FAQ: How does a company Repay a Shareholders Advance?

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Question: From my understanding, considering the company was initially funded by owner funds of $50K put into the company, it should be possible to take owner funds out from revenue earned up to this amount. Is this correct?

Shareholder Current Account

How Funds are Credited

It is common when a company begins operation for the shareholder(s): –

  • To pay up the share capital, for the purpose of this exercise we’ll say it is $120 being for 120 Fully Paid-up $1.00 Shares, and
  • To also advance needed capital so that the company can start operating and for the purpose of this exercise we’ll say it is $50,000. This is commonly referred to as Working Capital.

Let’s look at how this is recorded in the company accounting system. It is essential that the $50,120 be deposited into the company’s bank account. The $120 is coded to the Paid up Share Capital Account and the $50,000 is coded to the Shareholder Current Account, which essentially records any loans either to or from the company. Read More »

How does KiwiSaver work for self-employed

Self-employed and KiwiSaverindex

You don’t have to be an employee to be part of KiwiSaver, but the rules are a bit different.

If you will not receive PAYE income as a contractor – for example, if you are going to invoice for your contract work – your employment status will change to self-employed and you will not be required to make any contributions to your KiwiSaver account.

KiwiSaver is very flexible if you’re self-employed. You’re not required to contribute a set percentage of your pay. Instead you can agree your contribution level with your KiwiSaver provider. Some providers may have minimum contribution requirements. You can either: Read More »

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.

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?

Profit First Book Cover

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

Profit First Book Cover

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.

Read More »

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.

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.

What is profit first?

Profit First Book CoverOne of the best small business thinkers today, Mike Michalowicz recently released his third book, called Profit First. This book solves one of the biggest problems most entrepreneurs have: how do they actually get paid to run their business!

The story goes like this: The owner works really hard to sell and pay all their bills every month. When they go to pay themselves last, there is no money left! Mike’s new system proposes to change all of this and pay the owner first. Read how…