Bookkeeper and Accountant

The Difference Between An Accountant And A Bookkeeper

As a business owner, you know that you need an accountant.

After all, who will do your taxes at the end of the year without a numbers whizz?

But then, the term bookkeeper gets thrown in the mix… what do they do?

Bookkeepers and accountants both look after the various aspects of your business finances. Many people use the words ‘accounting’ and ‘bookkeeping’ interchangeably, but they are actually quite different functions.

In essence, a bookkeeper is a record keeper, and they have an administrative, transactional function. An accountant has more of an analytical function, producing insights and information from the financial records.

Clear as mud? Let’s look into the different roles in a little more detail and the main differences between the two.

The Difference Between An Accountant And A Bookkeeper Is…


Bookkeeping is a very important part of day-to-day business. A bookkeeper maintains records of daily transactions. They record all financial incomings and outgoings, create invoices, balance ledgers, take care of payroll, and process debits and payments. It is their job to keep all financial records up to date to make sure that tax and payroll obligations can be met, and end-of-year reporting can be done efficiently and accurately.

A bookkeeper usually utilises the power of accounting software. It means that both you and your bookkeeper have real-time access to the financial position of your business. It also makes it easier to ensure all of your transactions are regularly updated.

Bookkeepers do not usually require any specific training, experience, or education. Their tasks can be learned by anyone with sufficient attention to detail and a good mind for numbers and finances.

However, many bookkeepers regularly attend training sessions and ongoing professional development to ensure their knowledge and skills remain current in an ever-changing market.


An accountant takes the information and records provided by a bookkeeper and uses them to produce financial analysis and reports. Accountants will prepare your financial statements, complete tax returns, provide analysis to help your business make financial and strategic decisions, and also assess operational costs.

An accountant helps a business to get a better understanding of its financial performance, cash flow, and profitability. They can be relied on to help with tax planning and filing and financial forecasting.

Unlike bookkeepers, accountants do require formal education and qualifications. They also have to complete a certain amount of work experience. Most accountants will have either an accounting degree or commerce or business degree with a major in accounting.

They can then go on to become a Chartered Accountant. Once completing their initial qualification, they would then undertake three years of professional accounting experience, and meet other requirements set by Chartered Accountants Australia New Zealand, to become a Chartered Accountant.

How Do They Work Together?

The roles of bookkeeping and accounting are quite different, but they are closely connected. Good accounting relies on good bookkeeping for accurate and up to date data. Bookkeepers often use systems and processes established by accountants.

Regardless of the differences in their jobs, they are both very important for managing and maintaining healthy finances in any business.

How you approach bookkeeping and accounting for your business is up to you. You could take care of your own bookkeeping or have it done by admin staff, then have a third-party service take care of your accounting obligations.

Or you could outsource all of your financial work to an external bookkeeper and external accountant. This has many benefits, including saving your own time and ensuring the accuracy and independence of any financial analysis.

So, what do we do? Here at Accountants Plus, we are Chartered Accountants, Business Advisors and Taxation Specialists. That means we can help you with all of your accounting needs.

If you would like to talk to our experienced small business accountants to find out what would work for your business, then contact us here at Accountants Plus today.

How To Get Your Financial Forecasting Right

Being savvy with your finances is at the heart of every successful business. To make your finances work there are some key elements that you need to make use of. A financial forecast is one of those things.

A financial forecast is an essential tool for any business. It predicts your future financial state, tells you how much your business needs to be making to grow, and can help you understand the steps you need to get you there.

Your forecast helps to keep your business on track and is also key information for securing funding from investors and lenders.

So, let’s look into how you can get your financial forecasting right.

How To Get Your Financial Forecasting Right

A Budget vs. A Forecast

Did you know that a financial forecast is not the same as a budget? A forecast is a prediction – it tells you where you need to go and how to get there. A budget is a lower level plan to keep spending and costs in check to achieve the forecast.

Understanding the two terms will mean that you have the skills to produce both. Each plays a different role in your business’ success.

