the two. However, it’s not that simple. 65% of failed businesses say they closed their doors because of financial mismanagement, including issues such as lack of cash flow visibility. In other words, they didn’t know if they were making more than they were spending.

Why are people losing sight of cash flow?

Everyone knows a business needs to stay in the black. It’s not a new idea. So, it can be hard to imagine why a business would lose sight of cash flow. Until you’re in business yourself and you realise that tracking small business cash flow isn’t as easy as it seems.

For small businesses, this can involve:

  • keeping track of all your expense receipts – which gets really tricky if there are multiple people making purchases;
  • recording all your sales revenue – making sure to account for discounts you might have given; and
  • entering everything into your cash flow Excel spreadsheet or Google Sheet- including double and triple checks to make sure everything is entered correctly.

You may have to rely on employees or business partners to supply a lot of this information. Their paperwork will sometimes have scribbled notes in the margins, requiring a follow-up phone call. It takes a lot of time, patience, and energy before you’re even ready to punch the numbers into a spreadsheet.

But even if you’re vigilant, there’s a lag between when a sale or expenditure happens, and when it’s entered into your spreadsheet. You’re taking a series of snapshots of your cash flow, and there can be big gaps in between.

As business picks up, with more sales and more expenditure happening all the time, those gaps become more significant. More things happen in between each cashflow snapshot. And cash flow snapshots get further apart because you’re too busy to update spreadsheets.

Consider using cloud accounting software

Because money in and money out is the ultimate measure of business health and sustainability, you know you must watch it carefully. Cloud accounting software can automate the process for you. In fact, 98% of users of accounting software recommend it to others.

Here’s how it works:

Cloud accounting software is generally sold on a flat monthly subscription. You don’t need to download anything and you can run it easily off your existing laptop, desktop or smartphone.

It can link to your business bank account (and point-of-sale system) to track sales and expenses as they happen, with no data entry from you. Because the data comes straight from the bank, it’s clean and accurate. Smart accounting software will also send out your invoices, so it shows what you’re owed. Next, the system pools all the data to create a dashboard of your financial situation, which is automatically updated every day.

Accounting software probably only needs to save you one or two hours a month to pay for itself. In reality, because it will save you time that you can spend on other areas of your business, it will do that many times over.

Talk to us about your cash flow forecast and how to easily track it

Innovate Whanganui

Innovate Whanganui is in its second year and is a local competition based on the “Dragon’s Den” idea that supports an entrepreneur from ideation to scale and investment. The competition is designed to support local entrepreneurs and start-up business initiatives. Innovate is for those who have a novel idea, or are stuck and need a bit of guidance to push forward. Whanganui & Partners is delivering Innovate Whanganui in partnership with The Factory, a Palmerston North collective made up of experts at getting ideas off the ground, launching start-ups, and helping businesses grow.

Earlier this month, 5 finalists were selected and are now in a 10-week intensive phase, where they meet each week and develop their idea into a business. Each finalist is paired with mentors, receives tailored support, and has access to a pool of national and international mentors. They also receive $3000 in capital, tagged to specific milestones determined by their mentors. Congratulations to the finalists:

  • Abbi and Rodney Calman developing a Mobile Wheel Chock;
  • Alan Smith developing Ouchie Powder:
  • Julia Lee Hanson developing Pet Memorial Jewellery:
  • Laura Buchanan developing a Pottery Popup; and
  • Stacy Foskett developing Ready Bear.

This all culminates at pitch night on 25 August, where each finalist will present their idea to local business leaders, angel investors and others that support entrepreneurialism in the region. The winner receives $5,000 to support their idea.

Five Tips for your next Business Negotiation

The world of business negotiations often has a lot of contradictions. You need to be firm but flexible; open and sharing, but also hold back. This can be a lot to get your head around but if you aim for a mutually beneficial outcome, the negotiation is likely to go better and you’ll in turn be more comfortable.

Here’s five tips to prepare for your next negotiation.

1. Do your homework – Familiarise yourself with the main terms and concepts they’re likely to use so you’re not confused or intimidated by jargon. Know their products or services, their industry and their competitors. Understand your position and what you bring to the table and why they might want to do business with you.

2. Don’t be shy – Taking control of the negotiation might be as simple as being the first person to say a number. The first figure can become a reference point for the rest of the conversation.

3. Know where you can compromise – As a small business owner, you may need the deal more than your negotiating partner but be realistic about that. Decide what you need to make it worthwhile and then be prepared to compromise on the other less important aspects. Compromise is needed in negotiations as it’s rare that a party would get everything that they want.  

