(Because we love you)

INTRODUCTION

Even though New Zealand has surprisingly low compliance costs it can still be hard to write the cheque for compliance work. Every business owner should be improving their systems and procedures to ensure they get value for their money. Here’s 58 tips to help reduce compliance costs.

Jamie Tulloch Managing Director

E3 Business Accountants jamie@e3accountants.co.nz

We’ve Organised the 58 Tips this way: • 33 ways to reduce compliance fees • 25 typical errors to avoid • Total = 58 Tips

33 Ways to Reduce Compliance Fees

We know there can be a lot of information which, if not sorted and managed throughout the year, can be frustrating to find later. Much of this information is required, so will need to be found. It makes sense that you leave your accountant’s time out of this equation. Here are some things to look out for during the year:

1 Annual end of financial year checklist Answer every question. If a question is not relevant, state “not applicable” so we know you have read the question. Attach all information that is requested. Sign the checklist.

2 Loans

Attach all the latest loan statements and separate out what you paid in interest and what you paid in principal your financial year.

3 A full description of all assets purchased (Where the asset cost $500 or more excluding GST) The description should include the exact purchase price, sufficient description to help identify its correct depreciation rate and the date purchased.

4 Review Your Assets

Identify any assets that were sold, scrapped or written off in your financial year. For each asset sold, scrapped or written off, state the

date. If sold or traded, how much was received or credited?

5 Bank Deposits Clearly identify any bankings that were not sales. State the source of the funds i.e. personal funds introduced, sale of asset, bank loan etc.

6 Drawings

Make sure any money you have taken as drawings is identified. This is critical to ensure

your shareholder’s current account is accurate.

7 Cheque Butts Make sure every cheque butt is completed with an accurate description of what the cheque was used for. If it’s for a private expense or purchase, state “personal”.

8 Bank Statements

If you are supplying bank statements, make sure every entry has a code or a narration. If any entry is blank, it will turn into a

query back to you which increases the time spent on it.

9 Bank statement and accounting codes We can supply you with a customised set of codes for your business transactions. This will assist matching and identifying your transactions.

10 Supply details of all bank accounts

Accountants need the details of all the bank accountants the business may operate, including opening and closing balances –

not just the main trading bank account details.

11 Credit cards 1 Ensure that all credit card statements (even personal ones) that have been used for business related transactions are coded and supplied.

12 Credit cards 2

Recording and supplying details of the source of funds for every credit card payment made.

13 Answering queries When we email or phone to clarify anything you have done, answer promptly while it is still fresh in everyone’s mind. Every delay in answers takes time and can increase cost.

14 Draft accounts 1

When we send these out for review, look at them as quickly as you can and raise any queries

immediately. If queries are raised while it is fresh in mind, it doesn’t take much time.

15 Draft Accounts 2 If you do have queries with the draft accounts, detail these queries via email so as there is a permanent record.

16 In-house accounting

Ensure you’re doing it right. Call on us to help you set up, train and get your own internal accounting system working the way it

should, whether it is manual or computerised.

17 Use us as your first point of contact Use us as your first point of contact to discuss what is the best and most cost effective means of accurately recording all your business’s transactions.

18 Consider on-line accounting systems

Check out BankLink and Xero to record all your transactions. Go to their websites to see what they offer. If these are not for you, look

at MYOB and QuickBooks for your internal software.

19 Orderly document management Provide us with all your annual documents such as bank statements, loan and mortgage agreements, contracts etc. in an orderly, alphabetical or chronological order. Preferably in a hard cover folder.

20 Making historical changes

If you have supplied all your financial information as at 31 March, and then you realise that you need to make some pre balance date

adjustments, please tell us so we can still reconcile the numbers.

21

Know your accounting software Ensure anyone using the software understands both the software and bookkeeping procedures. Reconcile bank accounts once a month and print a hard copy. If trial balances and debtor/creditor reports are not reconciled this adds time for the accountant who has to reconcile them for you.

22 Real estate purchased or sold

Always provide a copy of the sale and purchase agreement plus a copy of the solicitor’s

settlement statement and details of any new loan raised or repaid.

23 General ledger Provide a general ledger (hard copy or soft), even if it means getting your accountant to extract it for you. Many queries can be answered by this one document in the hands of a good accountant.

24 Coding transactions

Don’t let the suspense account build up – many suspense transactions quickly fade from memory and take time to

sort out. If you are not sure what to code a particular transaction to, phone or email us.

25 Income other than sales Make sure that if income has come from sources other than sales, that it is clearly identified i.e. supplying dividend advices, interest certificates, share sale and purchase information etc.

26 Births

Keep us advised of a birth of a child, as it may offer working for families tax benefits.

27 Relationship changes Remember to tell us about any relationship breakdowns or get-togethers during the financial year, which may have child support and/or working for families implications.

