Beyond the Numbers magazine - Issue 11

08 Maintaining Balance Provincial Childcare discovers the art of ‘balance’ in business

I SSUE 11

Navigating Growth WHAT MASONRY DESIGN SOLUTIONS HAS LEARNT SO FAR

12 Baby on the Move’s Journey Danny shares how she ‘got this baby moving’

18 Where’s Jacko?

The latest on Jacko Gill’s athletic prowess

Business is a curve.

Where are you on it?

Today it isn’t enough to know what you do, and simply do it well. You also need an eye on your future, and a knowledge of what that might mean.

At Hayes Knight, we don’t just work the numbers, we interpret them. The result is a more empowered, knowledgeable client who knows what tomorrow might bring – curve balls and all. Visit hayesknight.co.nz

CONTENTS

Growing pains or growing gains?

What is your business’s experience of growth? Have you steadily been expanding your product range and services, adding new systems and staff over a number of years?...or, have there been major leaps brought about by innovation, new technology and changes to business structures that have literally transformed your business overnight? Have those changes caused disruption and chaos or have they been so carefully planned that the growth ride has been a smooth one?

There is no one perfect path when it comes to business growth, however there are many ‘best practices’ our business advisors recommend to reduce the growing pains. Inside these pages we have provided some practical tips and advice to navigate your way along the growth curve. We also share some of our

clients’ stories about what growth has meant in their businesses so far – hopefully you can relate some of this insight to your own business and find ways to better manage these phases of growth.

Catch up on the latest news at Hayes Knight, including the opportunity to support “Team Tristan” in his endeavours to raise funds for charity as part of participating in the New York Marathon later this year.

Grab a coffee and relax into your favourite chair, as you delve into these pages that aim to inform, spark a few ideas and help your business continue its journey of growth. Enjoy!

“Inside these pages we have provided some practical tips and advice to better navigate your way along the growth curve.”

Andie Johnson Editor, Beyond the Numbers

features

04

NAVIGATING

GROWTH What Masonry Design Solutions has learnt so far

news, views & tools for success

08

MAINTAINING

BALANCE Provincial Childcare discovers the art of ‘balance’ in business

07 FRANCHISE –

THE GROWTH SECTOR COMES OF AGE Results of recent Franchising New Zealand Survey

14 CHANGES TO

GOVERNMENT REVENUE COLLECTION An update on the transformation project

The information and advice contained in Beyond the Numbers cannot cover every financial situation or requirement. If you have further questions, we encourage you to contact a Hayes Knight business adviser for advice tailored to your specific circumstances. Hayes Knight Limited is an independent member of Morison KSi.

12

10

BABY ON THE MOVE’S

JOURNEY Danny shares how she ‘got this baby moving’

GROWING PAINS

A growing business is a great business, right?

15 AUSTRALIA

16

MAKES CHANGES TO GST ON LOW VALUE IMPORTED GOODS Learn about changes that are in store

HAYES KNIGHT NEWS The latest news from Hayes Knight

18

WHERE’S JACKO? The latest on Jacko Gill’s athletic prowess

Cover photo by Jason Dorday

19 RADAR –

OPINION PIECE Should our tax dollars be funding Team New Zealand?

Beyond the Numbers is published by Hayes Knight editor.

Andie Johnson Lewis Hurst hurstmedia.nz printing. Cube design.

3

BUSINESS STRATEGY MASONRY DESIGN SOLUTIONS

Back in control WORDS: Adam Fricker IMAGES: Jason Dorday

The clock was rapidly running down for Mark Wilson.

He had to catch a plane to the United States in a couple of days. He was in the middle of a tour of duty around the North Island judging for the Registered Master Builders House of the Year and was now in Hamilton on his phone doing the scheduled half-hour interview for this article. He was also in the middle of building a new show home, completing a move into his new headquarters – a bespoke showroom on Auckland’s North Shore, launching a new decorative concrete panel business, and all the while managing the rapid growth of his core business, the architectural design company Masonry Design Solutions (MDS), which has large, high-end projects on the go around New Zealand and Asia.

Wasn’t he feeling a bit like the proverbial blue-arsed fly? Not particularly.

“Even though we’re busier than ever, for the first time in a long time I actually feel in control,” says Mark. “If I thought back to three or four years ago, going away on a trip for two and half weeks like I’m about to do, the stress levels would have been out of control. But I’m actually thinking, ‘why have I not got a big list of things to do?’” Mark jokes about the fact that now the business has the people and systems in place, he actually feels a bit surplus to requirements!

Established in 2002 and run by husband and wife team Mark and Linda Wilson, MDS has built an enviable reputation in architectural design, established strong working relationships with consultants, building contractors and planners, and created an impressive portfolio of work.

