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The Top 10 Small Business Accounting Questions Answered

Danny Pritchard
New Zealand is a proud nation of small business owners and savvy entrepreneurs. Defined as those with fewer than twenty employees, there are approximately 530,000 small businesses in New Zealand representing 97% of all firms. They account for 28% of our country's employment and contribute over a quarter of New Zealand’s gross domestic product. As the foundation of our economy, these small businesses should have access to the same financial advice as the big players but often find themselves battling through income tax returns, GST returns, bookkeeping and Inland Revenue communications all on their lonesome. For the most part, it’s because they haven’t been set up with the basic tips, tools or financial guide to do the job right. As the small business accounting experts, we’ve pulled together the top ten questions asked by entrepreneurs on their path to finding the perfect financial support. Have a squiz and if you’ve still got any niggling queries or are ready to partner up with an affordable accounting service, schedule a call.

First thing's first, what does a small business accountant actually do?

Don’t worry, our mums still don’t really know what we do either. A small business accountant's fundamental role is to guide you through the financial elements of your business to ensure you are technically compliant, boost your revenue and save you money where possible. Because who wants to pay Inland Revenue more income tax or GST than they legally need to, am I right. 

Depending on your level of requirement, this can include preparing financial statements and reports for clients or company management, advising on the financial aspects of your company such as budgets, tax and cash flow, filing income tax returns and GST returns with Inland Revenue, processing payroll and providing year round bookkeeping services. 

With a mixture of specialty skills and accounting technology, they remove or automate administrative tasks that often serve as distractions from your core business and allow you to do your thing with clarity and confidence. Get all that mum?

So, when should I hire a small business accountant?

Those in need of a small business accountant are generally contractors, small business owners or freelancers. Some have a pretty good handle on things and just need assistance with their end of year income tax return, others have a significant financial situation on their hands such as buying a home, or perhaps you’re unsure if your accounting practices are compliant and are struggling to keep up with the financial side of things.

If you’re applying for a small business loan, buying a house, seeking government support such as maternity leave, subsidies or grants, selling your business, looking for investors, validating your numbers or working through a legal situation, a quality small business accountant is an essential. They can also help you handle growth transitions such as hiring employees, acquiring other companies or taking on more office space. 

If none of the above is currently relevant but you have registered for GST, then now’s a good time. GST requires a minimum turnover of $60,000 in the last twelve months or a projected turnover of $60,000 in the next twelve months, which is a good baseline for requiring an expert. 

For more information, our friends at Xero have a helpful article about identifying the right time to make the move. And if you’ve found yourself nodding to any of the above, schedule a free catch up with us.  

What is the average cost of an accountant?

Good question, New Zealand accountant rates generally range from $50 per hour for basic bookkeeping services, up to $200 per hour for income tax returns and around $250 per hour for specialist advice. The jump is due to a CAANZ (Chartered Accountants Australia and New Zealand) or ATAINZ (Accountants and Tax Agents Institute of New Zealand) member being required.

Anyone can call themselves an accountant in New Zealand, so choosing an expert with one of these formal affiliations will pay off in the long run. Both CAANZ and ATAINZ members require certain qualifications and work experience, will uphold a strict code of conduct and maintain current technical knowledge through ongoing education - which is essential in the ever changing world of tax law.

For a small business or start up, these costs can be a little intimidating which is the reason why Bring On Monday provides a selection of accounting services for less. We believe that all small businesses should have the same access to quality financial support as the big guns, so have designed our systems so everyone can afford them - without any of that corner cutting. 

On the off chance you find a cheaper all-inclusive accounting solution as good as ours, we’ll beat their price by 10%. Yes, that was a shameless advertisement for our company.

What type of advice and support can I expect?

A small business accounting firm worth their salt should go above and beyond the financial basics to provide a service that improves your life. The first step should be to work with you to identify and understand your business goals, put an action plan in place, check in regularly to make sure you’re on track and offer solutions and reminders when you’re not. 

Some would say a good accountant is not an accountant at all, but a long-term business partner with a financial mindset and passion for your small business only second to yours. 

From there, they could offer the income tax return essentials at the end of each year or a more hands on approach including business support through the year, tax minimisation, preparation of your financial statements, your final income tax return and liaising with the folks at IRD in regards to taxation.

Next rung up is an ongoing bookkeeping service with elements such as a monthly account health check, financial reports, accounts payable and receivable, record management, reconciliation, bill creation, support and performance tracking. 

Do I need an accountant for my startup business?

Whether you’re a startup or established small business, if your goal is to grow then it’s important to get your financial foundations right as early as possible. Establishing your goals and setting yourself up with the right accounting systems and support from the get-go will save a fair few grey hairs in the long run and provides a platform for efficient evolution and time maximisation. Backtracking and rebuilding isn’t impossible, but wouldn’t you rather just do it right the first time? 