28 Repairs and maintenance costs

All repairs and maintenance expenses must have a full description of what was done and when.

29 Web site expenses We need an accurate description of what was done. Some website work may be fully deductible while other work may need to be capitalised and depreciated.

30 Legal fees

Legal fees are not always deductible, therefore we need a full description of exactly what the legal expenses covered.

31 Travel expenses Travel expenses need to be clarified to enable a separation between private and business travel. This is particularly applicable to international travel.

32 Investment income

Providing complete details of any investment income including portfolio statements from your stockbroker/adviser plus any

interest advices and/or dividend warrants will save us time by not having to chase up missing information.

33 Significant decisions When making decisions to purchase, borrow, refinance,

hire or expand, it is important to understand what implications the decision, or even the timing of the decision, can have.

It may seem like a cost saving at the time not to ask us first, however you can avoid wasting many hours and hundreds, even

thousands of dollars by getting professional accounting advise before making any final decisions.

25 Most Common Errors We do a lot of accounts, and the following list has the most common errors/omissions that result in long back-and-forth periods between clients and accountants. Some of these may seem petty, but if you can tidy them up before they get to us it can save you a lot of time, and therefore reduce your fee.

1 Not reconciling bank statements Not reconciling bank statements and your cashbook during the year will just create time delays for you later in the year.

2 Skipping questions

Skipping questions in any checklists you have, particularly in regard to assets purchased or sold and not completing the assets purchased or sold

schedule adds time to a job.

3 Not including all your bank statements Note: common statements that are missed are the ones that overlap either end of the financial year.

4 Not making notes during the year

Not making notes during the year as decisions are made and financial transactions are recorded makes it difficult to

remember what was done and why.

5 Loan documents Loan documents, hire purchase and lease documents can be hard to locate if they are not kept somewhere special when you get them.

6 Not providing GST work papers

We need to understand your GST calculations so we can track your workings and reconcile your

figures.

7 Not informing us of any significant changes Changes to your business, cessation of services changes of business direction and so on. The more we are kept informed about your business, the better our understanding of the transactions we are bringing into your annual accounts.

8 Not answering queries quickly

If this happens it results in multiple pick-ups/put-downs of a job, increasing the time required spent to get it completed.

9 Over-reliance on accounting software We need more information than just what is contained in your in-house accounting information. The extra information enables you to have professionally prepared compliance accounts for legal and tax purposes.

10 Over-reliance on spreadsheets

Research shows that more than half of all spreadsheets that have not been peer reviewed are flawed. Make sure

you also supply supporting work papers and assumptions.

11 Information provided, but messy If you provide information in a shopping bag or a shoebox or a similar type of ‘happy chaos’ it will add time to your job while the accountant sorts everything out.

12 Going back on your balances

If you supply your end-of-financial year balances, and then go back and change something in that year without telling us,

reconciliation is impossible, and can take a long time to uncover.

13 Incorrectly coded bank statements

14 GST not reconciling

This can happen when claims have been made on donations, wages, interest, bank fees, other

financial transaction costs and personal expenses.

15 Receivables/payables not matching trial balance Providing accounts receivable and payables schedules that do not match the figures in the trial balance takes us time to sort out to find out what figures are correct.

16 Wage schedules not reconciling

We reconcile your figures with what IRD has. Note: Often a 5 week month or the first or last week of

the financial year can result in a mismatch.

17 Having a ‘dump’ code (aka: ‘Suspense account’) We all do it (more or less). But these transactions need to be noted, or preferably sorted, before the figures come to us. It needs to be tidied up anyway, but will take us more time to uncover.

18

Deleting prior year unpresented cheques/deposits We need to find out what the expenses or deposit was for

and then reverse it to get the correct opening balances.

19 Coding fixed asset purchases to expenses. Hint: If it is more than $500, it is most likely an asset.

20

Missing GST and FBT workpapers

21 Re-estimating your provisional tax This is fine to do, but you need to advise us when/if you do.

22 Not advising us about a change of vehicle

This includes switching from business to private use. We need to know as it may have FBT implications.

23 Not attaching copies of all tax payments to the end of year checklist.

24 Not sending us copies of any new lease or hire purchase agreements.

25 Not giving us all IRD correspondence you may have had through the year

• These tips are designed to reduce your fees through efficiency – yours and ours.

Note: • We don’t expect perfect

accounting records, after all, you need to be focussing on your business and area of expertise.

Final Note: • If you have a query, even if it feels like a small

‘silly’ one, ask us. A quick call or email now may save us all hours down the track.

• And yes, some of what we ask for may seem trivial, but we need to ensure your situation complies to all its legal requirements, even the petty ones.

THANK YOU Remember, we love seeing businesses succeed. If you want an unbiased, business owner’s perspective on your latest idea/wish-list/purchase/direction, why not contact us? You may be surprised at how we can help your visions become a reality.

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