Mark has worked in architectural design, construction and construction management for 30 years and is an architectural judge for the Registered Master Builders House of the Year Awards. His reputation and that of MDS have been hard earned and are intertwined – a benefit in some ways but 4

potentially a hindrance if Mark wanted to reduce his involvement or exit entirely.

It’s a classic Kiwi story: the founder becomes so central to the business, with every operational detail orbiting him, it seems the business might fall over without him at the centre. This in turn creates a problem with business valuation and limits succession or exit options for the owners. It also limits growth. “We were doing well, but we were in a zone where we couldn’t see the wood for the trees; when you’re right in the middle of something you often don’t see what needs to happen,” says Mark, adding “…we were after some form of growth but also wanted to create an exit plan and look at ways to reduce workload.”

Mark credits Hayes Knight director

“…we were after some form of growth but also wanted to create an exit plan and look at ways to reduce workload” Brendon Cutler and his team for helping them clearly identify their business and personal goals then create a strategy and an action plan to get them there.

Brendon says the overriding goal became, “how do we extract Mark from the business while continuing to allow the business to be successful and grow”. Once the goals were established, says Brendon, we developed a plan of what the business would look like under a new structure.

“We undertook a review of the financials, restructured how the owners took their remuneration, looked at cash flow and

MDS owner Mark Wilson

developed a cash flow forecast, assisted with bank finance and structuring that finance appropriately, and then set up regular monthly meetings with Mark and Linda.”

The thought of extracting himself from the centre of the business made Mark nervous on two fronts: being a self-confessed control freak he had been reluctant to delegate, hence the 16 hour days; and he was unsure how to decouple his reputation in the market from that of MDS – would clients still expect him to be at their fingertips as they had become used to?

MASONRY DESIGN SOLUTIONS BUSINESS STRATEGY

Resilience “We’re probably coming to the end of the buoyant cycle our industry has been in. Thinking back to the GFC, we lost hundreds of thousands of dollars within just a few weeks, but now we’ve got a plan and a fallback position for when the next downturn does happen. That’s partly around our diversification. It’s also around better control of overheads and understanding of our revenues.”

– Mark Wilson, MDS owner.

A key part of this transformation was the staff. Mark and Brendon made a real effort getting the tight MDS team to understand what they were working towards and getting their buy-in. They tightened up internal systems – reporting, KPI’s and identified personnel that would be key to the success of the changes, eventually appointing one as general manager.

“We’ve got some very long-term staff, so didn’t want to exclude them from the process,” says Mark. “They are right into the changes Brendon helped put in place. And even the long-term clients who are used to 5

BUSINESS STRATEGY MASONRY DESIGN SOLUTIONS just ringing me, are now ringing the office instead. We are a boutique business where a lot of work is referred, and it was a huge concern for me that we might lose some credibility, but the other guys in the team are looking after the clients very well.”

So does Mark feel MDS is now set up for the future and growing as a result of the new game plan?

“Definitely. For the first time we set some projections and targets – something I was very unsure about – some optimistic targets, which I was pleased to see we’ve actually hit. It’s also about knowing where we’re at.

Before, we knew we were making money but we didn’t really know our exact position.

The comfort level we have now is huge.

Obtaining funding for other projects now is also easier because the bank sees that Hayes Knight is involved, and everything is clear,” explains Mark. “It was about having someone create a process for us. It’s been fantastic really. It’s probably the biggest fundamental step we’ve taken with our business in a long, long time.”

Brendon says a key reason MDS has progressed so quickly is the owners’

“…Obtaining funding for other projects now is also easier because the bank sees that Hayes Knight is involved, and everything is clear” attitude. He says they saw they needed to change and were very keen to improve what was already a great business.

“Mark and Linda were definitely up for the challenge and have managed to tick off a number of goals already. A key word here is accountability. We can meet as many times as we like, have the best laid plans, but it’s all about implementation – at the end of the day, they’ve got to do it.”

And ‘do it’ they have: Mark and Linda have diversified, starting a separate business to import and sell high-end decorative concrete panel products. They

have invested, building a new headquarters on Wairau Road that also serves as a showcase of their work. They have hired, taking on new staff to support the growth plan. And critically, the owners have stepped back from the coalface, raising their eyes to opportunities they previously had no time to consider.

“I was also starting to get a bit stale, but am excited about the future,” says Mark.

“The domestic market is critical, but I’ve also been working with clients in China for a while now and I’m keen to explore new markets and opportunities there.”