Get Your Records Together

To set yourself up with an accurate and reliable forecast, you need to have thorough records of your past finances. The only way to see where your business is going is to look back on where it has been. Your past financial statements are a record of your business performance over time. These past trends can then be used to make your financial predictions for the future.

Your accounting software or accountant should have all of the statements you require (for example, income and gross income, cash flow, costs). If you don’t have these statements, you need to start building up a record of them before you can complete an accurate forecast.

Research and Forecast

Your forecast will be formed by a combination of two things – historical financial statements and market-based industry research.

By taking a look at the last few years of income and cash flow for your business, it is relatively easy to make an educated prediction about your future business growth. It isn’t overly complicated and doesn’t require expert knowledge. However, only relying on this information would not be enough for presenting to potential business partners or investors. It also does not take into account any trends in the wider market.

That is where your market-based research comes into play. You will need to look at new technologies in your industry and what the impacts of those have been or might be. You’ll also look at consumer buying trends and general financial performance in the industry in recent years.

This more in-depth research is what investors will be interested in, and can also help plug some gaps if you don’t have a large financial history for your own business to rely on.

Once you have completed your research, you can move on to making pro forma statements to project your income. These are your final records containing your forecasted predictions and details of revenue and sales. You’ll create a few different types of pro forma statements – one for income, one for cash flow, and a balance sheet.

As you can see, financial forecasting can be quite a complicated task. So, if you would like more information or assistance with forecasting for your business, contact us here at Accountants Plus today. We are experts in all sized business accounting and can customise hour services to suit your needs.

Get Paid On Time

Tips To Get Your Payments In On Time

Do you have clients or customers who are not paying their bills on time?

This can be one of the more awkward things about running a business. It can also have negative impacts on day-to-day operations if cash flow is constantly tight, especially in small businesses.

But what can you do about it?

How can you get the money into your accounts when you need it? After all, the ball is in your client’s court there.

Thankfully, there are plenty of ways you can encourage them to be timely with their payment.

So, let’s look at some tips for ensuring you receive payments on time, every time!

Tips To Get Your Payments In On Time

Be Clear On Your Terms Upfront

Before you undertake any work or provide any products or services, you need to agree on some terms with your client. Make sure the deadlines, scope of work, fees and penalties are clearly understood by both parties.

That means your clients will know right from the start what they are expected to pay and when.

Agree In Writing

Once you have discussed the terms, it is good practice to agree all of the above information in a written agreement or contract. This way, everyone is on the same page. There is a record of what was decided so that both parties can refer back on it if needed. It will also mean that no one can try to change the agreement at the last minute.

Send Reminders

When your clients are busy with their day to day tasks, it can be easy to forget things. Even if they have the best intentions! That is why it is helpful to send out reminders for upcoming payments.

Sending regular reminders about what is due and when, will help to remind your customers when they have payments coming up. Most accounting software will allow you to schedule automated reminders for your invoices.

You choose when you would like the reminders to go out (ie. one day before the payment is due, 3 days after it is due, and so on). Set up as many reminders as you want and you don’t even have to think about chasing payments going forward!

Prompt Payment Discounts

You could consider providing a small discount to clients who pay their invoices before the due date. An incentive as small as 2% can be enough to encourage people to pay on time. This saves you money later on if you aren’t having to spend time and resources chasing late payments, so it balances out.

Late Payment Penalties

You can give your customers extra incentive to pay on time so that it won’t cost them more. Adding penalties on for late or unpaid invoices is another way to ensure people will get their money in on time. They aren’t going to want to pay more than they had initially planned to, so if they can avoid a late payment penalty they are likely to do so.

Have Various Payment Options

People and businesses have different preferences when it comes to making payments. You should make sure you cover all the bases in terms of payment options so there aren’t any hurdles for anyone.

For example, some companies might utilise credit cards or automatic payments, but others might only have the option of internet banking. Allowing instalment options and spreading the costs over a few months is also very helpful to smaller businesses.

Be Polite

Being polite in your interactions with clients and customers is a no-brainer. Something as small as putting a “thank you for your payment/business” at the bottom of an invoice might seem insignificant but it provides positive reinforcement to get the money paid on time.

