It’s not unusual for small businesses in New Zealand to face financial challenges, especially when they’re just starting out. These issues typically stem from limited resources, fluctuating cash flow, and the need to make critical decisions with long-term implications. The input of a financial expert, such as a small business accountant Queenstown entrepreneurs trust, can be quite useful in helping both seasoned and newbie enterprise owners navigate situations that can lead to these problems. At the same time, it’s a must for business owners like you to be aware of common financial blunders so that you can steer clear of them as much as possible. Here are some of the issues you should make an effort to avoid while setting up or running your own small business: 1. Poor Cash Flow Management Poor cash flow management occurs when businesses struggle to maintain a healthy balance between cash inflows and outflows. It often manifests as struggles to pay bills on time, delays in receiving payments from customers, or unexpected expenses cropping up without the necessary funds to cover them. To avoid issues due to poor cash flow, your small business should learn how to create cash flow forecasts, negotiate its payment terms with suppliers, and incentivise early payments from customers. Such strategies will help you ensure that you have enough liquidity to sustain operations and seize growth opportunities in a timely manner when these crop up. 2. Underestimating Costs Many businesses also regularly fail to forecast and budget expenses accurately, which can result in financial strain and unexpected costs. This often happens due to insufficient research about the costs of products and services, unrealistic assumptions about monthly expenditures, and failure to account for hidden or variable costs. For example, a business may embark on a new project without fully accounting for all the expenses involved, such as labour and overhead costs. As a result, the organisation may find itself running over budget and struggling to meet its financial obligations. Conducting thorough cost analysis before committing to projects is key to accurately estimating costs. It’s also a must to factor in potential contingencies and to regularly review and update budgets as expenses change. 3. Excessive Spending Spending excessively can eat into profits and put small businesses at risk of financial instability. Businesses, unfortunately, do this from time to time by carrying out unnecessary office renovations or extravagant marketing campaigns that yield little to no return on investment. There are also organisations that invest heavily in expensive equipment without considering more cost-effective alternatives, like buying second-hand or prioritising essential expenses instead. If you want to keep your company’s spending under control, you have to make it a point to establish clear spending guidelines. You also need to prioritise activities that offer the highest return on investment and regularly review your expenses to identify areas for cost savings. 4. Ignoring Budgeting Akin to navigating without a map, ignoring your budget will make it very easy for your business to lose sight of your destination and veer off course. Without a budget, it will be difficult to allocate resources, track expenses, and plan for the future. This can even make it challenging for your enterprise to cover operating costs. To avoid this, your business should strive to develop a lean and practical budget based on your historical data and on realistic future projections. This effort should be coupled with regularly monitoring your financial performance against budgeted targets and adjusting your spending as needed to stay on track. Embracing budgeting as a strategic tool will also enable your enterprise to make the most responsive decisions and achieve its financial goals. 5. Mixing Personal and Business Finances Mixing personal and business finances is a recipe for confusion and potential legal and tax headaches. Commingling your personal finances with that of your business makes it more challenging to track business expenses, prepare accurate financial statements, and comply with tax regulations. If you use your personal credit card to cover business expenses, for example, then it will be difficult to distinguish between your personal and business transactions and to be conscientious about your company’s actual cashflow. It’s good practice to maintain separate bank accounts and credit cards for business and personal use. You should also establish clear procedures for reimbursing personal expenses and keep detailed records of all your small business’s financial transactions. These steps will make it much easier to ensure clarity and accuracy in your financial reporting and minimise the risk of compliance issues. 6. Overreliance on Debt While business loans can empower your enterprise to grow and expand, you should make an effort to avoid overreliance on debt. Depending too much on borrowed funds can leave your business vulnerable to economic downturns and interest rate fluctuations. Ultimately, this can put the enterprise’s financial stability at risk. Before taking out a loan, then, carefully evaluate your financing options and consider alternative sources of funding such as equity investment or grants. You also shouldn’t be remiss in developing and following a sustainable debt repayment plan. 7. Not Monitoring Financial Performance Without regular monitoring, your business will be unable to assess its financial health, which can mean that it might miss warning signs of trouble. For instance, there’s no shortage of businesses that failed because they did not notice declining profitability or cash flow problems until it was too late to take corrective action. Stay on top of your finances by setting key performance indicators (KPIs) to track your performance. Revenue growth, profit margins, and cash flow ratios are often used as KPIs. Regularly reviewing these will better equip you to identify trends, spot potential issues early, and make timely adjustments to your enterprise’s operations. Your ability to steer clear of these financial mistakes will factor into the success and sustainability of your small business in NZ. Sound financial management practices, as well as the advice of experts and professionals, will go a long way towards improving your enterprise’s financial health and achieving your organisation’s long-term goals. If you need expert financial advice or accounting services for your small business in Queenstown, reach out to our team at Target Accounting. We’ll help you carry out tried-and-tested strategies to avoid these financial blunders that many business owners know way too well. Get in touch with us at Target Accounting today.