Checklist þþ Assess personal and business goals for the next three to five years. Ensure they are aligned

þþ Tidy up the financials, tighten systems, improve reporting

þþ Identify key personnel, get

them on board with the plan

þþ Empower your team, and delegate

þþ Get your head out of the day

to day business and think strategically. But you will need to create opportunities to do so

þþ Check in: have regular meetings to measure progress against the plan and ensure accountability

þþ Look for opportunities to diversify and grow

A MDS residential project and 2016 House of the Year Winner on Auckland’s North Shore

6

F RANCHISE

Franchise – the growth sector comes of age Hayes Knight has been a key sponsor of the Franchising New Zealand Survey since the survey was recommissioned in 2010, after a period of 7 years when no nationwide survey was undertaken. The last survey was carried out in 2012 and the most recent survey results were released in July 2017. Undertaken collaboratively by Griffith and Massey Universities and supported by the Franchise Association of New Zealand, the ‘Franchising New Zealand 2017’ report provides a current profile of the sector.

The results tell a story of significant growth as well as a trend of increasing importance as a contributor to employment and GDP. The accompanying table provides a summary of the growth in the sector.

There is no doubt that the franchise sector has flourished in the economic environment of the past five years. Stable political and economic conditions have benefited business in general, including the franchise sector. Franchisors have been able to internally grow the number of franchise units and system revenue. The number of systems operating in New Zealand grew by 185 and of total franchise systems, 72 percent originated in New Zealand. Growth within the sector has been dominated by non-food retail, accommodation and food services and construction.

What is particularly encouraging and enhances the credibility of the sector is that the median age of franchise systems is now almost 18 years, with the median age of brands being 25 years. While 36 percent of brands began franchising in their first year of operation, the majority of franchisors tested their model for a median 4.5 years prior to franchising. This approach must contribute towards sector stability, along with demonstrating a commitment towards adopting best practice.

While the overall number of people employed in the sector increased by 22%, it is notable that the percentage of employees employed full time grew from 54.4% to 59.8%; further indicating stability in the sector.

KEY RESULTS

2012

2017

Increase %

Business Format Franchisors

446

631

41.5%

Business Format Franchise Units

22,400

37,000

65%

Persons Employed

101,800

124,200

22%

$30.8 billion

$46.1 billion

50%

$15 billion

$27.6 billion

84%

Sales Turnover (sector) Sales Turnover (franchises)

“Growth within the sector has been dominated by non-food retail, accommodation and food services and construction.”

Sixty percent of franchise brands report transacting sales online compared to 35% in 2012. Of those selling online, the median percentage of sales accounted for as online sales was 12%. Maintaining an active social media presence was rated as extremely important by 74% of franchisors.

Franchisors commented that they see the main challenges ahead as recruiting eligible and qualified franchisees, finding suitable locations and a general tightening in the availability of bank finance.

Source: Franchising New Zealand 2017

7

BUSINESS STRATEGY PROVINCIAL CHILDCARE

A delicate balancing act WORDS Adam Fricker IMAGES Jason Dorday

Rapid growth sounds like a good problem to have, but it can take a good business down if not managed right.

Provincial Childcare owners Katie and Andrew Phillipps

Walking that fine line between explosive growth and chaos requires balance. As Katie and Andrew Phillipps have found while building their childcare company Provincial Childcare Holding Ltd, that balancing act extends beyond the finances, it’s also about managing people and their expectations.

The Phillipps bought their first childcare centre in Rotorua in 2013 and just four years later have 22 centres, with another two in development, and employ over 300 staff. It’s a supercharged success story with no end in sight, but as Andrew 8

explains, with growth come challenges.

“In the first year we were in Rotorua 40 weeks out of 52, whereas now we haven’t seen some of our centres for three or four months, so being able to transition everyone’s expectations, while managing the ever expanding workload had been the biggest ongoing challenge.” He adds, “…that includes the personal challenge of having three of our own children who are now seven, 11 and 14. We work to ensure we’re spending enough time with them, while travelling.”

“Growth brought us to Hayes Knight” Andrew and Katie chose the childcare industry because they were looking for something meaningful to throw themselves into. After they bought their first centre, they were deeply impressed with the level of teaching expertise in the industry, but

PROVINCIAL CHILDCARE BUSINESS STRATEGY felt the teachers needed to be given a better platform to succeed. Giving them that platform became a central driver of Provincial’s growth, says Katie.

“Opening up opportunities for them to succeed was a win for them but it was also a win for our business. And it became a lot of fun. It started as a job but it was actually really fun so it became, ‘how do we make this bigger and have more people become part of what we really enjoy?’ It’s the people that make it worthwhile.”