4. Aim for a win-win – try for a profitable outcome that’s beneficial to all parties. A negotiation isn’t dominating your opponent into submission. Both parties can win and don’t underestimate the power of being nice.

5. Have a plan B – If you can’t agree, what happens next? If negotiations fail, can you live with that outcome? What are you willing to change/compromise for the deal to take place? This will help you decide how far you’re willing to negotiate the deal.  

Practice makes perfect

Negotiation can be tricky, which is why many of us don’t like doing it. Don’t be intimidated by it. As long as you know the strength of your position, respect the other party and know what you’re willing to compromise on, you’re off to a good start.

Is your cost of sales affecting your gross profit?

How much does it cost you to produce your product(s)?

The better you understand your cost of sales, or cost of goods sold (COGS) as it’s more commonly known, the better control you have of your company’s profit margin. Once you know your COGS, you’re able to set the right price point, get good profit margins, and know you’re maximising your gross profit.

However, in order to do this, you need to understand your COGS and the impact this has on your finances.

Knowing your COGS

Each product your company takes from inception to delivery, incurs a number of costs along the way. For example, a manufacturing businesses costs may include raw materials, labour costs, overheads, delivery costs, as well as sales and marketing expenses for each product they manufacture. These are all necessary costs and are the direct costs to produce your product for sale.

To calculate your COGS number for a time period, take the value of opening stock (inventory), add the costs from producing the goods, and then minus the value of the closing stock balance.

The COGS formula looks like this:

Opening Stock + Purchases – Closing Stock = COGS

For example, if you started with an opening stock/inventory of $10,000, your COGS calculation would be:

Opening Stock: $10,000 + Purchases: $25,000 – Closing Stock: $8,000 = COGS: $27,000

Reducing COGS to boost profit

The more sales you make, the higher your income will be. Deducting your COGS number from your income figure will give you the gross profit figure. Tracking gross profit is key to the health and profitability of your business.

If your COGS cost is high, this will reduce your profit margin. A small margin will start to have a negative effect on your gross profit. Controlling and managing your COGS, and in turn your gross profit, is vital for any product-based business.

Here are some ways to improve the profit margin of your COGS:

  • Reduce supplier costs – If you can reduce the cost of the purchases made to produce your goods, that means less expenditure and a positive impact on profit margins. See if you can find a cheaper supplier or negotiate bulk pricing with your existing suppliers to help bring down costs.
  • Streamline the production process – the more complex your production process is, the more overheads and production expenses there will be. Streamlining the process helps you to remove unnecessary processes and if you follow a lean approach you will continually evolve your processes. This cuts costs while still delivering a quality product.
  • Increase prices to boost your profit margins – if your COGS is eating into your profit margin, you may need to increase your price point. This will increase both income and your profit margins but if prices get too high, you will put off existing customer relationships and it may make you uncompetitive in the market. Think carefully about any price increases to ensure you’re remaining competitive.

Talk to us about improving your gross profit

If you want to boost your gross profit and get COGS under control, come and have a chat with us. We’ll look for opportunities to reduce your goods-related purchases and push for a better profit margin on your products.

Five Factors for Farm Accounting

We all know that farming is a different business to any other, not to mention that farm accounting is much more complex when you factor in the assets, liabilities, costs and revenue. Here are some factors to consider with your farm accounting.

1. The land is an asset

If you properly manage your agricultural land, it shouldn’t depreciate in value, in fact it may even go up. However, mismanaged land can take many years to return to productivity, especially if the land has become highly acidic or is nutrient poor. Whatever it costs to keep the land in good condition is money well spent. The cost of maintaining the land should always be accounted for including fertiliser, irrigation, drainage, soil pH management, weed removal, and pest control.

2. Record your stock

Most farmers will know how many animals they have – of what type, breed and age – to within a small margin. However, animals breed and die, so the number will not remain static. The old saying, “where there is livestock, there is also deadstock” still applies, especially during cold winters and lambing or calving season.

Your stock numbers will change over time and it’s important to record these changes in your accounting software. Every head has a value, and that value should be recorded.

3. Maximise your use of the internet and the cloud

Most farmers have some form of internet connection these days. It’s not always as fast as you’d like – rural life has its downsides. Some uses for the internet, in general, and the cloud, in particular, include:

  • Checking stock prices and trends: Keeping up to date with these numbers can help farmers decide how best to utilise their land.
  • Accessing kill sheets, tracking milk solid prices, etc: Usually faster and easier than getting this information by mail or word-of-mouth.
  • Long-range and short-range weather forecasting: Vital, required knowledge for just about every type of farm.
  • Using cloud apps: These new tools offer much faster access to information, accounting tools, resources and bank accounts.
  • Cloud based accounting: Keep up to date with your cashflow.