If you are registered with the companies office there’s a decent chance you’ll need support with your end of year income tax returns and GST returns at the very least, but a good accountant will offer a complimentary call or catch up to learn about your business and make sure support is required. Speaking of, you can book a free thirty minute consultation with your friends at Bring on Monday here. 

How do I file a tax return for my small business?

All businesses are required to file an income tax return at the end of their financial year to declare all gross income the business received during that year. For most New Zealand businesses, this is 31 March. 

An unregistered company such as an individual, soletrader, contractor or freelancer is required to complete an Individual Income Tax Return or IR3. IRD will provide you with the details of income you received that had tax previously deducted like salary or wages. If you complete your tax return through myIR, these details will automatically be included. Extra information might be required such as any untaxed income, rental income, bright-line property sale information and Working for Families or student loan payments. 

You don't need an accountant to do this, but it can help to have an expert by your side to offer advice, support or translate any of those techy questions to ensure you’re compliant and not paying tax you don’t need to. 

Being a registered business requires a more technical process and we highly recommend bringing in an accountant. You may be able to deduct business expenses from the business' income, provided those expenses meet specific criteria. You may have provisional tax obligations too, as income tax may be due in instalments throughout the tax year. And while your accountant efficiently works this out for you, you can focus on your bread and butter - or take a holiday! 

How hard is it to handle business taxes myself?

Every small business owner comes to the table with a different skill set. While some are finance savvy and feel comfortable in the world of Inland Revenue, income tax returns, cash flow and bookkeeping, others are the creative type whose time is better spent crafting and innovating. The scale of difficulty also increases rapidly with the size of your business and the amount of transactions, so what might be a walk in the park for one entrepreneur is a slog in the desert for another. 

What is bookkeeping and how do I do it for my small business?

Bookkeeping aka the daily nitty gritty of online accounting is all about the recording and reconciling of financial transactions in your small business. Every invoice paid, sale made, purchase put through the business, dollar spent or dosh received. 

Fun fact; it’s called ‘bookkeeping’ because these transactions used to be recorded in - you guessed it - books. But these days we’ve come a long way with accessible accounting software such as Xero or MYOB and there’s no need to put pen to paper. 

The key to good bookkeeping is making sure it’s regular and accurate, allowing you to breeze through your end of year tax and GST returns, understand your cash flow to make better budgeting decisions and have your financial information at the ready for lenders, investors or purchasers should you sell your small business. 

So what do we mean by recording and reconciling? Recording simply means that your accounting software is tracking every sale and transaction. Your bookkeeping software should be downloading all sales data automatically, though it’s still important to hold onto your proof of purchase if you plan to claim that expense as a tax deduction. 

Reconciling involves regularly cross-referencing your business books against your bank statements to check that the transactions and balances match – and identifying the reasons if they don’t. Often bank fees, interest payments, deposits and payments that haven’t yet hit your bank accounts will need to be accounted for.

You might do your reconciling daily, weekly, monthly, or less often, depending on the number of transactions going through your business. However, you will be required to reconcile your books before submitting tax returns at the very least. Our recommendation - do it while it’s fresh. 

Outside of recording and reconciling, other bookkeeping duties include accounts receivable (sending invoices and following up payment), accounts payable (paying bills) and your employee payroll. 

If you’re too busy to do the bookkeeping for your small business, then you can find someone to do it for you. Bookkeepers often allow you to choose different service levels depending on your budget. That means you can start out with basic bookkeeping at a modest cost and ladder up to more advanced services as your business grows.

How can accounting software help a business grow?

Most savvy small business owners will use some form of online bookkeeping software to speed up and automate their day-to-day and end of years. This drastically cuts down the chances of human error and reminds you to fill in any gaps before they become gaping holes. 

An accounting software tool like Xero will pull transaction data straight from a point-of-sale system, invoicing software and bank, significantly speed up bank reconciliation, automatically pay bills, send automated invoice reminders to late bill payers, let you know when sales invoices have been paid and allow you to check cash flow on the go from your phone. 

Are tax accounting services good for small businesses?

After years of experience working with small business owners, we are big believers in the benefits of collaborating with an expert. More than just making sure you’re legally compliant, improving your bottom line and saving time, there’s a lot to be said for removing the unnecessary stress that can come with the wonderful world of money. 

The stress of not knowing if you’re doing it right, paying too much, letting something slip or just not quite making the most of your resources. A quality accountant is your expert guide, your sounding board and number one supporter. They are there to help you maximise the good times and navigate through the hard times, with a few less wrinkles.

So are tax accounting services good for small businesses? Yes - but they’re also good for the mindset of small business owners. If you’d like to have a chat with one of these quality accountants you’ve heard so much about, schedule a free call with Bring On Monday today

Danny Pritchard

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