The plan was to buy and enhance, acquiring good centres that needed “a tune up”, improving them then growing the roll. As more and more childcare centres were added, mostly through acquisition, Provincial had to manage a growing team of teachers and a growing client list; families in this case. Expanding on Andrew’s point about balance, Katie says part of the challenge around growth was balancing cash flow against the expectations of the teachers and those of the families sending their kids to Provincial Childcare centres.“Obviously everyone wants the best equipment available and a great working environment so it’s really treading the balance between finances and your people.”

Katie explains further, “We’ve had really good support from BNZ who have backed our decision making and vision, which has been key to growing so quickly. But also making sensible business choices and making sure we’re monitoring key metrics at all times.”

Andrew’s background in corporate finance has allowed them to manage cash flow with a high level of precision. Childcare funding from the government comes through on three funding dates spread evenly across the year, so precision is critical as those funding dates approach. Couple Andrew’s financial skill with Katie’s people skills and passion and you’ve got a formidable and self-contained team. Despite that, they still felt they needed to bring in some extra help to keep that growth sustainable.

“Growth brought us to Hayes Knight,” says Katie. “We’d outgrown our accountant and these guys were the right size for us.

They could provide the quality and support while the cost was still reasonable.” Andrew says Hayes Knight’s ability to work in Xero also appealed. Their previous accountant was pulling Provincial’s data out of Xero and putting it into their own system and not tying it back into Xero. Working with a Xero-capable team has helped make their

The Provincial Childcare support office team

“It’s the people that make it worthwhile.”

historical data more reliable. Personal trust also played a part; they knew Business Advisory Director Tristan Dean through their common involvement with a school board.

Tristan explains that Provincial was already operating at a high level strategically and financially, they just needed some help to keep things tidy while they pursued growth. “They are easy clients. They’re running pretty fast in terms of their growth, and I guess they’ve relied on us to keep everything ticking in the background, to make sure things happen, because it is secondary to them – they’re out there chasing the growth and then building the systems, and we’ve got the scale to keep up with them.”

The Phillipps say Hayes Knight has also helped streamline internal processes that have made growth viable, and sorted Provincial’s tax structure, particularly regarding payments between their companies.

The business has now reached a scale where they have the resources to step outside their comfort zone and build new centres, with one underway in Silverdale, north of Auckland, and another due to start on the Whangaparaoa Peninsula at Manly later this year. Katie and Andrew are on a roll. They have recently jumped the Cook Strait for the first time buying a centre in Westport and they have no plans to slow down.

9

BUSINESS STRATEGY

Growing pains A growing business is a great business, right? Sales are up.

You are getting compliments for how well you are doing.

So, why do you have a niggling feeling that something’s not right?

10

BUSINESS STRATEGY

In a perfect world, business growth would be constant and you would be able to top up resources at an equal pace.

TH

OW

GR

In truth, businesses require step changes throughout their lifetime.

Whether it is a move to a bigger warehouse, expanding the sales team or changing your accounting package; business owners have to maintain a tricky balance between over-stretched resources and superfluous capacity.

As a business owner, you want to achieve sustainable business growth – growth at a rate that doesn’t disrupt or fracture your core business. Based on a body of research around the most common growing pains faced by businesses worldwide, here are our top tips to help you through those step changes and necessary growing pains.

Top tips to ease the growing pains Prepare a business plan ot only does a well written business plan give you strategic N

direction, it provides the starting point for setting your businesses key performance indicators (KPI’s) and a framework for ongoing reporting. Your decision making is enhanced by having a focused direction for your business, which will help you manage growth pains.

Annual forecast including cash flow reparation of an integrated forecast (i.e. profit and loss, cash flow P

Embrace technology in your business here are many great IT solutions for business use available today.

T

As a business owner, it’s smart to challenge the way you do things to find more streamlined and efficient business tools. That way, you can alleviate mundane but necessary business tasks, which allows the team to focus on tasks that help grow the business.

Human resource analysis s your business grows, chances are you need more staff. This is A

and balance sheet) will give you the financial plan for the coming year. Not only does it provide you with the ability to measure your actual results, it helps identify any potential shortfall in cash flow which will assist with investment decisions that you face.

a perfect opportunity to review your current skill set in your team and to actively recruit for the skills that you require. You may think you need “another Joe” but actually you require someone who can provide analysis and support to allow your current ‘Joes’ to focus on the sales that will give you the best results.

Plan your working capital requirement growing business requires more working capital to keep pace A

Run effective meetings s a business grows meetings become important to ensure A

with the growth. To explain by way of an example – let’s say last year the average debtors were $50,000 per month and inventory $25,000. With the recent growth in the business debtors are now $80,000 and stock $40,000. Your working capital requirement has increased by $45,000 – this must be found either via terms from your suppliers, a cash injection from you or extra facilities by your bank.

