Unfortunately the IRD has not for- given any taxes due. How- ever, there is now additional flexibly on how you pay these off. The IRD now has discretion to write off interest and penalties – once the original tax is paid. If ever unsure about what tax to pay first – choose PAYE. If you are going to have a problem paying, then make sure you involve your accountant. The rules are no different whether talking to the IRD, your bank (or even your partner). If something is going wrong – talk about it. The accountant should help you get the message right with the IRD and bank.
2. Improve your knowledge
Businesses also need to improve their level of financial understanding. We have already seen some businesses that relied on current sales to pay last month’s bills. Some- times this was done out of necessity, but also a lack of financial literacy played a part. Many business owners need to learn how to read their financial reports so they can make good decisions and plan with greater confidence.
We have all been in information overload, particularly business owners who are working through all the support packages that have been released. The Government and IRD have been making changes so quickly that there is more grey area then there usually is in the tax rules. It is important to read the conditions you are agree- ing to. If you are not sure – ask for help.
We will provide trusted advice to local business owners and investors. Some clients will need help under- standing all the new rules, help with an IRD negotiation, help getting more bank funding or just a sympathetic ear.
While businesses will need ac- counting help, Ingham Mora will also be here to provide focused business advice and assistance too. The two key areas where businesses need the most assistance is with optimising their cashflow and business planning for the uncertain times ahead.
Business Planning – If you fail to plan, you’re planning to fail
Every business has been impacted in some way by Covid-19, and every business should have a plan to deal with the fallout.
A plan will help businesses reset their futures by review- ing their response and assessing the true impact on their business. A plan should set realistic goals to strengthen every aspect of the business.
A plan should have a high-level budget, details of necessary recovery finance, key opportunities and vulnerabilities, most critical challenges, risks and mitigation strategies. It should set annual and 90-day goals and actions. This will give businesses the best chance of recovery.
Know your cashBusinesses should know their cash – where it comes from and where it goes to. One of the most important ways for businesses to improve and recover is to shorten their cash con- version cycle.
In other words, get their cash quicker. There is also a big difference between profit and cash and business owners should have a handle on this.
Profit is what they pay tax on; cash is the oxygen their businesses need to survive.
Profitable businesses can, and do, go broke at times like these. Businesses need to be looking at how they can maximise their cashflow using strategies to get paid quicker, reduce stock or work in progress or by negotiating better payment terms with their suppliers.
Now is not the time to be slow or lenient on debt collection. Likewise businesses need to be very careful about re-ordering stock – can they operate with less stock or are there items that are likely to be in short supply?
Other areas to assist cashflow include capitalising on the many tax concessions available right now and looking at different interest and debt repayment arrangements with their banks.
Businesses should be forecast- ing their cashflow out six months and beyond and reviewing and updating their forecasts weekly.
Survive and thrive
In terms of what we are doing differently – we are making a conscious effort to spend more time than ever talking to our clients and providing support and assistance with free resources and regular webinars. An accountant that you trust and who has time for you can be a real difference maker.
We are a firm backed by experience, enabling us to provide expertise across the life cycle of a business.
We are a full service from tax to business advice, and believe there is no one better equipped to provide you with the advice and coaching your business needs than the one that knows your numbers.
Make sure your business is ready to survive the impact of Covid-19 and thrive. Give our team at Ingham Mora a call today.