Don’t Be Afraid To Ask

Sometimes people forget about their bills, or they just need a bit more time to get the money together. Politely following up about a missing payment is part of business and is nothing to be apprehensive about. A lot of the time it simply slipped their mind or they didn’t see the invoice come in, and they appreciate the reminder!

Delay Work If Necessary

A customer or client with a history of paying late sometimes needs a bit of extra management. If other attempts to get invoices paid haven’t been successful and they still owe you money, stopping services until they get caught up might be necessary.

Part of getting the money you are owned into your account on time is having a great accounting system that is backed by a great accountant. Drop us a line here at Accountants Plus if now is the time to get your payments in order as we can take this hassle away for you.

Bookkeeper and Accountant Working Well Together

Why Accountants Love It If You Have A Bookkeeper

Do I need an accountant or a bookkeeper? Do they do the same thing? Don’t they work in competition with each other?

These are questions that we get asked all the time.

To be perfectly honest, accountants love it when you have a bookkeeper. The jobs each profession do are completely different, but do work in synergy with each other.

Bookkeeping is important for any business, regardless of the industry or size. It keeps all of your financial records in top shape, which makes all aspects of your accounting a lot easier.

Let’s take a look at the role of a bookkeeper and the difference they can make to your business.

The Role Of Accountants v. Bookkeepers

Sometimes the roles of accounting and bookkeeping can overlap, or the names may be used interchangeably. But there are some distinct differences between the two. The role of a bookkeeper is to have everything prepared for your accountant when it comes to analysis, auditing, or tax time.

Bookkeeping refers to the recording and maintenance of day-to-day financial transactions. This includes all purchases, sales, payments, and receipts. A bookkeeper often also produces weekly or monthly reports and account reconciliations.

This keeps everything in order for the accountant to come in and take care of data analysis, auditing, and filing tax returns. Having a great bookkeeper who is efficiently managing the day-to-day work makes an accountant’s job easier and saves you money on your accounting fees.

Below are some of the top benefits of having a bookkeeper:

Cash Flow

Your bookkeeper can track ingoing and outgoing payments – making sure that you are paying bills on time and your clients are paying you on time. This is important for making sure you have money coming in when it is supposed to, and keeping you out of bad credit with suppliers.

Matching Transactions To Correct Accounts

Businesses often have multiple accounts and things can get messy if they aren’t monitored properly. A bookkeeper can make sure money is put in the right place or quickly remedy it if it isn’t. This can be especially crucial around end-of-year accounts and tax time.

Regular Account Reconciliation

You don’t want to get to the end of the financial year and find out that you will be paying an accountant overtime to correct mistakes in your financials. Regular bookkeeping can ensure your accounts are reconciled on a daily, weekly, or monthly basis depending on how many transactions you have per day.

This means the records will all be correct when the accountant needs them.

Required Reporting Completed

Profit and loss statements or reporting to investors can all be taken care of by your bookkeeper. This means that you can check up on the financial health of your business easily by looking at these records. Also, it is one less thing that your accountant will have to worry about.

Expenses Tracked

Having a dedicated eye on your day-to-day expenses is very important. A bookkeeper will be paying close attention to outgoing costs like company credit cards, company vehicle use, and supply costs. They can also alert you to any red flags in these areas, like sudden increases in costs or suspicious activity with company money.

Everybody Wins

When it boils down to it, your accountant is not the only one who wins from having a bookkeeper – you benefit too! You will get more time for business operations (and some well deserved time off) by leaving the finances to a professional.

Got the bookkeeper but not the accountant? Or maybe you are looking for a great accountant who can work in with your existing financial team? Then get in touch with us here at Accountants Plus today.

Profit and Loss

How To Read Your Profit and Loss Statement Correctly

Financial reports can be a bit overwhelming. With columns of numbers everywhere, coding, and subtotals, it is hard to decipher what they all mean.

But your profit and loss statement is a pretty key report to understand. If you only learn about one aspect of financial reporting, then your P&L is a good place to start!