Risk protection and documentation hile not necessarily the fun part of business, it is an important W

aspect to keep the business moving in the right direction. By having the right HR procedures, health and safety procedures, office administration procedures etc. in place, you provide your team with ‘go to’ resources. As long as they are documented and updated, they will produce efficiencies and minimise your risks. Often, it’s the person in charge of the office admin, bookkeeping and filing that has the most knowledge of how the office runs. They can be your key person for day-to-day sanity.

communication and co-ordination amongst the team. If you or your team feel meetings are a waste of time – it’s a sign your meetings are not well planned and run. Removing or reducing meetings can create uncertainty within your team. Improving the quality of your meetings is the answer.

Provide focus to your growth n increase in turnover on its own does not mean the business is A

going well. In some instances, a company may find that its sales continue to improve while gross profits remain flat. All that company has achieved is an increase on workload. Consider your customer segments, sales channels and product mix to ensure your growth is beneficial to your business. Focus your sales team on how they can ‘add fries’ to each order rather than cold calling for new customers.

Growing pains are evident in businesses of all sizes. They are a warning signal to management of impending difficulties.

In some cases, they signal potential failure. That’s why it’s important to recognise them and address them in a timely manner. Your accountant can be a real asset in helping you work through the numbers and plan ahead. If you need support, now is a great time to get in touch with a Hayes Knight advisor.

11

BUSINESS STRATEGY BABY ON THE MOVE

A rewarding journey WORDS: Deirdre Coleman IMAGES: Jason Dorday

With passion and hard work, Danny Beh has transformed a fledgling franchise business with a valuable offering into a true success story. Hayes Knight has given her the confidence and advice she needed to achieve her business and personal goals.

There’s no shortage of physical and online retail stores selling baby products to new parents. But Auckland businesswoman Danny Beh has nurtured a very specialised offering. Baby on the Move is a network of retail stores with a point of difference and Danny owns the Auckland Central franchise. While it sells a range of products for babies and toddlers, the company specialises in the rental, sale and expert installation of car seats.

“We’re the only retail space where customers can bring in any brand or type of car seat and we’ll install it for them,” says Danny. “Nine out of 10 car seats are not installed correctly; our service is invaluable because there’s so much to know about car seats. Our staff are qualified Child Restraint Technicians; this gives customers the reassurance that their seat is installed correctly and that their child is safe in their car.”

Danny purchased her Grey Lynn franchise in early 2014. Having worked in advertising and recruitment, and raised two children, she was looking for a new challenge. The franchise model offered the combination of independence and a business-network support she was looking for.

Before finding Baby on the Move, Danny had investigated other business opportunities and needed advice from an accounting firm with franchise experience.

Through the Franchise Association of New Zealand she found Hayes Knight.

Business Advisory Director, Scott Travis, has led the firm’s specialist franchise division since 2008. He understands the specific requirements of the industry and was well placed to advise Danny. Having 12

conducted initial investigations into another franchise business Danny had found, he dissuaded her from purchasing it.

“I liked that Scott was detail-focused and thorough,” she says. “The numbers didn’t stack up on that business and his evaluation made sense to me.”

However, the Baby on the Move franchise proved a much better proposition. With Hayes Knight’s guidance in formulating an offer price and conducting pre-purchase financial due diligence, Danny bought the business and set about making some major changes.

“I knew that to grow, we needed to be in a different space. The lease was about to expire, so I had three months to understand the business, serve the customers, find new premises and move in. It was full on.

Fortunately, the ideal location came up. We took it, and it’s transformed everything.”

“When I first bought the business, I’d anticipated an initial drop in revenue, but by the six-month mark we’d doubled the monthly turnover. After 12 months, we’d doubled the annual turnover. Now it’s tripled. Revenue is one thing but gross profit is what’s important – and that’s also been increased.”

The complete business advisory service Scott and colleague Janice Osbaldiston provide Danny includes ongoing advice on tax minimisation, inventory management, gross-margin improvement, financing structure, revenue growth and cost management, and running her cloud accounting software and systems.

Scott credits Danny’s drive, hard work and courage for Baby on the Move’s success.

“Danny is quite fearless. Instead of

“We’re the only retail space where customers can bring in any brand or type of car seat and we’ll install it for them” simply seeing how things went, she’s quickly moved the business forward. She’s concentrated on a great service offering and adding value by skilling employees with technical expertise needed for the use and installation of car seats and equipment.”

For the first two years, Danny lived and breathed Baby on the Move, working 80hour weeks. But with a family waiting at home, she realised she needed to reassess her work/life balance, and turned again to Hayes Knight for advice.