When people think about the world of accounting, we find that 99.99% of people stumble at what our role as accountants actually entails There is this common misconception, more often than not, that accountants do things, and three things ONLY: Manage the books Help with GST And some random bits and bobs with the IRD or whatever At Target Accounting, we're on a mission to not only shatter but OBLITERATE that myth into smithereens. What do we mean? Let’s just say it’s time to ‘think beyond tax’ Here’s what we mean. Most new clients we deal with opt to use us for those three things we mentioned above, and that’s it. Now it might be because they don’t like us very much OR they don’t know the SPECTRUM of services we offer . To make this easier, let’s go through some likely scenarios that can happen to a business owner such as yourself 1. Free doesn’t always mean better For the sake of this example, imagine you own a bustling furniture business, where we handle your accounts, and sprinkle in some GST consultations occasionally . NOW, think about that hiccup you’ve got with a new employee eight months in – a contract glitch you didn't see coming from that free employee contract template you found on Google Who's your go-to for friendly HR advice? Ahhh… bet you wouldn’t have thought Target Accounting, right? 2. Woe is Me! How about this then picture a scenario where your business is BOOMING , but the invoicing side is becoming a bit of a headache, you’re struggling to keep up, you begin to get stressed, and you start to work later and LATER . You jump online and Google throws a MILLION software options your way, and it's overwhelming. Who not only helps you pick the perfect solution but also ensures it fits seamlessly into your day-to-day? Yep, that's us – Target Accounting 3. When disaster strikes! Let’s say you’ve been riding the growth wave for three solid years.. DISASTER STRIKES!! Now, over the last 12 months, you’ve hit a rough patch. Income is slipping, unpaid bills are starting to pile up, and staff need to still be paid - it's a challenging time Is there ANYONE out there that can offer personalised business advice, restructure my financial landscape, and help me understand my woes and work through a solution!? Two words - Target Accounting Think BEYOND the tax - get it now? At Target Accounting, 'Think Beyond Tax' isn't just a catchphrase; it’s our new philosophy We’ve realised it’s the core of our business, because like your business and what we do as accountants, there SO MUCH MORE than just numbers . BUT - it’s beyond those numbers that people often forget about or don’t know who to turn to. Your job now - is to ask what more we can do for your business and we’ll take care of the rest

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.

While it’s not the most exhilarating topic to discuss, here at Target, we think it’s important to acknowledge the ever-changing economic landscape that small business owners are facing right now here in Dunedin and all the way up to Whangārei. While we might sound like a broken record, we don’t think it can be said enough that as a small business owner, with careful planning and strategic measures, you can build resilience and ensure sustainable growth despite economic downturns. Essential Pieces Of Advice To Help You ‘Recession-proof’ Your Business Strengthen Cash Reserves First and foremost, maintaining healthy cash reserves is crucial during economic downturns. You should prioritise building a ‘financial cushion’ to cover operational expenses and potential emergencies. And sometimes, we see many business overlooks not setting aside a portion of profits for a rainy day. If you haven’t already, make sure you do! You’ll thank us later. Develop Agile Business Strategies Adaptability is KEY to surviving a recession. Dedicate a day to sitting down by yourself or your team to review your business model, identify weaknesses, and implement agile strategies to respond swiftly to changing market conditions. Regularly assessing the effectiveness of your business strategies will help you make informed decisions about what necessary adjustments need to be made or planned just in case. Monitor Financial Health Stay vigilant about your financial health. Regularly analyse financial reports, cash flow statements, and key performance indicators (KPIs) to identify potential areas for improvement and make data-driven decisions. (And yes, we can help you with that before you ask!) Invest in Employee Development Employees are valuable assets in building business resilience. Invest in their professional development, ensure job satisfaction, and foster a positive work culture. Engaged and motivated employees are more likely to contribute to the business's success during challenging times. Stay Informed and Plan Ahead Closely monitor economic trends, government policies, and industry developments to anticipate potential challenges and opportunities. Plan for different scenarios and have contingency plans to respond promptly to unexpected events. Recession-proofing a small business requires a combination of foresight, adaptability, and strategic planning. With some planning and our help, we can help your business be more resilient and ensure sustainable growth even in challenging economic conditions.

In today's challenging financial landscape, you're not alone in seeking ways to navigate through the uncertainty. If you've ever wondered how to steer your business towards financial security in these turbulent times, exploring the our business advisory service might just be the beacon of hope you've been looking for. If you’re thinking ‘hmm, I’m not quite sure what business advisory even is’ then here’s a breakdown of how we can help! 1. Financial Forecasting: Predicting Tomorrow's Weather Remember that time you got caught in the rain without an umbrella? Financial forecasting is like having a trusty weather app for your business.Our team will create a detailed financial forecast for you that predicts your income, expenses, and cashflow. This’ll help you foresee potential financial storms, like a sudden drop in sales or unexpected expenses. 2. Cash Flow Management: Keeping the Ship Afloat Cash flow is the lifeblood of your business. It's the difference between sailing smoothly and hitting treacherous waters. During your advisory sessions, we’ll dive deep into your cash flow management. Let's say we notice that your accounts receivable are piling up while your accounts payable are due soon. We’ll suggest strategies to speed up payments from clients and negotiate extended payment terms with suppliers. At the end of the day, our role is to ensure you can maintain a healthy cash flow, so you can keep your ship afloat. 3. Business Planning: Plotting Your Course Your business plan is your roadmap, but it shouldn't gather dust on a shelf. We’ll be on your shoulder, reminding you to revisit it and make revisions. For instance, let's say your original plan aimed for aggressive growth, but the current economic landscape favours stability. We will help you adjust your goals and strategies accordingly. 4. Risk Management: Preparing for Storms In business, storms come in many forms – economic downturns, supply chain disruptions, or unexpected legal issues. We’ll will help you identify potential risks and develop strategies to mitigate them. So when the unexpected happens, you're prepared, and your business remains resilient. Benefits Galore! Now, why should you have these conversations with our business advisors? First, it's all about being proactive instead of reactive. You're ready for challenges before they hit, ensuring your business's stability. Second, it's like having a trusted confidant who knows your business inside out. Our team will offer tailored advice that suits your unique needs, not a one-size-fits-all solution. Lastly, it's about feeling more financially secure in today's turbulent business landscape. With a business advisor by your side, you'll confidently navigate the twists and turns, keeping your business on course toward success.