4. Depreciation

The cost of new equipment can be offset against tax, using depreciation. The value will depreciate over time as it becomes older, wears out, or is made obsolete by newer technology. You can depreciate:

  • Tractors, trucks, harvesting equipment, and other farm machinery.
  • Computer equipment.
  • Hand tools, machine tools, and repair equipment.

Remember to keep track of what you buy and account for its depreciation each year.

5. Record the loss

Farming is dependent on the weather, and sometimes the weather wreaks havoc. A hot, dry summer might be great for wine growers but it can be catastrophic for dairy farmers. Unseasonal storms can destroy entire crops, and unexpected rain can leave hay rotting in the fields.

It’s important to record any losses in your accounts, to reduce your overall tax bill. You don’t want to be taxed on something that’s been destroyed, or on a profit that you haven’t made.

Could you benefit from the new Business Growth Fund?

The latest government budget announced an investment of $100 million into a new Business Growth Fund. This funding is designed with small and medium-sized businesses (SMEs) in mind, to allow them to get the investment they need to grow, whilst also allowing owners to keep control of their business.

Why has this fund been launched?

The fund has been launched in recognition of the difficulty SMEs have always had in obtaining business loans which can restrict growth in the business. Banks can be reluctant to lend, and often ask to secure it against the house. This pushes many small business owners to use mortgage debt to fund growth, which skews our household debt and business investment data.

For businesses that are able to secure other types of investment, the investors usually require a significant stake in the business. This can take the majority shareholding out of the hands of the original owner, and sometimes out of New Zealand.

How will it work?

The Business Growth Fund (BGF) will partner with retail banks to lend money to NZ SMEs. The banks will choose the SMEs for funding and the BGF will take a minority shareholding in each business. Minister for Small Business, Stuart Nash, told reporters, that the BGF will provide support to the SMEs, and will have “modest return expectations and no hard exit deadlines, allowing business owners to set their own growth targets.”

Will my business be eligible?

That’s not known yet. Unfortunately, bank partnerships have not been set up, nor have criteria been set and it could take some months before the scheme is up and running.

What if my business needs funding now?

In the meantime, if you need funding to support your business growth, there are a few options. The Small Business Cashflow Scheme is an option for those SMEs struggling with a pandemic-associated loss of income. Other options are bank loans, private equity and angel investors, as well as tax pooling for those big tax bills.

Give us a call and we can talk you through the various options. We’re here to help.

The COVID-19 Small Business Cashflow Scheme (SBCS)

The Inland Revenue Small Business Cashflow Scheme (SBCS) was announced to support struggling small and medium businesses with a loss of actual revenue because of COVID-19. This scheme has now been running for 2 years which means depending on the date you withdrew the loan, the 2 year interest free period is now finished.  

Inland Revenue will communicate a payment schedule, one month prior to your due date. Interest will be charged from the first day of the third year of the loan, at an annual interest rate of 3%.  

If the loan is repaid in full within the first 2 years, no interest will be charged. If you default on your loan, it may become immediately due as well as incur default interest and penalties.

If you haven’t received your repayment schedule, or you don’t know when your repayment due date is please get in contact with us.

Key Points from the 2022 Budget

​Yesterday’s Wellbeing Budget for 2022 had a lot to digest. The main areas for spending by the government are in Health, Housing, Education, Māori​, Equity finance for SMEs, Income Insurance and a Cost of Living payment plus other Allocations. Below is a summary of the key spending in each area.

The health sector is being given $13.2 billion over the next four years.

An initial $1.8b in new spending in the coming year to address historic cost pressures, including DHB deficits. 

$188 million for the Māori Health Authority to commission services and develop iwi partnerships. 

$102m over the next three years to provide better, earlier GP and community care and to ease pressure on hospitals. 

Pharmac will also get an extra $191m over the next two years.  It is Pharmac’s biggest boost in history to make more medicines and other health treatments available.  Pharmac said it welcomed the $191m boost and was already working through the medicine options for investment list.  It brings total funding to $1.2b.

More than $166m has been set aside over four years for ambulance services, adding more than 60 vehicles to the road fleet and about 250 more paramedics and frontline staff. Another $90.7m will go towards air ambulance services to replace ageing aircraft with modern helicopters.