“Scott confirmed that I could afford someone to take over part of my role, so I brought in a senior manager and

VILLA MARIA BUSINESS STRATEGY Baby on the Move franchise owner, Danny Beh

Top tips when buying an existing franchise business

slowly let the reins go. It was hard – our customers need to know they can trust our knowledge so it’s vital to have the right people – but we have a really cool team now.”

Working with Scott and Janice has given Danny the confidence and support she needed to make some difficult, but ultimately rewarding, business decisions.

“I like to know the worst-case scenario from any decision so I can go ahead feeling prepared. Scott understood that early on. He was always honest about the potential consequences. I value his input enormously; he’s become a real mentor

who is so supportive, open and well informed. Janice understands that I like detail – I never expected that from an accountant – and always gives me great advice.”

Danny’s focus for the future is on consolidating and enjoying the successes Baby on the Move has experienced to date.

“I’ve spent considerable time training staff and invested a lot in increasing our rental stock. I really love this business and it has a valuable place in the market.

I don’t think anyone else in New Zealand offers what we do.”

Decide whether the franchise business model is right for you – in business for yourself not by yourself Do your research on the franchise system – its history, market awareness and perception of the brand Talk to other franchisees to hear about their experience Understand the franchise agreement – your rights and obligations on purchase, during ownership and when you sell the business Consider the legal ownership structure you are best to adopt Engage legal, accounting and advisors with franchise experience early. Use them to assist you in presenting an offer to the vendor Ensure an appropriate due diligence process is carried out before going unconditional 13

TAX MATTERS

Changes to Government revenue collection

A couple of years ago the Inland Revenue signalled it would be entering into a major business transformation process. At the time, the New Zealand media focussed on the projected cost of this project that was estimated to be more than $2.0 billion.

This is the biggest project of its kind that has ever taken place in New Zealand.

Clearly the Inland Revenue’s aging FIRST system was struggling to cope with the pressures placed upon it by various governments. It was therefore necessary to build a platform that was agile and could cope with ongoing change that will be placed on our tax collection system.

The system also needed to contemplate what the collection of tax may look like in the future.

The Inland Revenue has promoted this business transformation project as being far wider than an IT upgrade. Their website states: “Business transformation is an end-to-end business change to bring New Zealand’s tax administration into the modern world. It involves our people, processes, policy and technology and will be delivered in four stages.”

Major changes have already taken place and further changes will continue to be rolled out in the coming years. These changes are both IT related and will also involve significant legislation changes.

In April 2017, the first stage to the Inland Revenue’s “START” system (yes START!) took place with the transfer of GST onto their new IT platform. Whilst to their credit, this transfer largely went without a hitch, cracks began to show from a users perspective with some of the functionality that used to be there, that was no longer there. We are told that some of these issues may fix themselves once other revenues are also transferred onto the new platform however, time will tell whether that is the case. On a postive note, the change to the new system also introduced some new functions that were not previously available via their online system.

Income tax was the next tax type due to transfer onto the new system in early 2018.

After taking on feedback from users, we understand this has been “deferred”.

This will allow for more user testing. On that matter, the Inland Revenue has recognised that real users need to be brought in to assist for testing of the system, to ensure that any issues can be ironed out before release.

Hayes Knight Tax Director, Phil Barlow, was asked to be part of a forum to give feedback to the Inland Revenue on their business transformation. If you have any comments, do not hesitate to feed these through to Phil or one of the Hayes Knight team.

14

T AX MATTERS

Australia makes changes to GST on low value imported goods

In the ongoing global struggle for countries to compete for taxes, Australia has now moved to collecting GST on low value goods.

The Australian Government has passed the Treasury Laws Amendment (GST Low Value goods) Bill 2017, which will extend GST to low value imports of physical goods imported by consumers from 1 July 2018. Under the original proposals, the Australian Government was looking to introduce these new rules in 2017 however, during the legislative process the commencement date has been deferred.

New Zealand businesses that are selling low value products into Australia (to consumers) will need to review their GST position in Australia to determine whether they now need to register and account for Australian GST. Businesses that meet the A$75,000 registration threshold will need to review their business systems now to ensure their compliance.

The existing processes to collect GST on imports above $1,000 at the border are unchanged.

In summary, the reforms: • make supplies of goods valued at A$1,000 or less at the time of supply ‘connected with Australia’ if the goods are purchased by consumers and are brought into Australia with the assistance of the supplier; • treat the operator of an electronic distribution platform (EDP) as the supplier of low value goods if the goods are purchased through the platform by consumers and brought into Australia with the assistance of either the supplier or the operator; • treat re-deliverers as the suppliers of low value goods if the goods are delivered outside of Australia as part of the supply, and the re-deliverer assists

with their delivery into Australia as part of a shopping or mailbox service that it provides under an arrangement with the consumer; • allow non-resident suppliers of low value goods that are ‘connected with Australia’ to elect to access the simplified registration and reporting system.

