Even with a calculator close to hand, a few shortcuts to help you calculate Goods and Services Tax (GST) are real handy.

The whole business of dividing or multiplying by can get very ugly indeed, so here’s Smarts handy hints for working out GST content in New Zealand.

Think of your Balance Sheet reports as a set of before-and-after photos, with your Profit & Loss report telling the story of what happened in between.

Balance Sheet:

Gives you a snapshot of the value of assets, liabilities and equity at any one point in time.

Profit & Loss report:

Summarises income, expense and net profit over a specified period of time (e.g. a month or a year).

Cash Flow:

Examines the cash flowing in and out of your business.

Trial Balance:

Lists the debit and credit balances of all general ledger accounts at any point in time.

Click here to get regular financial statements and management reports for your business.

Understanding debits and credits is enough to test the patience of a saint if it’s not really your cup of tea.

How can bookkeepers and accountants make head or tail of these, you may wonder?

No sweat, with this helpful little table you can get your debits and credits spot on, every time.

Click here if you need some Smart help with your debits and credits.

Forget birthdays, anniversaries and Christmas and instead, punctuate your diary with a list of tax deadlines.

Here’s a summary of the deadlines that every New Zealand bookkeeper needs to know about in order to stay out of trouble.

New Zealand bookkeeping deadlines

GST return - 28 days after the end of each reporting period, with the exception of the November period, when the deadline is mid January, and the March period, when the deadline is the first week in May.

PAYE and KiwiSaver - 20 days after the end of each month.

Click here to generate a list of IRD due dates that apply specifically to you.

Click here for help with GST and PAYE Returns

Understanding the difference between account types is the secret to coding transactions correctly.

Here’s a bit of a guide to help explain the difference between assets and liabilities, equity and income, and all that accounting mumbo jumbo.

Current asset:

Anything that a business owns that can realistically be converted into cash within the next 12 months, such as stock and work in progress.

Non-current asset:

A physical asset such as office equipment, land, buildings, computers or motor vehicles, that isn’t expected to be converted into cash within the next 12 months.

Current liability:

An amount owed by the business that is due within the next 12 months, including scary stuff like company credit cards.

Non-current liability:

Anything you owe that isn’t due to be paid out within the next 12 months, like hire purchases or bank loans.

Equity:

The ‘interest’ that shareholders or owners have in the business, including both funds contributed by the owners (the shareholders)  and the retained earnings (or losses) that have built up over time.

Income:

Money generated from sales to customers or returns on investments.

Cost of sales:

What it costs in raw materials, supplies or labour to make the goods that you sell (also called cost of goods sold).

Expenses:

The day-to-day running costs of your business, including things like advertising, bank charges, office supplies, electricity,  motor vehicle expenses, rent, telephone expenses and wages.

1. Reconcile every bank account at least every month.
2. Check for old or stale transactions.
3. Look for pre-dated or future-dated transactions.
4. Clean up the accounts receivable list – in other words check who owes you money and follow up regularly.
5. Do a sweep through the accounts payable list to see who you owe, what and when.
6. Check account codes on all transactions.
7. Reconcile your GST liability accounts.
8. Make sure your accounts receivable and payable reconcile back to your balance sheet.
9. Give stock / inventory the once over.
10. Reconcile all payroll, PAYE and KiwiSaver liability accounts.
11. Scan transaction reports for weird stuff or mistakes.
12. Read through the financials and check they make sense.

And if that makes no sense at all – get help!

Click here to enquire about Bookkeeping services

A good bookkeeper cares

A good bookkeeper cares when something doesn’t balance and gets upset when stuff goes missing.

A bookkeeper cares that the financial statements make sense, and feels responsible when it comes to getting customers to pay on time.

Good bookkeepers are very detail oriented

Good bookkeepers are very detail oriented and superb organisers, have a natural talent for working with numbers, are able to use effective time management practices, and be up to date with technology.

The very best bookkeepers are experienced

The very best bookkeepers are those who have been working with a variety of businesses for many years, and even better is a team of experienced bookkeepers.

They may have a higher price than a brand new bookkeeper but you are paying for experience, accuracy, and your own piece of mind.

Experienced bookkeepers will be able to prepare your reports and handle your paperwork quickly and accurately. You can’t afford to have someone that might make a mistake because in bookkeeping even a decimal point entered into a form incorrectly can cause  great trouble.

A good bookkeeper, in other words, is worth his or her weight in gold.

Click here to contact the Smart team of bookkeeping specialists

At the very least customers and suppliers can leave. Inland Revenue and your bank will certainly take notice too, and this can have serious implications.

If you’re aware of the problems that simple accounting errors can cause, you have a head start on avoiding the worst mistakes.

