Sound accounting practices are part of the backbone of doing good business, regardless of the organisation’s size or home industry. Any small business entrepreneur based in New Zealand should strive to be compliant with government regulations and know the ins and outs of their company’s financial health and performance. Having a solid grasp of the numbers that drive their business is the only way for an entrepreneur to sustain their business growth and capitalise on any momentum that comes their way.
If you’re in such a position, now’s the best time to assess your enterprise’s accounting needs and to find the best solutions for your everyday financial management. Remember that it’s an option to get the services of a small business accounting Dunedin company like Target Accounting to expertly manage your accounting needs if you’re unable to devote time to it yourself.
Either way, you’ll need to familiarise yourself with a number of accounting considerations that are specific to small businesses in NZ. Here’s some knowledge that every Kiwi entrepreneur should have on their side:
1. Consider the Implications of Your Business Structure
First, if you’re still in the process of setting up your enterprise, you should know that your chosen business structure can have long-term implications on your business finances. Your chosen structure—whether it’s that of a sole trader, partnership, or limited liability company—impacts taxation and personal liability.
Sole traders and partnerships may have simpler tax structures but come with increased personal liability, while limited liability companies offer protection but involve more complex compliance requirements. You’ll want to have a good grasp of implications like these to manage your financial expectations for your business and to make decisions that are best aligned with your business goals.
2. Learn about Goods and Services Tax (GST)
In New Zealand, the goods and services tax or GST is a value-added tax added to the sale of goods and services. Kiwi businesses with an annual turnover exceeding NZD 60,000 must register for GST.
This means that, as a business owner, you’ll need to include GST in your prices and then account for it in your financial records. Regularly filing GST returns with the Inland Revenue Department (IRD) ensures compliance with NZ’s laws. Don’t forget that GST is a key aspect of your financial responsibilities that informs both your pricing strategies and your observance of good financial reporting practices.
3. Know Which Financial Reporting Requirements You Have to Meet
You should also stay abreast of all the financial reporting obligations you have to meet, as these are critical for the long-term financial health and transparency of your small business.
The Inland Revenue Department and the Companies Office in New Zealand have specific guidelines for financial reporting, including how to maintain accurate financial records, how to prepare annual financial statements, and how to file annual returns. Potential investors or creditors will also want to see these reports before finalising their transactions with you.
4. Know How to Handle Your Payroll Taxes
If your small business now has several employees under its name, then your accounting responsibilities include effectively handling their payroll taxes. Payroll taxes include deducting income tax and making contributions to employee superannuation funds.
To this end, you must regularly update your payroll system to reflect changes in tax rates and comply with any alterations in NZ’s legislation. Ensuring accurate payroll tax management enables your enterprise to not only meet its legal obligations but also strengthen employee satisfaction and morale.
5. Fulfil Your ACC Levies
Simply put, the Accident Compensation Corporation (ACC) provides no-fault personal injury insurance to constituent businesses. As a Kiwi business owner, you are required to observe this workplace safety measure and pay ACC levies based on your industry classification and employee earnings.
Your timely payments help fund the compensation scheme. If you properly classify your employees and conscientiously meet your ACC payment obligations, your business will capably contribute to the collective safety net offered by the program.
6. Address Your Income Tax Obligations
Just like anywhere else, businesses based in New Zealand are responsible for addressing their income tax obligations. This involves filing an annual income tax return, paying income tax on profits, and maintaining proper documentation of all payments.
During this process, make sure to consider allowable deductions, as these can significantly impact your tax liability. It may be a good idea to seek expert advice on maximising your legitimate deductions and minimising your tax obligations, as doing so can contribute to the financial health of your business.
7. Prioritise Accurate Record-Keeping
Making a priority of accurate and organised record-keeping is a foundational practice that all NZ small businesses should observe. These days, you can use cloud-based accounting software or enlist the services of an accounting firm that uses cloud solutions to simplify this process.
Regardless of the platform you use, you’ll want to keep meticulous records of your income and expenses, invoices, receipts, and other financial transactions. This will make it easy for your business to meet its regulatory requirements and derive valuable insight into its current financial performance.
8. Navigate Additional Currency Considerations
Lastly, if your small business is engaged in international transactions, you need to be able to navigate the issue of foreign currency as well. This means keeping a close eye on foreign currency exchange rates and factoring them into the performance of your business.
Fluctuations in exchange rates can result in gains or losses that will affect your bottom line. Staying informed and, if necessary, seeking expert advice on the issue of forex will help you manage these considerations effectively.
Though accounting is an important part of any business, the truth is that numbers aren’t every entrepreneur’s forte. Many Kiwi entrepreneurs choose to leave complex accounting procedures to the experts so that they can concentrate on value-adding activities like sales and brokering new business partnerships.
You can count on the people at Target Accounting to help you stay on top of key accounting considerations while always staying on target with regard to your bottom line. Contact Target Accounting today and ask us more about the accounting services we offer to our small business clients.