If you are exporting your product to consumers in Australia please contact your Hayes Knight advisor to help review your GST position. Hayes Knight is part of an international affiliation of accounting firms and therefore we can also seek assistance from our colleagues in Australia if required.

15

H AYES KNIGHT NEWS

Congratulations to Newmarket Business Awards winner Hayes Knight is a proud sponsor of the Newmarket Business Awards.

Sponsoring the category this year of ‘Retailer of the Year 2017’, we were delighted to award Michael Holmes Premium Eyewear this prestigious title.

Now in their sixth year, the Newmarket Business Awards celebrates business excellence and aims to recognise businesses that are maximising their potential and have mastered the art of delivering excellent products and services in the Newmarket area.

Hayes Knight Director, Brendon Cutler (pictured right, with the winners), presented the Award and attended the Awards dinner along with a number of our Hayes Knight team.

The event held at Auckland’s Langham Hotel on 22 June has grown every year and was attended by over 330 people. Congratulations to Michael and his Newmarket based team!

Going the distance for Spinal Injury Charity November 5th 2017 is a very significant date for Tristan Dean.

Tristan, one of our Business Advisory Directors, along with two others representing Hayes Knight will be amongst the 28 athletes participating in the New York Marathon to fundraise for Catwalk.

Catwalk Spinal Cord Injury Research Trust is a registered charity that was founded in 2005 by Catriona Williams MNZM, formerly one of New Zealand’s leading international equestrian riders. Following a riding accident in 2002, she is now a C6/C7 tetraplegic and confined to a wheelchair.

Catwalk raises funds to support the body of scientific opinion, which says a cure for spinal cord injuries (SCI) will be found. Their goal is to enable SCI sufferers to walk again – getting people out of wheelchairs and back on their feet.

The New York Marathon has grown to become the world’s largest and most popular marathon since it started in 1970. There are now over 50,000 runners in the race and Tristan is excited to be a taking part. He comments, “At the back of my mind while completing the marathon will be the thought that every kilometre I cover is hopefully one step closer to getting people with spinal injuries moving again.

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It is such a worthwhile cause to be involved with and I feel privileged to be a part of it.”

We are appealing to clients and anyone else reading this to get behind Tristan and the Hayes Knight team in their fundraising efforts. You can donate by visiting this web page (shown below) that also details the personal story behind why Tristan decided to get involved and why November 5th is a particularly special date. http://tristan.catwalk.org.nz or contact Tristan directly tristan.dean@hayesknight.co.nz To learn more about Catwalk, visit www.catwalk.org.nz Thank you in advance for your generous support.

H AYES KNIGHT NEWS

Farewell to Kathryn Buchanan In May this year we saw the departure of long standing Hayes Knight receptionist Kathryn Buchanan. Kathryn took up a welldeserved retirement down in the sunny Bay of Plenty.

As a celebration of Kathryn’s long service, we held a surprise Pink Breakfast, also raising funds for Breast Cancer Foundation; an organisation she has supported actively for many years. We wish Kathryn all the best in her retirement.

Spotlight on…

a couple of questions about how her role is helping Hayes Knight navigate this growth phase:

Helen Hall

What experience do you bring to this role as Practice Manager Helen?

I have spent the last 24 years working in chartered accounting firms and commercial roles. Eight of those years were as a director of a small chartered accounting firm. This broad experience means that I have a range of skills to help the professional and admin teams.

Practice Manager Helen Hall is Hayes Knight’s new Practice Manager. Hayes Knight has introduced this newly created role as a result of our strong growth, now operating out of our two locations in Albany and Newmarket. Helen brings strong management and financial skills to complement our existing management team. Able to give increased focus to our human resources requirements, Helen has quickly added value by acquiring some of New Zealand’s best accounting talent, as we continue to expand.

We ask Helen

What major challenges do you think Hayes Knight shares with other businesses experiencing strong growth?

We share the challenge of keeping pace with the growth to ensure it is

sustainable. This includes increasing productivity, updating systems and processes, staying on top of planning by constantly reviewing and revising these plans. Our staff are the engine behind this; building a strong base to deliver exceptional client service from an ever changing platform.

When interviewing candidates for roles at Hayes Knight, what particular attributes have those appointed by Hayes Knight had in common?

We take particular care to ensure our staff are the right fit for Hayes Knight. As well as standing out amongst their peers, they must be able to relate to our clients and team members on a real personal level.

What has been the most surprising thing about working for Hayes Knight so far?

Regular team building events have proved to be fun and hilarious. The sense of fun and whimsy is the perfect tonic after a busy week.

