Becoming Self-employed – what you need to know

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Going from a person employed on salary and wages to going into business or becoming a self-employed contractor there are certain aspects of this transition that you need to understand and consider very carefully: –

Finally, thank you for taking the time to read this. I trust that the above has been informative and if there is any aspect that you wish to discuss further please contact us.

Disclaimer: This publication has been carefully prepared, but it has been written in general terms only. The publication should not be relied upon to provide specific information without also obtaining appropriate professional advice after detailed examination of your particular situation.

The simple way to save for business taxes

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As a Profit First Professional helping our clients to increase profitability, I educate the business owner / self-employed contractor that like all other business expenses, taxes must be saved for. In Profit First methodology, regarding saving for taxes, we encourage clients to have a minimum of three bank accounts: –

  • Their current operating account which is normally a cheque account which we ask them to rename as the Income Received Account,
  • A savings account named Operating Expenses Account, and
  • A savings account named Tax Account.

For the purpose of this discussion I will keep the explanation simple as to what I require you to do:-

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What are the relevant laws and regulations a business must comply with?

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As with anything in life you have the freedom of choice however also be aware that with every choice you make there is a consequence.  In this instance you have the choice to either take care of your business compliance responsibilities yourself or to engage the services of a professional such as ourselves.

Let’s take a look at each option.

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Compliance

In general, compliance means conforming to a rule, such as a specification, policy, standard or law. Regulatory compliance describes the goal that organisations aspire to achieve in their efforts to ensure that they are aware of and take steps to comply with relevant laws and regulations.

Thank you for taking the time to read this. I trust that the above has been informative and if there is any aspect that you wish to discuss further please contact us.

Disclaimer: This publication has been carefully prepared, but it has been written in general terms only. The publication should not be relied upon to provide specific information without also obtaining appropriate professional advice after detailed examination of your particular situation.

Is there a GAAP in your Business thinking?

The GAAP (Generally Accepted Accounting Principles) formula for determining a business’s profit is Sales – Expenses = Profit. It is simple, logical and clear. In the GAAP formula profit is a left over, a final consideration, something that is hopefully a nice surprise at the end of the year. Alas, the profit is rarely there and the business continues on its cheque to cheque survival.

Sales – Expenses = PROFIT

With Profit First you to flip the formula to: –

Sales – PROFIT = Expenses

Logically the math is the same, but from the stand point of the entrepreneur’s behaviour it is radically different. With Profit First, you take a predetermined percentage of profit from every sale first, and only the remainder is available for expenses.

If you want help or have any questions in regards to the above then please contact us or find out more about Profit First

How can I increase PROFIT? Have you heard of the Bank Balance Accounting principle?

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Most entrepreneurs do not have the time or gumption to read the different accounting statements necessary to manage the financial aspect of their business. Theoretically you should review and correlate your Income Statement, Balance Sheet and Cash Flow Statement monthly (or more frequently), but few entrepreneurs do. Most resort to “bank balance accounting,” where we check our bank balance every day and make financial decisions based upon what we see. Per Parkinson’s Law, we consume what we see in our bank account.

Profit First encourages the entrepreneur to continue “bank balance accounting” by first allocating money to profit (and other accounts) so that the entrepreneur sees the actual portion of deposits that are available for expenses and they automatically adjust their spending accordingly. About Profit First

“If you always do what you’ve always done, you’ll always get what you have always got.”

Thank you for taking the time to read this. I trust that the above has been informative and if there is any aspect that you wish to discuss further please contact us.

Disclaimer: This publication has been carefully prepared, but it has been written in general terms only. The publication should not be relied upon to provide specific information without also obtaining appropriate professional advice after detailed examination of your particular situation.

 

 

How a British naval historian from the last century can make you more profit

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Author and British naval historian Cyril Northcote Parkinson theorized that our demand for a resource increases to meet the supply of it. That is why when we are given two weeks to do a project it takes two weeks, and when we are given eight weeks to do the same project it takes eight weeks. That is why when given $1,000 to complete our work we get it done with $1,000 and when given $10,000 to complete the same work, it takes $10,000. Profit First makes Parkinson’s Law an asset. By taking profit first the money available for expenses lessens, and we are forced to find ways to get the same things done for less money.

Thank you for taking the time to read this. I trust that the above has been informative and if there is any aspect that you wish to discuss further please contact us.

Disclaimer: This publication has been carefully prepared, but it has been written in general terms only. The publication should not be relied upon to provide specific information without also obtaining appropriate professional advice after detailed examination of your particular situation.

Do I need a business bank account?

