INCLUDED THIS MONTH; We say goodbye to Julie Congratulations to Megan Potter Read of the month – The power of cash flow forecasts Noticeboard Careers with CooperAitken download here

At some point in it’s lifetime, every small business suffers from cash flow problems. The trick is to think ahead and figure out when these problems are going to arise, so you don’t have to unexpectedly postpone a purchase or hurriedly seek out additional finance. This is where cash flow forecasts come in. To effectively manage your cash flow, essentially you use your sales and expenses figures to calculate your cash flow figures before they happen. Then you can plan to limit the impact of a cash drought before it arrives, so you can still pay your staff, the bank and your suppliers. The importance of cash flow forecasts Cash flow forecasts are used to predict your business’s future financial position for the period ahead, from three months to a year in advance. Your forecast allows you to see what money you expect to be paid into the business and the amount you’ll need to pay out. It’s a useful tool to help you manage your business more effectively. If we used a typical retail store as an example, you may see high sales over Christmas, and then a traditional slump after the New Year Sales, your cash flow forecasts would show high income in December and much lower income over the following two months. Your forecasts would also show stock purchased on a 30 or 60-day term ahead of the festive Christmas rush in November and December would need to be paid at the end of January and February. If you racked up record Christmas sales, there might be a strong temptation to splash out and buy that big-ticket item you’ve been dreaming of – but can you really afford it? A quick look at your cash flow forecast will probably tell you that you need to park the thought of a new car or holiday, reduce your drawings and hold on that big spend for now. Otherwise, you’ll have no money left to pay for the stock you sold in December. If you’re more pragmatic and less inclined to impulse spending, your forecast will also be able to tell you if you’ll generate enough profit to cover the costs of new refurbishments or hiring a new team member. Say your forecast sales figures for March and April will be down on previous years, as a result of continued low national economic growth, the global financial turmoil or the arrival of a new competitor in the market. You might need to arrange short-term finance to tide you over or find ways to increase sales to cover your monthly overheads and operating costs. In summary, your cash flow forecast gives you a future view into your business finances. It helps you identify cash flow problems before they appear and allows you to make informed business decisions. Putting your forecasts to use Apart from giving you a fairly good indication of your likely cash position at any point in time in the year ahead and alerting you to potential cash flow problems (which enables you to act in advance, rather than react), your cash flow forecasts can be used to model your future plans. Once you have your forecasts set up, you can use them to model “what if” questions about your business to help you make the best decisions for your business. If you need some support with your cash flow, talk to our team. get in touch

Would your business still thrive, or would it suffer a catastrophic failure if you suddenly stepped away? It’s tough to remove yourself from the day-to-day operations when you’re passionate and busy. However sudden accidents, illnesses, or family emergencies can – and will – happen and you need to be able to step back knowing your systems are robust enough to cope. For your business to work for you, you need to make yourself replaceable. Large corporations have plans in place to mitigate what’s known as ‘Key Man Risk’. But when you run a small business, who is the backup?  The more you can train and empower your team to perform the business’s essential daily functions without micromanagement, the closer you’ll be able to enjoy a lifestyle business. Establish repeatable and scalable support infrastructure to run the daily operations and create a great team that you can lean on. Your staff need a common purpose – knowing why what they’re doing matters – as well as clear expectations around their roles. By creating a suitable work environment, where employees both individually and as a team are more efficient and likely to enjoy what they do, you’ll breathe easier knowing they have your back (and your business) in an emergency. Finally, it’s important to know what the business looks like without you. An exit strategy is often thought of as the way to end a business — which it can be — but in best practice, it’s a plan that moves a business toward long-term goals and allows a smooth transition to a new phase. That may involve re-imagining business direction or leadership, keeping financially sustainable, or pivoting for challenges. Top Tips: No one is irreplaceable – Challenge yourself to step away for a week. Which systems fall over? Which procedures get left hanging? Which duties get ignored? Go cold turkey as a test case for the time you may have to leave your business in the hands of others.Embrace innovation – Get systems that are simple, streamlined, effective and can be used by multiple key team members. Make sure anyone can log in and see exactly what’s needed for what reason at any time.Recognise the value you’re creating – A business that doesn’t rely on its owner is worth a lot more when the time comes to sell or pass the reins to someone else. Strong plans and systems recognise the true value of a business and provide a foundation for future goals and new directions, so if you want some help putting together solid business plans and systems, get in touch with our team. get in touch