The Budget increases dental grants for low-income families from $300 to $1000 in line with Labour’s 2020 campaign promise.

A new Ministry for Disabled People is also being established at a cost of $100m.

The Budget includes more support for first home buyers with funding available for about 7,000 extra first home grants and 2500 more first home loans available every year.

House price caps across regions have been increased in most of the country, for example shifting to $875,000 in Auckland and Tauranga and $925,000 in Wellington and Queenstown.

The income caps remain the same but will be reviewed every six months along with the new house price caps.

A new $350m housing fund has also been set up where not-for-profit developers can apply for grants to build affordable rental accommodation.

Nearly $3 billion is going towards the education sector as it moves away from the decile system and addresses pay parity issues.  Replacing school deciles is the single biggest area of new spending for education.

The Budget provides more than $80m a year for the equity index which replaces deciles as the measure of disadvantage in schools.

Most of the money, $75m a year, will go directly to schools, adding to the $150m they currently receive through the decile-based system.

The budget increases school operations grants and tertiary and early childhood education subsidies by 2.75 percent.
There is also $266m over four years to give early education teachers pay parity with school teachers.

In tertiary education, the Budget provides $56m a year to pay for an expected increase in enrolments next year and in 2024.
There is also $40m for modernising polytechnic facilities.

More than half a billion dollars is being pumped into the Māori Health sector with $579.9 million going towards Māori health and wellbeing.

The new Māori Health Authority, Te Mana Hauora, will receive $188.1m over four years for direct commissioning of services.

$20.1m will go to support iwi-Māori partnership boards, and $30m will be invested into Māori​ Providers and health workers to provide support and sustain capital infrastructure.

Lack of workforce capability has been identified as a key factor in being able to bolster Te Mana Hauora – and $39 million will be used for Māori workforce training and development to support them within the new health system.

The $579.9 million invested in Māori health and wellbeing is on top of the $11.1 billion health allocation.
Equity finance for SMEs
The Government is planning to team up with retail banks to create a new fund that will invest in small and medium-sized enterprises (SMEs).

It has committed to investing $100 million, alongside banks, in a new Business Growth Fund.  The Crown will have a minority shareholding in the Fund, which will be privately operated and independently managed.

The Government has discussed the proposal with the Reserve Bank, which will consult on it publicly.

Income Insurance
The Finance Minister is working towards getting his proposed Income Insurance Scheme underway in 2024.

The Government has committed to providing the Accident Compensation Corporation (ACC) funding to do preliminary work to establish the systems and operational processes for the scheme.

It is allocating $4m towards ACC in 2022 and 2023, and set aside a further $56.5m in “contingency” funding over 2023, 2024, 2025 and 2026.

The proposal is that employees and employers pay levies to the scheme, which would pay a claimant out in the event of job loss due to redundancy or illness.

The value of the pay-out would be equivalent to a certain portion of the claimant’s previous income – up to a certain level. The payment would be available for a set time period, after which the claimant would need to go into the regular welfare system if they’re still unemployed.

Participation in the scheme would be compulsory.  However, the proposed scheme’s details are still being worked out.

Cost of living package
A cost-of-living package has been announced.  The cost-of-living measures in the Budget are mainly temporary and targeted at those on lower incomes.

New Zealanders aged 18 and over will be eligible for a $350 payment unless they earn more than $70,000 a year or already receive the Winter Energy Payment.

The sum will be paid in three instalments over August, September and October, working out at roughly $27 a week.

This payment, which will be funded out of the money remaining in the COVID-19 fund, is estimated to cost $814 million.

The fuel tax reduction and half-price public transport will also be extended for a further two months. New Zealanders who have a community services card will continue to get half-price public transport permanently from mid-September.

The government will also address the problem of competition in the supermarket sector, with urgent legislation going in tonight to ban the use of covenants, which make it hard for new players entering the market.

Ministers flagged that there will be further announcements in the coming days in response to the Commerce Commission’s recent report on the sector.

Other Allocations
$200m towards the first stages of the light rail project in Auckland, feasibility studies for a new port in Manukau Harbour and for a dry dock at Northland’s Northport.

High inflation: What does it mean for your business?

High inflation is hitting businesses and households hard this year. Across the world, inflation is running high, thanks to factors like pandemic disruptions, monetary stimulus and supply-chain issues.

You’ll be starting to see the effects of inflation at the supermarket, the fuel pump and in your business.