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As a new start-up or new part time business owner do not fall into the bad habit of co-mingling your finances with your personal money. While it may be the easiest, most convenient and cheapest way of operating, it can have its drawbacks – especially further down the line. As a new business owner you need treat your business as a business, regardless of whether it’s a part-time venture or not; while setting up a separate bank account could mean additional bank fees and expenses, if you don’t you could be storing up a lot of hassle for yourself in the future.

All our clients will vouch that keeping their business spending completely separate from their personal account ensures manageability.

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Audit Trail – Definition

certAn audit trail is a paper or ‘electronic’ trail that gives a step by step documented history of a transaction. It enables an examiner to trace the financial data from general ledger to the source document (invoice, receipt, voucher, etc.). The presence of a reliable and easy to follow audit trail is an indicator of good internal controls instituted by a firm, and greatly assists in the case of an IR audit.

Thank you for taking the time to read this. I trust that the above has been informative and if there is any aspect that you wish to discuss further please contact us.

Disclaimer: This publication has been carefully prepared, but it has been written in general terms only. The publication should not be relied upon to provide specific information without also obtaining appropriate professional advice after detailed examination of your particular situation.

Further 4% Penalty applied on 15th January 2015 Unpaid GST

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Last Thursday, 15th January 2015, for many entities (read our post about what an entity is) was the GST Due Date for the GST Period 1st October 2014 to the 30th November 2014. If you were you unable to pay the GST due then please note that: –

  • An initial 1% late payment penalty has been charged on the day after the due date.
  • A further 4% penalty will be charged if there is still an amount of unpaid tax (including penalties) at the end of the 7th day from the due date.

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How to always pay GST on time, every time

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It would be very remiss of me not to address my previous post Unable to pay GST? Take Action Now without offering a solution on how to ensure that you always have funds available to pay your GST in full when it is due so as not to end up being unable to pay your GST.

I start by asking the question “Why is it that any Payments Basis Entity is unable to pay the GST Due on time?” Read More »

Unable to pay GST? Take action NOW

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The 28th of this month is the GST Due Date for the GST Period 1st June 2015 to the 31st July 2015. If you are unable to pay the GST due then please note that: –

  •     An initial 1% late payment penalty will be charged on the day after the due date.
  •     A further 4% penalty will be charged if there is still an amount of unpaid tax (including penalties) at the end of the 7th day from the due date.
  •     Every month the amount owing remains unpaid, a further 1% incremental penalty will be added.
  •     As well as the penalties above you will be charged interest on tax that remains unpaid until it is eventually paid.

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What is an Entity?

An entity is any one of the following: –

A Sole Trader – a person who decides to start a business by trading on his or her own. Typical sole traders include trades people, such as painters and decorators, electricians and repair technicians. Being a sole trader doesn’t stop you from employing people to help you in the business

A Partnership – a business agreement between entities – rather than a business that exists as a separate legal entity – in which all the profits/losses, responsibilities and liabilities are shared according to a deed of partnership contract.

A Company – a business that is a separate legal entity from the people who have a financial interest in the business, who are known as shareholders and are taxed separately from the company on the income they receive from it.

A Trust – another very popular entity in New Zealand is a trust. Trusts are particularly useful for asset protection and estate planning, and so are commonly used for owning private and investment assets rather than for operating businesses.

For a complete overview of structures go to Business.Govt.NZ

Disclaimer: This publication has been carefully prepared, but it has been written in general terms only. The publication should not be relied upon to provide specific information without also obtaining appropriate professional advice after detailed examination of your particular situation.

Yippee!!!! Today is our Quarterly Distribution Day.

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We are about to take our quarterly distribution cheque. That’s right, our business is serving us, now and we take a distribution cheque every quarter, every ninety days profit is shared to us.

An important aspect of the Profit First Methodology is for the business owner on the first day after the end of a quarter, to take a Quarterly Profit Distribution.

Let me explain: By implementing Profit First on the first day of each new quarter (or the first business day after), you, will take a profit distribution. This is done by adding up the total amount of profit in the Profit Account, taking 50% of the money as a profit distribution with the other half remaining in the Profit Account, as a reserve.

Not paying a quarterly distribution and want to start? Find out how

 

Who or what had the greatest influence on your business in 2014?

As 2014 has drawn to a close and I reflect on the question “Who or what has been or had the greatest influence on our bookkeeping business in this last year” I would have to answer “the introduction to my now good friend Gabrielle Fontaine”. Gabrielle is the founder of The Freelance Bookkeeper (TFB) and I was introduced to her and the Premium Training at the beginning of the 2014 year. Read More »