We are committed to finding innovative ways to improve the way we do business with you.  As part of our ongoing development, CooperAitken is enhancing our systems and procedures.  Going forward, you will notice changes to how our invoices look and in the way we communicate with you about your account with us. Where you prefer to receive an electronic statement, these will now be emailed to you along with the copy of the invoice. We also now offer more options for you to pay your invoices: Internet banking Monthly Instalments – subject to credit criteria Credit Card – we now offer payment by Visa or Mastercard online Other Options – please contact our credit team as below for other payment options: Hazel Miller     hazel@cooperaitken.co.nz     027 262 5962 Ali Little            ali@cooperaitken.co.nz          027 212 2866  To pay online, head over to our payments page or click on the link at the bottom of your invoice. Another change you may notice is during the month when we are completing different pieces of work, we will invoice each piece of work when it’s completed rather than at month end.  Overall, the total fee will be the same and summarised on our statement. If you have any questions around our new systems, please do not hesitate to contact our office. make a payment

INCLUDED THIS MONTH; Read of the month – Could your business survive without you? Certificate of Public Practice – Congrats Chloe, Gerrie & Sharlotte Upcoming Sir John Kirwan Event The end of Banklink NZ Dairy Industry Awards Careers with CooperAitken Proud to Support download here

INCLUDED THIS MONTH; New Trust Disclosure Rules: What you need to know, by Gerrie Jacobs Chartered Accountants ANZ team achievements Team News Quiz & Cocktail Team Night Careers with CooperAitken Proud to Support download here

The 2020/2021 year will always be remembered for the worldwide Covid-19 Pandemic which affected people from all walks of life. Whilst the virus was slowly spreading two significant tax changes happened in New Zealand, specifically: The Government proposed new trust disclosure rules and passed it into law five days later with little to no consultation, almost as if by stealth The Government also passed legislation under urgency to increase the top individual income tax rate from 33% to 39% for personal income in excess of $180,000 Both changes are applicable from 1 April 2021. The Government’s motivation behind the new disclosure rules has a direct correlation to the use of a trust as a tax planning tool. The new rules will enable Inland Revenue to establish to what extent trusts are used to effectively avoid the 39% tax bracket. The new rules will additionally enable the Inland Revenue to share the disclosed information with overseas tax authorities and other New Zealand Government Departments such as the Ministry of Social Development. What do the New Disclosure Rules entail? In short, from the 2021 – 2022 income year  all New Zealand Trusts  have to: Disclose a laundry list of additional information Prepare financial statements File a tax return Complying Trusts that are non-active with interests only income of less than $200 per annum are exempt from the above three requirements. Per Inland Revenue legislation the additional information is provided with the IR6 Trust Tax Return in the form of: IR6S – Relates to Settlor & Settlements (Current Year Settlements) IR6B – Relates to Beneficiaries details IR6P – Relates to the details of any person that has the power to appoint or dismiss a trustee, to add or remove a beneficiary, or to amend the trust deed The additional information required to furnish the above forms include but is not limited to: The amount of settlements made to the trust in the income year which includes cash, financial arrangements, land, buildings, shares/ownership interest and settlements that have been valued at zero. The full name, date of birth, jurisdiction of tax residency and IRD number or Tax Identification Number (if tax resident in another country) of all settlors. The full name, date of birth, jurisdiction of tax residency and IRD number or Tax Identification Number (if tax resident in another country) of all beneficiaries as well as any movements in beneficiary current accounts which include: The Opening balance Distributions (accounting income, trust settlement, capital, use of trust property for less than market value, distribution of trust assets and forgiveness of debt) Amounts withdrawn or enjoyed from the trust The Closing balance of the amount owed to the beneficiary or owed to the trust Over and above the non-active trusts that are exempt of the new rules, the following trusts are also exempt: Estates still under administration Foreign Trusts Charitable Trusts Trusts that are eligible to be Maori Authorities Widely-held superannuation funds Exempt employee share scheme Debt funding special purpose Lines Trusts How does it affect you? Trustees have to spend more time than ever before on the administration of a trusts, it is also likely that there will be a large increase in the compliance cost for trusts because a lot of the information required by the new rules is not always readily available. We are finding that the 2022 year is particularly challenging as all of the required information not only has to be sourced, it also needs to be entered into the prescribed Inland Revenue provided IR6 returns. Income tested benefits you receive may be affected in that Inland Revenue will now have access to not only taxable income distributions but also non-taxable distributions which are both taken into account for testing purposes. An example being working for families. Inland Revenue has the power to request the same information from the trust for the previous eight years should they find anything of concern during their review of the 2022 income tax returns as filed. In summary we believe the impact of the new disclosure rules are significant on trustees and we urge you to contact us if you would like to discuss your trust disclosure obligations. download a copy Gerrie JacobsAssociate, CA P: 07 889 7153E: gerrie@cooperaitken.co.nzM: 021 284 6444