A profit and loss (P&L) statement (also known as an income statement) summarises the costs and expenses of your business, incurred during a particular period. It basically shows the money that comes in and the money that goes out.

With accounting software you can easily and regularly produce these reports to help you see revenue trends in your business. Or of course, your accountant can do it for you.

Let’s look at this vital report in a bit more detail.

Why is a profit and loss statement important?

Your P&L statement is an essential business tool. It helps you to keep an eye on your finances and to address any issues if they arise. For example, you might notice that certain expenses are increasing significantly each month or quarter. This may highlight to you that you need to look at new providers or suppliers.

This statement is also going to show your company’s ability or inability to generate profit. It shows you a total of all expenses and all income sources. This will display your total net profit. You will be able to see immediately if your business is spending too much money to be viable.

This will be a true indicator of whether you need to reduce costs, increase sales, increase marketing, or a combination of these things.

Your P&L statement helps you to monitor any changes you are making to your income and expenses monthly or quarterly (or however often you decide to run the reports). This allows you to easily compare statements from different periods, which shows you your progress over time.

How To Read Your P&L

The P&L/income statement is fairly easy to read and understand once you know what you are looking at. They will differ slightly between different accounting programmes, but will follow a general format. Below is a quick guide to the main parts of the statement and what they mean.

  • The report begins with your revenue entries from all sources of income. This will be your income from sales, interest, and any other avenues.
  • It will then list the various business costs underneath the income. These are sometimes separated into two types – fixed costs and cost of sales. Fixed costs are things like rent, Internet, or power bills. Cost of sales is the money you spend on things like materials and/or stock. These costs can be quite variable month-to-month.
  • If the expenses are not split into these categories they will just be listed as separate lines. They will include operating expenses, cost of goods sold, taxes, interest expenses, and any miscellaneous expenses. 
  • At the end of the statement it will give you your net profit. That is your total profit (including interest received) minus all of your expenses.

There are a couple of other key points to note about your P&L:

  • It is accrual based – which means it includes all income and expenses, regardless of whether they have been paid yet.
  • It does not include personal items, capital items, owner drawings, or any business loans (or repayments against loan principal).
  • It will include interest on loans, as this is an expense. It will also include depreciation on capital items.

So there you go, your P&L in a nutshell. Once you know what you are looking at, it is a reasonably easy report to understand. If you do need some help understanding the intricate ins and outs of it, then get in touch with us here at Accountants Plus.

We can help your small to medium-sized business in all aspects of business performance. Talk to us today!

Company Vehicle

Financial Considerations For Having A Company Vehicle

Financial Considerations For Having A Company Vehicle

Love the idea of having a shiny new company car or van to cruise around town in but not quite sure how it works and what you need to consider? As much as the idea is appealing and you might think you can write off all the expenses at tax time, it isn’t quite that straightforward.

The financial rules for vehicles can be quite complicated. There are actually different rules for sole traders and companies, variations that depend on whether the vehicle is exclusively used for business or also allows personal usage, and a slew of other considerations.

In some cases, it may be more prudent to maintain your own personal vehicle and claim back expenses such as mileage and maintenance.

Let’s have a look at some of the financial considerations to take into account if you have a company vehicle.

Financial Considerations For Having A Company Vehicle

Is It Viable?

Before you start looking at all the shiny new cars on the lot or deciding whether to go petrol or electric, you need to know if it is a viable choice for your business.

First and foremost, you need to figure out if you have enough financial stability to make such a sizeable investment up front. It is not just the cost of the vehicle to consider, insurance and other associated costs add up. Although you can write off a substantial amount, you still need the money upfront.

If you don’t have the funds upfront, you may decide to take out a loan to purchase a company vehicle. In some cases, the interest on the loan may be tax-deductible. But, don’t bank on that fact. It pays to check with your accountant before making any financial commitments. They will have the right advice for your individual situation and advise whether or not it is a good investment for your business.