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SPONSORSHIP JACKO GILL

“I think the key to my improvements these last few years has been creating a tight team that I trust.”

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Questions for Jacko Gill

You may recall in 2016 Hayes Knight announced a partnership with Olympian and shot putter hailing from the North Shore, Jacko Gill. Hayes Knight are giving support to his goals as an elite athlete; helping Jacko represent New Zealand and maximize his potential on an international level. We promised to keep you posted about his journey – recently we asked Jacko some questions that bring us up to speed on where he is heading…

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1. What have been your athletic highlights for 2017 so far?

4. Why are those particular ingredients for growth so important?

My highlight of 2017 was breaking 21.00 Metres for the first time. It has been a goal for quite a few years now and to finally achieve it meant a lot. Now I’m working towards 22.00 Metres.

I really feel the support from my “team” even when travelling to competitions alone in Europe. I know they want me to succeed as much as I do. I believe this is really important because there is always the odd bad result and without fail they are there to offer support and turn things around for the next meet.

2. What is in store for the rest of this year?

I’m currently right in the middle of the Season. I had a Diamond League event today and World Championships are on the 4th August. Then the Commonwealth Games are in early April. There are also lots of smaller meets all around Europe before the World Championships. Prior to the Commonwealth Games on the Gold Coast, there are around 10 meets in Australia and New Zealand.

5. Have you been able to apply these ingredients for growth to areas of your life outside athletics? Give us an example Good question, I guess the more likeminded people you have around, the easier it is to achieve a goal. That goes for sport and life.

3. Describe the top ingredients required for your growth as an athlete over the past couple of years?

UPDATE!

I think the key to my improvements these last few years has been creating a tight team that I trust. Before these last couple of years, I was trying to juggle writing programmes (coaching myself) and being an athlete.

Just before going to print Jacko competed at the World Athletics Championships in London placing 9th overall in the men’s shotput. Well done Jacko!

O PINION

Radar

By Tristan Dean, Business Advisory Director

Should our tax dollars be funding Team New Zealand?

As I write this article it has just been announced that the Government will provide $5 million of funding to help Emirates Team New Zealand stay together and prepare to defend the America’s Cup in four years time.

I’ll now brace myself for the inevitable round of complaints from the public about Team NZ being funded while the local school buildings are in a state of disrepair and kids go without breakfast. While quite a different set of circumstances, it was a similar story when Duco Events asked for public funding to help them host the Joseph Parker title fight in Auckland.

I’ll admit, the first reaction I have to some of these funding requests is negative. In many cases we’re talking about public money being spent funding the salaries of some very well-paid sports people and sports administrators. On the face of it, this is hard to swallow, particularly when you look at all the underfunded, worthy causes in New Zealand. However, when you take a broader view, in many cases having the government or local council provide funding makes perfect sense.

The estimates of the level of additional spending a local defence of the America’s Cup would bring to New Zealand range from $500 million to $1 billion. That is money being spent by the teams renting premises, hiring labour, building boats and feeding, housing and entertaining their teams of people. It also represents money that tourists will bring to the local hotels and restaurants. The spending then spreads wider than Auckland, as the tourists that come for the Cup stay on and explore New Zealand.

Let’s assume that the lower end of the spending estimate applies, being $500 million, and that GST applies to 75% of that spending (probably a conservative estimate). This alone equates to about $49 million of GST revenue going to the government; revenue that simply wouldn’t exist if the Cup defence wasn’t hosted in New Zealand. After the government gets $49m in GST, the remaining $451 million is pumped primarily into local businesses, and is then filtered down to their employees and suppliers as they

ramp up their activities to cope with the increased demand. The employees will pay tax on the wages they’re paid, and the businesses will pay tax on the increased profits generated. If we take another conservative view, and apply a moderate personal tax rate of 17.5% to the $451 million, the government ends up with another $79 million in increased taxes.

So in the above scenario, which granted is very simplistic, where is the problem with the government pumping $5 milllion, or $50 million, into the Team NZ defence if that investment returns $128 million back to them? I don’t really care what the government funding is

“Essentially, providing government funding to Team NZ, or any other sporting or cultural event is simply an investment decision.” used for within Team NZ. If Team NZ want to keep the key individuals required to defend the cup, they must pay top dollar for them, or they’ll be poached by other, better funded teams. Loyalty to New Zealand only goes so far, and at the end of the day, these hugely talented individuals can’t be expected to forego a big personal windfall to stay with an underfunded national team.

Essentially, providing government funding to Team NZ, or any other sporting or cultural event is simply an investment decision. Will the investment provide a positive return that can then provide more funding to fix the school buildings or provide a better health system?

In the case of Team NZ, providing the funding will keep the team together and the event in New Zealand…it looks like a no brainer.

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