Eroding your buying power

Inflation increases prices, which eats away at your buying power. For business owners, that means you’ll encounter higher costs from your suppliers. Materials are more expensive, transport has become more costly and everything, from office supplies to utilities, is rising in price.

In addition, your staff may be asking for pay rises. To keep up with inflation, your income needs to increase by at least the same amount as inflation and to achieve that could mean a seriously large wage bill increase for your business.

Rising interest rates

Banks try to keep inflation at a sustainable level and react to high inflation by raising their interest rates. This, in turn, slows the economy and puts a handbrake on inflation. As a business owner, you’ll see this reflected in a higher cost of borrowing and if you have a home loan, this will be true as well.

Inflation does have some positive side-effects for your business. First, it tends to push up the value of big-ticket assets such as property. Second, it makes debts seem smaller – the amount of debt stays the same but hopefully your income rises.

It’s time to raise your prices

The rise in prices means you’re spending more so it may be time to consider raising your prices. If you’re wondering how much you need to increase prices in order to keep up with inflation or maintain your margins, give us a call. We can work with you to find the best price for you and your customers.  

Fonterra Co-Operative Difference Payment

In 2021, Fonterra introduced the Co-operative Difference Payment (CDP). From 1 June 2021, up to 10 cents of each farm’s milk payment will be determined by the farm’s sustainability credentials and milk quality. This payment was introduced as the Co-operative believes that farms that sustainably produce higher quality milk help to increase the value of all the Co-operative’s milk. The CDP is made at the end of the year in the final retro payment.

“The new payment recognises farmers who are already going above and beyond because they’ve innovated and invested early, and it also offers farmers more encouragement for taking the steps required to meet the changing expectations of customers and communities, both today and into the future” says Richard Allen, Group Director, Farm Source at Fonterra.

A new milk payment parameter has been created that is used to value each farm’s milk. This may mean each farm is paid a different amount per milk solid. Currently, the parameters include fat and protein composition, volume as well as achievement of Te Pūtake and Te Puku.

If you reach Te Pūtake you will receive 7 cents per kgMS. To achieve Te Pūtake, you’ll need to meet achievements in four focus areas:

  1. Co-operative and Prosperity – you need to keep full and accurate Farm Dairy Records and submit them by 30 June 2022
  2. Environment – you must have a Farm Environment Plan in place that focuses on the achievement of all good farming practices by 2025 and must be achieving at least three out of four of the following key practices:
    • the farm’s purchased nitrogen surplus is at or lower than the target;
    • all on-farm plastics and unused agrichemicals are managed through an approved product stewardship scheme such as AgRecovery or Plasback;
    • there is no discharge of dairy shed effluent to water;
    • 80% farm-grown feed across the season.
  3. Animals – have and implement an Animal Wellbeing Plan developed with and signed by your veterinarian addressing nutrition, health, environment and behaviour.
  4. People and Community – you will need to complete all three sections of the DairyNZ Workplace 360 assessment and achieve 100% on the foundation level.

For farms that meet Te Pūtake, the next step is Te Puku which is an additional 3 cents for every kgMS that meets the excellence standard. To achieve Te Puku, you’ll need to achieve milk quality excellence on a minimum of 30 days during the season (days need not be consecutive).

All amount and targets will be set annually by the Fonterra Board and current Farm Source Reward Dollars will be replaced with the Co-operative Difference Payment. However, the total amount available to be paid to Fonterra’s farmers will not change, a proportion of the Farmgate Milk Price will be available to be redistributed between farmers to better reflect individual farm’s achievement against the Co-operative Difference Framework.

How to improve your procurement spending

One of the biggest areas of business expenditure is buying the goods and services your company needs to operate. Whether these are raw materials, wholesale goods or cloud services, you need someone to be managing this process to keep your business cost-effective and competitive in the market. If you’re overspending on materials, or overpaying your delivery partner, this can start to have a significant impact on your bottom line.

If your procurement costs are high, it will be difficult to maintain a positive cash position, so reducing your costs and negotiating better terms is all part of the procurement process. How do you go about reducing your costs?