Ongoing Costs

Cars and vans are not a one-time purchase. You will need to have the budget to maintain a WOF and registration, make repairs, pay road user charges (if applicable) and cover insurance for all employees who use the vehicle. Again, most of these expenses are deductible, but your bank account needs to be healthy enough to sustain unexpected costs.

Although it is possible to claim back all the running costs, petrol, insurance and even depreciation of the car, bear in mind that you are likely to be required to pay fringe benefits tax (FBT). This is tax your business is liable for if the company car is made available for staff for any form of private use. Even travelling from home to work is considered to be personal use – unless you are a sole trader and using a truck or van as your company vehicle.

The amount of FBT you pay depends on how much the car is worth and how much your company earns. If you are a sole trader, you won’t need to pay FBT on your business vehicle – instead, your accountant will make other tax and GST adjustments.

If your company vehicle is a non-passenger vehicle and is only ever used for work-related tasks, you are exempt from FBT. As a general rule, if you are more likely to use the vehicle for personal use, it makes more financial sense to pay FBT.

Do You Need It?

Probably the biggest consideration is whether or not your business needs a company vehicle? Because it makes your financials a lot more complicated, you should carefully consider if you are buying the vehicle for the right reasons or for vanity’s sake.

Deciding whether or not to invest in a company vehicle is no small decision. You need to discuss your current business requirements and finances with an experienced accountant who can advise you of your options and help you save money in the long term.

If you are considering buying a company vehicle and need to understand how it could impact your business, then get in touch with us here at Accountants Plus today. We can advise you on the best way to handle the vehicle situation specific to your business.

Tasks to make your accounting easier

Tasks You Can Do To Make Your Accounting Easier

One of the biggest time suckers for a small business is trying to maintain your finances. That is why hiring an accountant to manage them for you is a smart move. You give yourself extra time and energy to focus on the important aspects of growing your business.

However, if you don’t utilise or support your accountant, you are not doing yourself or your business any favours.

With any outsourcing you choose to do, you want to ensure that your money is well spent and the service adds value to your business. Because accountants need to charge for their time, it is in your best interest to make sure you have all your ducks in a row. That way, they can get straight to the grunt work without having to chase you for more information.

Here are some key tasks you should be doing to help your accountant do their job effectively and efficiently.


Tasks To Make Your Accounting Easier

Organise Your Receipts

In this age of advanced apps and software, there is no excuse for keeping a shoebox piled full of receipts under your desk. Grab an app or use the capabilities of accounting software like Xero to save all your electronic receipts and organise them into categories.

Photograph hard copy receipts and add them to the folder, or assign them to your entries in Xero. You will save your accountant the hassle of endless hours of sorting and cut down on the billable hours you have to pay.

Meet Deadlines

A good accountant will give you plenty of warning in advance of tax time. They will tell you what they need from you to file your tax returns. Help them out by getting them what they need, when they need it. They have many clients and can’t receive everybody’s info back at the last minute. Plus, a late tax return can incur fines and fees which you don’t want to deal with!

Bill Efficiently

Talk to your accountant about the best-invoicing cycle to stay in the black and make sure you chase clients who are late to pay. Your finances can get out of whack if you have already paid for stock and employee wages, but then have to wait another month for the invoices to be paid by clients.

If you struggle to find time for this, consider an automated invoicing system that will remind you of any outstanding invoices and send reminders to clients on your behalf. Most online accounting programs have this function built in.


Always keep your accountant up to date on any changes to your personal or business circumstances. They can anticipate problems or challenges that you weren’t aware of and assist you in coming up with solutions.

It is far better to be proactive than reactive. Also, discuss with them if you are intending to make any big financial moves in your business like buying a new significant asset or borrowing funds. Your accountant will be able to advise on the best way to handle it and if it is a smart financial move to make.

Manage Your Books Regularly

Set aside time every day to reconcile your Xero accounts, update your spreadsheets and records, produce your invoices and pay any bills that are due. Delaying these tasks for days or even weeks can lead to gaps or inconsistencies that will cause problems for your accountant and potentially your cash flow. Getting into the habit of dealing with this daily means there is less of a chance you will forget something important down the line.