Here are  the most common accounting errors causing businesses problems, so take whatever measures are necessary to avoid them:

1. Not having accounting procedures

Many business owners think they can “just wing it” when it comes to accounts, but even the most detail-oriented owner can forget to instruct employees or contractors on the rules for their business.  Setting the rules, putting procedures in writing and making sure each step is followed, every time reduces the chances of skipping something important and protects your business even if you’re too busy to oversee every single accounting transaction.  Include everything from the way to accept, document and deposit payments, pay bills and every step in between – as well as how to deal with routine tasks like payroll and GST.  That will make it possible for any employee or contractor to quickly and easily record transactions the right way… the first time.

2. Making data entry errors

Accidents happen. A $500 payment entered as $50 or transposing numbers – $432 instead of $423 – so check and double check every entry every time. A certain level of data entry errors are just par for the course, however the number one way to prevent data entry errors from hurting your business long-term is reconciliations.  Make sure that accounts are reconciled against bank accounts frequently and that any accounts requiring frequent data entry are routinely reviewed and reconciled – before month end and by another person if possible.  Don’t overlook even the smallest discrepancy. Small errors don’t go away – they just become bigger problems.

3. Working without a budget

Most business owners think that because they keep an eye on every dollar that goes out the door that they don’t need a budget.  Wrong!  Budgets are the key for understanding where your business is versus where it could be.  Budgets don’t have to be complicated, but they do need to be drawn up. Just look at a few months’ worth of bills and deposits to create a starting point. Then refine as you go along. Any business owner who dismisses having a budget because he or she “watches expenses” is making a serious mistake. You can’t control overspending or invest a surplus if you don’t know they exist.

4. Not recording enough detail and failing to categorise

All money coming in and going out of your business can be roughly categorised into a few general categories e.g. sales, travel expenses.  If transactions aren’t recorded with enough detail, some of the best business intelligence you need as the owner to keep the business running profitably is lost.  The key here is setting up your initial chart of accounts and making sure that business transactions are properly categorised. That will save you a lot of time and trouble down the road.

5. Disorganised filing

It’s sad to say, but half the battle is simply making sure that documents are properly filed.  Disorganisation with receipts, bank statements and other documents can create problems with accounting, GST and PAYE.  But a hidden cost – one that probably costs businesses more than many other errors – is simply the hours lost in searches for that one tiny little piece of paper!  Paperwork is the bane of any business, but clearing that box out on a daily basis – and filing it, instead of dumping it into a “to be filed” stack – can make a big difference.

6. Playing fast and loose with petty cash

Small expenditures like picking up a few office supplies or buying a pizza for the team are easy when you have cash on hand. The amount of money seems small, but petty cash is one of the most easily abused assets of your business.  If controls aren’t established and regular reconciliations aren’t performed, petty cash can quickly slip away.  Petty cash usually flies under the radar of auditors, owners and even many employees, and it’s an easy way for unscrupulous employees to swipe a dollar here or there. Treat petty cash like a cash cheque. Handle with care. Keep it under lock and key, authorise only a few people to use it and require receipts for everything.

7. Forgetting to back up

Think of backups as insurance.  It’s likely they’ll never be needed, but the one time you do they’ll be invaluable. So establish an automatic backup of your accounting program. A web-based system such as Xero is particularly useful because it stores your information off-site, making it accessible in the event of a natural disaster, fire or other emergency

8. Using free or inexperienced help

It’s tempting, particularly for small or start-up businesses, to accept free help from the wife, advice from a sister-in-law who’s a bookkeeper or from the neighbour who has done accounts for someone else’s business. But don’t be pennywise and accounting foolish – and don’t put all your eggs in one basket with one person. Select a team of financial experts who know how to navigate the unique world of accounting for your business.

These simple actions can save your business big money.  Click here for help putting these into place in your business accounts.

Ensure no one person has control over all parts of any financial transaction.

• Require all purchases, payroll, and bill payments to be authorised by a designated person.
• Separate handling funds (receipt and deposit) from record keeping (recording transactions and reconciling accounts).
• Separate purchasing tasks from payables tasks.
• Ensure that the same person isn’t authorised to both write and sign a cheque.
• When opening mail stamp cheques “Not Transferrable” immediately.
• Require supervisors to approve employees’ time sheets before payroll is processed.
• If your team is so small that you can’t separate duties, require an independent check of work being done, for example, by outsourcing accounts and payroll preparation.
• Require accounting and payroll employees to take holidays.

Reconcile bank accounts every month.

• Require the reconciliation to be completed by an independent person who doesn’t have cheque signing abilities.
• Examine bank statements and cancelled cheques to make sure cheques are not issued out of sequence.
• Initial and date the bank statements or reconciliation report to document that a review and reconciliation was performed and file the bank statements and reconciliations.

Restrict use of credit cards and verify all charges made to credit cards or accounts to ensure they were business-related.

• Limit the number of business credit cards and users.
• Establish policy that credit cards are for business use only; prohibit use of cards for personal purposes with subsequent reimbursement.
• Set account limits with credit card companies or vendors.
• Require employees to submit itemised, original receipts for all purchases.
• Examine credit card statements and corresponding receipts each month, independently, to determine whether charges are appropriate and related to business.

Provide Directors oversight of financials.

