McLEAN AND CO. Chartered Accountants

Accounting          Taxation         Business Advice and Development Assistance           Audits                             

 P.O. Box 10 , Clive         133 Main Rd, Clive           Tel. (06) 8700952          Fax. (06) 8700955 

Email murray@mcleanandco.co.nz                                  Website www.mcleanandco.co.nz

 
 
EMAIL NEWSLETTER  JULY 2008
 
 

Welcome again to the McLean and Co. Newsletter in which we discuss current taxation and business matters. We trust you find it informative.  

 

NEW CLIENTS

We are happy to accept new clients.  We would be happy to assist colleagues and acquaintances as new clients.

 

INDEX

  1. Tips for Paying Your Mortgage Off Earlier

  2. Business Activity Remuneration

  3. Companies Office Announces Changes to Filing Annual Returns

  4. Pricing for Profit

 

 

 

TIPS FOR PAYING YOUR MORTGAGE OFF EARLIER

 The following examples are based on a $250,000 mortgage at 9% p.a. for a term of 30 years.

Pay your Mortgage fortnightly instead of monthly

Increase your regular mortgage payments

Shorten your loan term

Pay Lump Sums off your Mortgage

Keep Mortgage Payments the same if the interest rate drops

 

BUSINESS ACTIVITY REMUNERATION

Sole Trader

If you are a sole trader you dont pay yourself a wage- you simply take money from the business when you need it for personal use. These takings are called "drawings".  Drawings are not regarded as a business deductible expense when calculating profit.  At the end of the year the full taxable profit or loss from the business is assessable to the sole trader.  The sole trader can engage other opersons and pay wages (and deduct PAYE). This is a business deductible expense.

Partnership

At the end of the year the net profit (without allowing for partners drawings) is shared in full between the partners.  The partners then pay tax on their share of the profit in their individual tax returns.  As with a sole trader, the amount the partners take as drawings can be more than their share of profit, and the drawings are not tax deductible.

A partner who works for the partnership can be paid a salary with PAYE deducted if there is a contract of service. The contract must be written and agreed by all the partners. Such wages would then be a deductible expense in the partnership Business Accounts. Partners paid in this fashion are not then eligible for the distribution of profits or losses as described above.

Company

Companies can distribute money in three ways:

 

 

COMPANIES OFFICE ANNOUNCES CHANGES TO FILING ANNUAL RETURNS


As part of a wider shift towards electronic filing, the Companies Office is no longer accepting manually filed annual returns.

The shift is being undertaken to enable the New Zealand business community to take advantage of the many benefits associated with online filing such as the lower cost of compliance.

The Companies Office will no longer be distributing paper annual returns to companies in their annual return filing month. However, companies that have not provided an email address will continue to receive their reminder by post.

 

PRICING FOR PROFIT

  Some typical methods of pricing are::
 

 

Follow competitors or the market
The problem with following competitors is that you don't always know how they calculated their price. It may be unsustainable in terms of the costs to deliver the product or service.

You may win sales from them in the short term but unless you develop a better way of pricing you are likely to go out of business eventually if the price doesn't cover costs.

They may have cash reserves to cover the shortfall between Costs and Price for a while and you may not. They may be able to ‘sit it out' until you go out of business trying to compete and collect all your customers later. 

 

Charge a bit more than the product or service costs
The  question here is ‘how much does the product or service cost?'.  

Your costs include your Cost of Goods Sold (direct product and service costs) plus your  overheads such as administrative staff, advertising, stationery etc.

Break-even analysis is the practice of calculating how much Revenue you need to cover COGS and Overheads. It is important in business to know your ‘Break-even situation'.

 

Charge as much as you can get away with
This is a great strategy so long as it covers your COGS and Overheads. It may work at first but if you don't keep a close eye on COGS and Overheads and they ‘creep up', it may turn out to be unprofitable in the end.

 

Charge what you think it's worth
Worth can mean different things to different people. What the customer thinks it's worth may be quite different to your perception.  You still need to keep a close eye on costs to ensure your margin is not being eroded by increased costs.

The issues relating to Price are as follows:

In order to get the price right you need to:

 

Keep the Price Right
Price increase can be a very controversial subject. Many business owners fear increasing prices because they think customers will go elsewhere. 

This scenario can have a positive impact on both profit and cash-flow. It is often more difficult to increase Revenue than to increase Prices. Many customers don't even notice a small increase and fully accept one to cover CPI rises. For many businesses failure to incorporate this into their price means they are absorbing increased costs and eroding margins.

 

 

McLEAN AND CO KNOWLEDGE CENTRE AND ARTICLES ABOUT TAXATION AND BUSINESS IN GENERAL PRESS HERE FOR BUSINESS STARTUP KNOWLEDGE CENTRE PRESS HERE
FOR INFORMATION ABOUT COMPANY INCORPORATION PRESS HERE FOR PREVIOUS MONTH EMAIL NEWSLETTERS PRESS HERE

FOR PROPERTY INVESTMENT AND TAX INFORMATION PRESS HERE

FOR FRANCHISE INVESTMENT AND TAX INFORMATION PRESS HERE


The information provided in this email newsletter is for informational purposes only.   McLean and Co. accept no responsibility for the opinions and information expressed in the information provided and it is provided "as is" without warranty of any kind.    The user assumes the entire risk as to the accuracy and use of this document.   Readers are asked to seek professional advice pertaining to their own circumstances.    The McLean and Co. email newsletter may be copied and distributed subject to the following conditions:
  • All text must be copied without modification and all pages must be included.
  • This document must not be distributed for profit.    

 

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