Using cloud-based accounting software makes this part easy. You can create rules to reconcile transactions so that it would be a 5-minute job to get everything up to date. Plus, your accountant can log in any time to get an accurate snapshot of your finances.

Help Your Accountant To Help You!

If you have a scheduled catch up with your accountant, take the time beforehand to write down a list of questions or outline any plans you have for your business. Send this list to them ahead of the meeting, so they have time to get any information or documents ready for you.

Your accountant has a wealth of knowledge in many areas of business. That means they can provide you with sound advice on how to scale or grow your business. More than just numbers, they cover all the important parts of business.

If you would love to work with an Accountant that loves to work with you, then get in touch with us here at Accountants Plus. We make a point of getting to know your business so that we can always work in your best interests. Get in touch today.

Embracing Cloud Accounting

Why You Should Embrace Cloud-Based Accounting

What do clouds, rainbows and accounting have in common?

Normally those are three things that you wouldn’t necessarily hear in a sentence together. But cloud-based accounting really can make rainbows appear in your business. And that is why we think you should embrace it wholeheartedly!

Let’s face it; if you are self-employed or running your own business, your bookkeeping obligations can be a bit of a drag. You got into this to do what you love and be your own boss – not to spend hours at a computer screen trying to make sense of invoices, transactions and tax.

But then, cloud-based accounting entered the market. Many small business owners are choosing to move to the cloud due to the increased ease and efficiency. So if you are still doing your accounting the old-fashioned way, it might be time for a change!

What does it mean to be cloud-based?

Is my information literally floating in the sky?

Kind of! Cloud-based software gives users access to accounting technology on a subscription basis. You pay a monthly or annual fee, and the provider remotely and securely hosts the databases and servers. You can easily access your data from anywhere at any time by simply going online.

Let’s explore why cloud-based accounting is so much better than the old traditional paper methods!

Problems with traditional accounting systems

  • It’s inflexible – Older accounting software is installed on your computer and is usually limited to exactly that – your one Data cannot be securely transferred from one place to another, it often requires the use of a USB drive or something similar. That jeopardises the security of your information and limits where you can do your work (hint – that means you can’t sneak in cafe working hours!)
  • It’s risky – It’s also common to only have one account or user login, because buying additional licences for other users is very expensive. This means if your computer is lost, stolen, or has a virus – you’re up the proverbial creek. Computers can be vulnerable to viruses, and if all of your data is stored on one PC, you could lose it in one hit.
  • It’s outdated – As the software gets older, it gets more out of date and inefficient for your growing business needs. It can be an expensive process to upgrade existing software and keep access to your old data.
  • It’s unreliable – Speaking of data, some older systems do not have the capacity to back it up at all. We’ve all accidentally deleted something that we really shouldn’t have. Not being able to get it back is a less than ideal situation.
  • You’re on your own – It’s almost impossible to get help or support when something is going wrong with your old accounting software. There is usually a customer support phone number, which is either never answered or it’s disconnected.

Benefits of cloud-based accounting systems

  • It’s accessible – Wherever you have Internet or mobile data, you can access your business information. This is essential for meetings on the go or for work trips where you can’t be at your desk, but need to be able to see or edit your data. It also means that your accountants have a clear and up-to-date overview at all times. No more frantic searching for receipts and invoices at tax time!
  • It’s streamlined – Cloud-based accounting systems are relatively new and have been designed to be user-friendly and largely automated. This cuts out a lot of the administrative work for you, giving you more time for other things.
  • It’s really smart – Most cloud-based systems are sophisticated and go way beyond basic spreadsheets and calculations. They feature detailed budgeting and financial analysis and come with heaps of other features to help you run your business better.
  • It Saves You Time – Systems like Xero offer one-click reconciliations, tax and GST reporting (with a direct link to upload to IRD), the ability to set up repeating invoices, automatic invoice reminders and so much more. That means it saves you hours of time completing these tasks manually.

As you can see, we are complete cloud advocates here at Accountants Plus. If you are interested in knowing more about how cloud-based accounting can streamline your business, or even how we can help you manage your cloud accounts then get in touch with us today.