INCLUDED THIS MONTH; Did Dairy Farmers actually make a big profit in 2022? By Coral Phillips 2022 Herd Scheme Values Directors Strategic Retreat Law change for incorporated societies Matamata office Proud to Support download here

As the 2022 financial year comes to a close for Dairy Farmers, the record high milk payout forecast from all dairy companies is a positive to celebrate.  But the question needs to be asked, has the high payout resulted in more cash in the pocket?  Also of concern, what are the tax implications?  Was it in fact a good year for our dairy farmers and what will future cashflows look like for the 2023 year. High demand for our products and good returns overseas along with excellent grass growth in the spring and early good production levels made for much positivity in the sector.  The hype of a high payout for 2022 continued to grow through the season when Fonterra forecast it’s highest ever of $9.60 midpoint per kilogram.  However, many farmers did not get too excited as they had clear memories of the previous high in 2014 of $8.40, which was quickly followed by a drop to $4.40 and subsequently $3.90 the following year. Also, for many farmers, the autumn drought has been the worst they have seen.  Intermittent skiffs of rain gave hope of more to come.  Greater quantities of supplements were fed to push out the drying off date but was mostly all in vain.  The 2022 forecast also took a small downward turn on the back of decreasing world demand for product despite a favourable exchange rate for exporters, currently under $US 0.65. Meanwhile an inflation rate of 6.9% has been announced for the March quarter.  That is bad enough.  However, farm inflation is running much higher and has created a lot of nervousness.  For example, the palm kernel price has increased by up to $200 per tonne.  Fertilizer has increased and fuel prices continue to soar.  The 2022 Federated Farmers and Rabobank remuneration survey shows an increase of approximately 15% in employee’s gross income  since the previous survey two years ago largely due to a shortage in the labour market due to problems with immigration, and as everyone is aware, bank interest rates continue to increase with the Official Cash Rate (OCR) now at 2.00%, the highest since 2016. These increases in expenses all counteract the positive of the increased milk price. Many farmers will feel cash is tight after repaying bulk debt, and potentially having purchased the long awaited new tractor.  Using cash on capital items does not mean less profit, but simply less cash in the pot left to pay the tax bills.  Therefore, it is important to quantify the effect on the bottom line. To analyze the effective payout in the 2022 tax year, we need to consider the 2022 advance rate and the previous year’s deferred rate, using a Fonterra farmer as an example.  In the 2022 tax year the advance rate was $7.70 plus deferred milk from 2021 at $1.49 plus 30c dividend which gives an effective payout of $9.49.  The 2021 final payout was $7.54, but when adjusting for the tax year, an advance rate of $6.05 plus deferred milk from 2020 year at $1.34 plus a 10c dividend, gave an effective payout for tax purposes of $7.49.  This is $2.00 per kilo more for 2022 compared with 2021.  This is effectively extra income of $300,000 for a dairy farmer producing 150,000 kg of milk solids – but how much of this is profit? The majority of dairy farmers have a May balance date, so with their next provisional tax payment due at IRD on 28 June, this is a good time to review the financial year profits.  In addition, as the 2023 budgets are currently being completed, it is important to accurately forecast the tax payments which will be due.  No one likes to think about tax, but it is a cost which we at CooperAitken can help to plan for.  If funds are short, it is not a good idea to simply not pay the tax that IRD are expecting.  Better options include agreeing to an installment arrangement with IRD before the due date.  Alternatively, tax pooling is an excellent mechanism to lock in lower interest rates than what the IRD will charge and is simpler than increasing the bank overdraft limit.  The use of Income equalization can be another option. It’s a great idea to get your accountant to prepare an estimate of the 2022 profit before provisional tax is due on 28 June.  This will help with the 2023 budget, show where the funds are required and give peace of mind.  If any of the specialist rural team at CooperAitken can help, please contact us. download a copy Coral PhillpsDirector, CA P: 07 889 7153E: coral@cooperaitken.co.nzM: 027 285 1106

INCLUDED THIS MONTH; The long and overwhelming to-do list of a dairy farmer, by Gavin Haddon. 31 March Balance Date New Financial Year ACC CPX Renewals Using the correct tax code Proud to Support download here