Newsletter December 2008
Welcome
Welcome to the final newsletter for 2008 of MCI & Associates. The year has been a challenging one for us all and we are very proud of the way our staff have risen to the challenges put before them over the past 12 months. We are fortunate to have a core group of experienced people who have been with MCI & Associates since our merger in 2007 and also in the calibre of people we have taken on since then.
Our goal for 2008 has been to improve our turnaround times in getting your accounts completed. We have made some great improvements this year and we are confident that we can improve this further in 2009. We have a large amount of client papers to be collected as storage is an issue for us. Please call in if your 2008 work has been completed and you have not picked up your papers.
In 2009 we will be concentrating on improving our services that we provide to you. We have appointed more staff and the focus of our Practice Manager, Annette Kendall, will be to ensure that we provide our customers with:
• value for money,
• staff who identify with your business and your specific needs, and
• a quick response to your queries.
We will also be delivering added value to you in 2009 in the form of training seminars (ie Banklink, GST, managing staff).
Remaining Robust in Times of Uncertainty
Global economic crisis, credit crunch, financial meltdown – all terms that have been echoing around the world in recent months. What has been happening around the world will inevitably affect New Zealand businesses. The state of the world economy is such that New Zealand cannot ignore what is happening – after all, given the relative size of the New Zealand economy, it is not able to influence the outcome of the current crisis.
From a New Zealand perspective, the question is whether businesses do nothing and hope for the best, or take appropriate measures to strengthen themselves for the storm to come and emerge on the other side in a relatively healthy state.
The majority of New Zealand businesses are small to medium sized enterprises (SMEs). Given the uncertainty for businesses at present, they need to make every attempt to safeguard themselves against the downturn in the economy. The mantra for businesses, to ensure survival in difficult times, must be “Cash is King!” Cash is the life blood of businesses.
What follows are some reminders for businesses of sensible and good business practice in uncertain times. They are by no means anything extraordinary that businesses must do; they are merely reinforcements of how to maintain a strong and healthy business.
Cash Position
Businesses will need to take a more focussed approach to what their cash requirements are. What are the business cycles for the business If cash resources are inadequate, it will need to talk to the bank to make appropriate arrangements. The business will need to review its overdraft facilities for adequacy.
For a large number of businesses in New Zealand, their stakeholders’ lifestyles are funded by the business. In the current economic climate, businesses should be prudent about how much funds are being extracted by stakeholders by way of drawings or otherwise.
Stock
Businesses must determine the levels of stock required for operating the business at an optimal or efficient level. Too little stock means the business could be caught short; however, too much stock means cash is tied up unnecessarily. To get stock levels at as optimal a level as possible, the management should review turnover levels of the business, which will in turn provide information about when stock should be re-ordered. As part of the stock review process, any obsolete or slow moving stock should be cleared as soon as possible – they could become sale or discounted items. To move stock quickly, the business should also review its sales and distribution strategies.
Debtors
The first thing to remember about debtors is that they represent money belonging to the business – money that is sitting in someone else’s bank account. This is the time to ensure that the business has robust credit control policies. To encourage prompt or early payment, discounts could be given. Debtors, who may have been lax in the past with payment, may need reminders to prompt them for payment.
Cost Management
Businesses must also review their cost structure and, where possible, savings should be made. Wherever feasible, businesses should concentrate on their core functions and costs. Where there is “dead wood” within the business, consideration should be given to pruning that part of the business. The business should identify which parts are operating efficiently, and which parts are not. Can efficiencies be improved upon Where there are inefficiencies, management should isolate the reasons for the inefficiencies, and work on improving those parts of the business.
These are a few areas that businesses can focus on. There are many more areas and strategies that businesses can look at to ensure a robust future in difficult economic times. Businesses that have a strategy now are more likely to come out at the other end of economic unrest unscathed.
Managing Staffing Levels in Tough Times
For the last couple of years employers have been saying that the lack of good staff is the biggest constraint to the growth of their business. In stark contrast with this, over the last few months as the economy has tightened, employers have started
laying off staff. It is never an easy thing to do, and it is really tough breaking up a good team.
If labour costs have to be reduced, several options can be applied such as:
• Controlling the hours of work. Unless it is absolutely critical, stop all overtime and casual / temporary workers. Where staff on wages are working more than the minimum hours stated in the employment agreement, their hours should be reduced to the minimum. Where staff have accumulated annual leave, they should be encouraged to take it.