Key Metrics In Your Business

Key Business Metrics You Should Be Monitoring

Do you know how healthy your business is? Could you say with confidence how much money is in your surplus budget, that all of your expenses are accounted for, and that there is little chance of a nasty surprise popping up?

If you answered no to any of that, you need to be monitoring aspects of your business more closely.

The secret to success is tracking key business metrics within your operation. Those metrics are…

Your Cashflow

Monitoring your cash flow is Business 101. It means looking at the physical dollars that are coming into your bank accounts, and the ones that are exiting your accounts too. The money that you pay out is known as negative cash flow, and the money that comes into your business is positive cash flow.

If you don’t know what is coming in and going out, then you don’t know if your business is doing well or not. Do you have enough to cover your expenses? Or do you have surplus money that you should be investing into a growth strategy? Remember this one key thing, positive cash flow does not equate to profits, it is simply the money that you have to spend in your business.

Short-Term Debt

Your most common form of short-term debt is your Accounts Payable. That is the bills that your business has received, but hasn’t paid yet. They will show up as a liability in your financial reports and statements. Tracking this metric is important, as you need to know that you have the cash flow to cover these upcoming bills.

You don’t want to fall into the trap of paying bills late as this can result in penalty fees or a black mark against your business’ credit rating. You also don’t want your bills to impact any debt repayments or your ability to pay your payroll. Keep a close eye on your short-term debt and manage it well.

Funds Owed

Generally, the biggest part of funds owed to your business is from your Accounts Receivable. This is generated by invoices you have sent out, or products sold and services completed that you have not yet been paid for. These funds will show as an asset on your financial statements, as they are revenue that you expect to receive in.

You should not recognise your funds owed as money in the bank until it actually hits your account. Encourage your customers to pay on time so that it doesn’t negatively impact your cash flow. If they are late in paying your invoices, make sure you follow up as quickly as possible. The longer a debt is outstanding, the harder it is to collect.

Direct Costs

Direct costs are also known as the cost of goods sold. They are costs directly associated with providing your products or services – wholesale costs, the cost of materials to make your products and even specific labour time specifically dedicated to producing your products. Monitoring your direct costs will show you how much it cost you to provide your products and services. If these costs become too high then you need to consider the viability of your offerings, or if you can make some cost savings.

Direct costs show on your Profit and Loss statements. If you subtract your direct costs from your revenue then you will be able to calculate your gross profit. Your direct costs do NOT include indirect fees like the cost of advertising, marketing, rent, or insurance.

Operating Margin

Your Operating Margin is the money you have left in your business after your income has been generated, and your direct and indirect costs have been paid. It is a good indication of how well your business is performing after you have paid for your products, all of your marketing and general expenses.

If the amount leftover is low then you might not have enough left to pay your taxes. This may mean you need to review your business model or pricing structure. But if you have a lot leftover, then there is potential you can reinvest the funds.

Net Profit

The net profit is the bottom line of your business. It is the money that is left over after you have paid all your costs, as well as Tax and GST. They are the funds that don’t have to be reinvested into your business. Tracking this helps you to establish how much money you have to invest in the growth of your business, or how much you can draw out.

Cash Balance

How quickly do you burn through any funds left in your business? Do you spend it as soon as it comes in, or can you maintain a healthy balance of positive cash flow? You should think long and hard about how you spend your cash balance as it is the funds you have to invest in your business. If you spend everything you have the second it hits your account, then you will have nothing available to support your future business growth.

While it is important to track these metrics in your business, it is not always possible to do it yourself. Financial terms can seem like a foreign language and who has the time to decipher a new language? After all, time is always an issue when it comes to running a business as you want to focus on the things you do best to generate revenue.

So, if you would rather rest easy knowing that your finances are being looked after, consider letting Accountants Plus monitor them for you. We have a team of financial gurus who are experts in measuring the financial health of your business with these metrics. Get in touch with us today to see how we can help.

Is Business Tax Really That Scary

Is Business Tax Really That Scary?