Here are 5 key ideas to focus on:

  1. Reduce your base cost per item – what is your basic cost per unit. This price can be difficult to alter, but it can be reduced. Obtaining quotes from a range of suppliers and look for a supplier that offers the best mix of value, quality and reliability, at an economical price. Negotiating with competing suppliers can help reduce your costs further, which helps to cut that initial base cost.
  2. Cut your logistics and delivery costs – transport costs are unavoidable, but can be reduced. Shop around and see if a competing carrier/logistics provider can reduce your overall costs. Enquire about discounts for faster payment or if they have a loyalty programme.
  3. Nurture the best supplier relationships –building solid relationships with your suppliers is important. The more stable your supply chain is, and the deeper the trust between you and your supplier partners, the easier it will be to negotiate good terms, beneficial prices and flexible contracts. Nurture these relationships, pay on time and set a good reputation with these suppliers. This will make it easier to renegotiate prices in the future.
  4. Reduce tax and duty costs – depending on which goods and services you’re selling, if dealing with overseas markets, there will be certain territory-specific taxes and duties to pay when buying and transporting goods. If you engage a tax adviser with industry-specific knowledge, they’ll be able to check that you’re paying the right taxes on your goods/services and that they’re correctly categorised for taxes like VAT or GST. Working with a customs broker can also help to organise and streamline the customs process, and ensures that you’re paying the correct duty on all your imports and exports.
  5. Using tech to get in control of procurement – investigate some of the many cloud-based procurement management solutions. Being able to access your procurement information in one place, from anywhere, has huge advantages. It also enables you to streamline internal processes, manage risk more effectively and regularly check your spending against budgets, cashflow and expected expenditure. You’ll know about any variances quickly and be able to take action to reduce the problem.

Talk to us about your procurement management

When you’re in control of your procurement spending, that’s good news for your cashflow, your end profits and the long-term health of your supplier relationships.

Getting in control of your budgets, expenditure and overall spend management is a big part of the procurement process, and an area where we can help guide you in the right direction.

Come and talk to us at Balance about your current procurement process to see where we can lend a hand.

How an accountant supports your business development

As your accountants, we don’t just look after the financial side of your business. We can provide advice on the strategic side of your company, including the importance of business development as a vital part of your growth plan.

Business development is turning your strategic ideas into real success stories and moving your business from slow, organic growth to fast-paced growth.

The starting point is to devise the goals and aims for your business. When you know what you want to achieve, it’s far easier for us to work together to define a strategy for success.

Depending on your business and the goals and aims of that business we can work with you to drive your business development and find the best opportunities for you to focus on.

Once you’ve developed your business goals and aim, we can put together a comprehensive plan to achieve this. Our years of experience advising business leaders really comes into play here. We know the best routes to take, the budgets that will be needed and the right tactics for bringing in more business. By putting these strategies into a clear plan with a timeline, you have a business development map to follow and action.

Depending on the goals you’ve set, you may need to obtain finance. Balance can advise you on the best way to do this and link you up with some key people.

It takes time, as well as dedication, to meet your business development goals and aims. We can help you measure your business performance over time which will give you a good indication of how well you’re tracking against your planned progress.

If you want to develop your business, get in touch. We’ll partner with you to put some real drive, experience and impetus behind your business development strategies.

BALANCE Chartered Accountants officially extends its support into Taranaki

The Partners of Balance Chartered Accountants and Business Advisors are proud to announce that, as of the 1 April 2022, Laurie Jordan Accounting and Business Solutions are officially joining BALANCE.

Balance and Laurie Jordan have been working together for the past two years and they have now decided that the time is right to become one name servicing both regions.

The New Plymouth and Stratford offices will continue to operate from their current locations under the leadership of Craig McKinnon.  He will continue to be supported by Brenda Avery and her team, and it is business as usual as the only difference is the name change. Although Laurie Jordan has officially retired from the practice, he will continue to be available to assist clients as required.

The word “BALANCE” means more than just accounting. It reflects the equilibrium of all aspects of business. For us, this means working alongside our clients to enable them to achieve work/life balance. In these changing times businesses are looking for support, expertise, and guidance in this very competitive world and through our team and network of professionals we have the people to do it.

We enable our clients to reach their dreams and goals and we do this on a foundation of service and success over a century old while changing to meet the wide variety of needs our clients face.

Accounting is historical, looking back to go forward. It is critical to interpret and know how your business has performed, and that won’t change. But in these rapidly changing times you need advisors to supplement the historical performance with forward thinking strategic expertise and information. Such expertise maximises your opportunities and mitigates risk – you’ll find that expertise and solutions at Balance.

Partner Craig McKinnon says, “We are not just accountants, we are Chartered Accountants and innovators who are thinking of the future. Working smarter and developing new ways of assisting you is a priority for Balance. We are proud to continue to support the Taranaki and Whanganui regions and are excited about the growth of the Taranaki region”.