• Reducing the contracted hours of work. To do this the employer will need to have the agreement of the staff affected, otherwise it is a unilateral change to the employment agreement. If this option is being considered, the employer will need to reflect on what is fair for the individuals. A reduction of 4 hours a week is a 10% pay cut for a full time staff member but a 20% cut for a person who works 20 hours a week.
• Reducing staff numbers. Identifying those who want to go and pursue other options is the least painful approach. Are there any staff who are considering retiring or resigning Is anyone planning to do their ‘overseas experience’ and do they want to bring it forward
• Finally, there might come the decision to actively lay off individuals. It is really important that there is genuine consultation with the staff, explaining the situation and the options. How should this be done Should a team be removed, should all part time jobs be stopped or should there be a selection of individuals Whichever choice is made, it has to be justifiable in the eyes of the law. That includes both a fair process and a genuine need for change.
In one case, an employer developed a comprehensive method for assessing and rating the suitability of the employees they were considering making redundant. But instead of appointing those who got the best ratings, they selected the individuals they wanted and ignored the ratings. The redundancies were found to be unjustified dismissals.
Therefore, employers who find themselves having to cut staff costs should seek advice before embarking down a path that may turn out to be the incorrect one. It is cheaper to get good advice than to get it wrong.
Snippets
Family Tax Credit Increase
The annual amount of the minimum family tax credit, which guarantees a family's after-tax income, rises from $18,460 to $20,540 from 1 April 2009. This increase was approved by Order in Council on 6 October 2008.
FBT Interest Rate for Low-interest Loans
The prescribed rate used to calculate fringe benefit tax on low-interest, employment-related loans rose from 10.57% to 10.90% from 1 October 2008.
New Secondary Tax Rate
The Government announced on 7 October 2008 that Cabinet has agreed to a new, bottom secondary tax rate of 12.5%, from 1 April 2010. Hon. Peter Dunne said, “Secondary tax rates are not intended to tax income earned from two or more jobs more heavily than the same income derived from a single job.”
Lowering the secondary tax rate is not actually a tax cut. Taxpayers’ tax obligations do not change - lowering the secondary tax rate merely reduces the chances that taxpayers will be overtaxed during the course of the year. Where taxpayers have been overtaxed, they will be entitled to a tax refund at the end of the year.
Staff News
As mentioned above we have recently appointed more accounting staff. This has been done to allow our staff more time to focus on your individual needs and queries and to provide a greater range of services to you.
Kirsten Akast begins in the new year. Kirsten has lived in Dannevirke her whole life and will be known to many of you. Sharyne Wimsett is also working for us on a casual basis. Sharyne is a Chartered Accountant and will be assisting us in 2009 to ensure we are able to deliver a quick turnaround for your accounts.
Once again we have Tamsyn Hardie, Namrata Prasad and Adam Cload working for us over the summer. They do a great job at helping us with our workload and we are pleased to be able to provide some practical experience for them as they further their studies.
Congratulations to Jess Barnes and George Frame who were the winners of the MCI Accounting Prizes for the Top Year 12 and 13 (respectively) accounting students at Dannevirke High School.
Congratulations also to Fallon and Daniel on the birth of their baby girl, Tara in November. Fallon is taking a well deserved break and will return in March.
And congratulations to Anna and Tony on the birth of their baby girl, Luuka on 27 December. Anna will also be returning in March.
Principals, Associates & Staff
Ian McKenzie Principal
Simon Curran Principal
Neil Ivamy Principal
Moira Paewai Principal
John Dodson Consultant
Esther Davis Associate
Warwick Gernhoefer Associate
Annette Kendall Practice Manager
Alison McKenzie Admin Manager
Gloria Hayward Accounting Manager
Administration Staff
Francie Edgington Receptionist
Gay Warrington Typist/Admin
Jessica Ross Reception/Admin
Jo Duff Wages Clerk
Karen Brooks GST Clerk
Leah Curry GST Clerk
Accounting Staff
Anna Clark (on maternity leave)
Beth Fowler
Bronwyn Irwin
Debra Jewiss
Fallon La Dette (on maternity leave)
Janine Boyden
Kirsten Akast
Maryanne Kroot
Ray Phillips
Sarah Stephenson
Sharyne Wimsett (casual)
Sherynn Harold
If you have any questions about the newsletter items, please contact us, we are here to help