T… A… X. Three little letters that can strike fear into the heart of any small or medium business. And what about all those other acronyms… FBT, GST, IRD, ACC, and PAYE.

But is tax really all that scary?

Your business tax does not have to be an unsolvable mystery. Let’s have a look at how it works and what you can do to make the whole process easier for your business.

Is Business Tax Really That Scary?

When it comes to tax, you need to be well informed of what is going on in your business and what obligations you need to meet. Unless you are a financial whiz, it is 100% recommended to have an accountant on board to help you meet those obligations.

Here are the benefits of having an accountant when it comes to your tax:

  1. Accountants deal with tax on a day to day basis so have all the up to date information on changes to regulations
  2. There are many ways that you can streamline your tax process, an accountant can help you set up systems that will save you time and keep you compliant
  3. Dates are a fundamental part of your tax obligations, these dates are ingrained in an accountant’s brain so they will always be able to remind you of when milestones are coming up
  4. An accountant can help you claim on all the expenses that you are entitled to which can save you money
  5. Accountants can provide advice on the tax advantages for large purchases, leasing equipment, using a private vehicle, or other business queries

Here at Accountants Plus tax does not scare us at all. In fact, we are actually tax experts. So don’t hesitate to get in touch with us if you need help figuring out what you have to pay and when you have to pay it.

What Is Tax?

Let’s cover off the basic question first. What is tax?

Tax is a compulsory financial payment that every New Zealand business must pay to the government to fund various public services and expenses. The amount of tax you have to pay will depend on your earnings and the setup of your business.

The different tax types are:

Income Tax: The main compulsory form of tax. It is calculated on your net profits (your total revenue, less your expenses) and the rate will differ depending on whether you are a sole trader, partnership or a company. To prevent the shock of a large tax bill, you are encouraged to pay in instalments throughout the year called provisional tax payments.

ACC: An annual levy that you must pay to cover the cost of workplace injuries. Even if you work in a low-risk profession or from home, you will still need to pay this levy. It is like an insurance policy in case injury does occur.

GST: Your business must be registered for GST if you have an annual turnover of more than $60,000. GST stands for Goods and Service Tax and applies to any product or service that is sold within New Zealand. The current GST rate is 15%.

PAYE: If you employ staff and pay them a wage or pay yourself a salary, then you will need to pay PAYE (Pay As You Earn) to the IRD on a monthly basis.

ESCT: A tax paid on any contributions to employee superannuation schemes including Kiwisaver.

FBT: This is payable if you provide perks or benefits to your employees as part of their employment.

This does look like a long and scary list of taxes. But, if you manage your business well and get the required help, then none of them should come as a shock when the bill arrives.

Ways To Make Tax Less Scary

There are a few things that you can do in the day to day running of your business to make tax less scary.

Have A Good System

The key thing with tax is having a clear picture of your earnings and expenses. The best way to do this is to have an effective accounting system in place that allows you to see your numbers at a glance. Something like Xero is easy to use and has great reporting that will help at tax time.

Regardless of the system you choose, it is important to stay on top of your financials regularly. So take the time to reconcile your incoming and outgoing funds on a daily or weekly basis.

Put Money Aside Regularly

It can be really difficult to come up with a large sum of money at tax time. If you set aside a portion of your earnings each month then you will never have to worry about being caught short. Have a chat with your accountant to find out how much you should be setting aside to cover all of your tax obligations.

Don’t Try And Muddle Through Or Stick Your Head In The Sand

Paying tax is a part of business. In fact, it is a positive part. If you have a tax bill then you must be turning a profit. So don’t ignore your tax and hope that it will go away because it won’t.

Likewise, don’t be naive about the process. There are some strict and specific regulations when it comes to tax. If you don’t really know what you are doing, seek help. You can end up paying more tax, or have penalties applied if you don’t follow the process correctly. There is information available online for free, but it is generic information. It is far better to get individual advice specific to your business from your accountant.

If you don’t have an accountant in place or you aren’t happy with your current one, then get in touch with us at Accountants Plus. We will be happy to take your scary tax monster and turn it into a very manageable process with no monster spray required!