• Monitor your financial records on a regular basis, comparing actual to budgeted revenues and expenses.
• Use independent bookkeepers to process accounts and payroll, and audit accounts prepared by employees.

Have written policies for the following:

• Cash handling
• attendance and leave
• expense and travel reimbursements
• use of business assets
• purchasing guidelines
• petty cash
• conflicts of interest

Ensure that business assets such as vehicles, mobile phones, equipment, and other resources are used only for official business.

• Examine expense reports, credit card charges, and telephone bills periodically to determine whether charges are appropriate and business related.
• Maintain vehicle logs, listing the dates, times, mileage or odometer readings, purpose of the trip, and name of the employee using the vehicle.
• Periodically review the logs to determine whether usage is appropriate and business related.
• Maintain an equipment list and periodically complete an equipment inventory.

Protect petty cash.

• Limit access. Keep funds in a locked box or drawer and restrict the number of employees who have access to the key.
• Require receipts for all petty cash with the date, amount received, purpose or use for the funds, and name of the employee receiving the funds listed on the receipt.
• Reconcile the petty cash fund before replenishing it.
• Limit the petty cash amount to a total that will require replenishment at least monthly.

Protect cheques.

• Prohibit writing cheques payable to cash.
• Deface and retain cancelled cheques.
• Store blank cheques in a locked drawer or cabinet, and limit access to the cheque book.
• Ensure that blank cheques are not pre-signed.
• Require that cheques are to be signed only when all required information is entered on them and the documents to support them (invoices, approval) are attached.
• Require two signatures on cheques above a specified limit.
• Mark invoices “Paid” with the cheque number when cheques are issued.

Protect cash and cheques received.

• Ensure that all cash and cheques received are promptly recorded and deposited – ideally the same day.
• Issue receipts for cash, using pre-numbered receipt book.
• Conduct unannounced cash counts.
• Reconcile cash receipts daily with appropriate documentation (point of sale, cash reports, receipt books etc.)

Avoid conflicts of interest.

• Have a written conflict of interest and code of ethics policy and update it annually.
• Require that related party transactions be disclosed and be approved by the Owner/Directors/Board.
• Require competitive bidding for all major purchases and contracts.
• Discourage the hiring of relatives and business transactions with Board members, employees or their family and friends.

Click here for payroll or accounts help

There are four main areas to consider:

1. Separation of duties
2. Authorisation to approve payment
3. Security of assets (e.g. stock)
4. Review and reconciliation

So here are some best practice tips for each area:

Separation of duties

Ensure that payment documents are processed correctly by having different people involved in the payment process. This principle is called separation of duties.

Best practice is to have different people:

• Approve purchases
• Receive ordered materials
• Approve invoices for payment
• Reconcile financial records
• Review financial records

Potential consequences if duties are not separated:

• Erroneous or fraudulent invoices approved for payment
• Unauthorised payments made to non-existent vendors

Outsourcing part of your accounts and payroll processing seperates these duties from internal employees.

Authorisation and approval

Ensure that you authorise, review, and approve invoices for payment based on signed agreements, contract terms, and purchase orders.

Best practices:

• Review and update authorised signatories periodically.
• Obtain pre-approval for any consultant agreements.
• Verify receipt of goods and services to the contract, purchase order and invoice information.
• Reconcile ledgers for accuracy of recorded transactions.
• Monitor that invoices are paid in a timely manner.

Potential consequences if accountability does not exist:

• Unauthorised, unnecessary, or fraudulent payments or purchases
• Unauthorised work performed by vendors
• Loss of supplier discounts due to late payments
• Improper charges to incorrect accounts
• Conflict of interest when paying an employee for outside work

Security of assets

Once you receive your goods purchased, secure them in a safe location. To account for resources, periodically count your inventory and compare the results with amounts shown in operational, warehouse, point of sale and accounting records.

Best practices:

• Secure goods received in a restricted area.
• Restrict inventory access to appropriate staff only.
• Lock up goods and materials, and provide key or combination to as few people as possible.
• Keep inventory records and periodically calculate opening and closing inventory amounts.

Potential consequences if your assets have not been secured:

• Theft of goods
• Inventory shortages / stock losses
• Additional costs incurred for replacement of goods

Review and reconciliation

Your reconciliations confirm that you’re paying for approved purchases and are being billed correctly. Perform regular bank account and ledger reconciliations to catch improper charges and validate transactions.

Best practices:

• Review vendor invoices for accuracy by comparing charges to purchase orders.
• Verify that the goods and services purchased have been received.
• Perform daily, weekly or monthly bank account reconciliations.
• Perform monthly reconciliations of operating ledgers to assure accuracy and timeliness of expenses.
• Perform monthly review of profit and loss (month, year to date, compared with previous 11 months, actual compared to budget) and balance sheet.

Potential consequences if review and reconciliation is not performed:

• Improper charges made to your business
• Costs charged to incorrect accounts
• Payments made for items or services not provided
• Penalties for not paying for goods or services received on time

Click here for help with reconciliation of accounts and report production.