Numbers magazine summer 2013

No 28 SUMMER 2013

FIT FOR THE FUTURE A new fitness test for your business

SELLING YOUR BUSINESS How to get the best outcome

www.staplesrodway.com www.staplesrodway.com

A STAPLES RODWAY PUBLICATION

THE IRONMAN 3 Taranaki trio in training

CUTTING THE WALLET STRINGS Are your kids financially independent?

Staples Rodway is an independent member of Baker Tilly International

DIRECTORS AUCKLAND

Roger Thompson

(09) 309 0463

HAMILTON

Rosanna Baird

(07) 834 6800

TAURANGA

Chris Downey

(07) 578 2989

HAWKES BAY

Stuart Signal

(06) 878 7004

TARANAKI

Chris Lynch

(06) 757 3155

WELLINGTON

Robert Elms

(04) 472 7219

CHRISTCHURCH

Ross Erskine

(03) 343 0599

DISCLAIMER No liability is assumed by Staples Rodway for any losses suffered by any person relying directly or indirectly upon any article within this document. It is recommended that you consult your advisor before acting on this information.

No 28 SUMMER 2013

A MESSAGE FROM PETER GUISE While 2013 continued the recent trend of difficult economic conditions, I believe Staples Rodway can look back on the year with some satisfaction and look forward to a 2014 that appears as if it will finally bring better news for business.

The high point for the year was the welcome addition of a Wellington team to the Staples Rodway network with the well-established Martin Jarvie team joining us formally in April.

We had been looking for a Wellington partner for some time to fill an obvious gap in our network and Martin Jarvie is a good fit with our business.

We continue to live in a world of more regulation and changing legislation. The new Financial Reporting Act was enacted in November and while there will be some changes in the ensuing years, most will be minor without too many issues for Staples Rodway and our clients.

I’d like to say thank you to all our clients for their continued support during 2013 and wish you all a great Christmas and an enjoyable summer break with families and friends.

I must also say thank you to all people across that Staples Rodway network that make our business strong and successful. Without the great work of our staff team and the support they get from the families Staples Rodway could not continue to be the success it has been for nearly 70 years.

I’m looking forward to a 2014 as it looks like we will finally throw off the economic gloom and business should be able to make positive decisions to expand and grow.

To all the staff at Staples Rodway enjoy the festive season, your family and friends and we’ll see you in the New Year for a great 2014.

Merry Christmas to all.

Peter Guise CHAIRMAN, STAPLES RODWAY NEW ZEALAND

IN THIS ISSUE 2

Shave 'em clean for Canteen

3

Meet Hawkes Bays' new HR consultant

3

Canteen budgeting workshop

4 The Ironman 3 6

Fit for the future

8 Optimise the sale of your business 9

Park & Fly

10 Are your children financially independent?

12 Going spare? What are your options for savings & investment 14 Not-for-profits under the spotlight 16 Health & Safety changes place more onus on business leaders

SHAVE ‘EM CLEAN

FOR CANTEEN

In October six Staples Rodway Taranaki employees willingly gambled their tresses for CanTeen, a national support network that supports teens living with cancer.

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HE “SHAVE ‘EM CLEAN FOR CANTEEN” campaign was run over 2 weeks via our Staples Rodway Taranaki Facebook, where users simply voted for one person to lose their locks.

The competition was fierce, with some competitors launching individual “shave” campaigns to entice voters. BIS Manager, Bryce Gordon’s mane initially did not attract any attention, however through rigorous campaigning, and the lure of a leg shave, Bryce was able to clutch his way to the top and take out the competition.

Competition favorite Nykki Steel, with her 12 inches of glossy, groomed hair, came in at a close second. Nykki’s dedication to the cause was unwavered as she sat alongside Bryce for a shave as well.

Over $1,300 was raised for CanTeen by members of the public and Staples Rodway staff. To see more photos from the event please visit the Staples Rodway Facebook page.

Bryce Gordon BIS manager (competition winner) having full head shave. Nancy Riddick attempted the eyebrows but no luck.

The whole office wore mufti, Canteen bandannas and celebrated with a big morning tea.

Abbie Tebbutt and Lyn Wilson not really excited to be shaving Bryce’s legs. Bryce loved the pampering.

Nykki Steel, assistant manager (second place) had a lot of hair to lose.

CAPE KIDNAPPERS CHALLENGE T

HIS YEAR 822 PEOPLE TOOK part in the Staples Rodway Cape Kidnappers Challenge.

Staples Rodway Director, Libby O’Sullivan says that “Staples Rodway are excited to be the principal sponsors and organizers of the event which continues to grow each year, donating all surplus funds back to charities. We are very proud of how involved all our staff are in ensuring this event runs smoothly.”

“Encouraging fitness has a huge positive impact on society, and each year we are amazed by the number of people who compete in the event having never done anything like this before” added fellow Staples Rodway Director, Dave Sawers.

The course had to be diverted this year to avoid a river that had swollen after heavy rainfall a couple of days before the event, resulting in a slightly shorter distance and competitors finishing times being faster. “But this was better than having to cancel the event” says Libby.

For the first time in the event’s history, registrations for teams and individuals reached capacity and had to be closed off.

Craig from U Turn trust receiving their $8,000 donation

MEET HAWKES BAYS' NEW HR CONSULTANT

BONNIE LAJUNEN

Libby was also thrilled to announce that a total of $16,000 was raised this year, and split evenly between Hayseed Trust in Napier and the U Turn Trust (who run the Flaxmere Boxing Academy). Both of these charities are focused on assisting youth in Hawke’s Bay through education, mentoring and personal development. “The funds raised will make a huge difference in our community” says Libby.

Bonnie has a generalist HR background and brings with her a broad range of skills and experience in HR issues and interventions to the Staples Rodway Hawkes Bay HR division. She has 7 years experience as a Senior HR Advisor and Partner working in Tertiary Education and 5 years experience as Generalist HR Advisor in the Timber and Manufacturing sector.

CANTEEN BUDGETING WORKSHOP S

TAPLES RODWAY’S AUCKLAND OFFICE, AS part of our sponsorship of Canteen, invited a group of Canteen committee members from the Northland and Auckland branches to attend a budgeting workshop.

The committee members are mostly high school and university students with little or no accounting background. These people are responsible for running the day to day activities of the branches as well as organising events such as camps.

Those responsibilities mean that the committee members are involved in the budgeting process for their respective divisions and to increase their understanding of what budgeting involves Staples Rodway runs such workshops.

The workshop, run by Auckland Business Advisory team members Robyn O’Brien and Hayden McGregor, covered the basics of budgeting such as the purpose of a budget, how to understand and use budgets as well as an introduction into how to read a profit and loss statement and balance sheet.

The workshop was highly successful and the feedback received was really positive. We look forward to similar events occurring in the future.

www.staplesrodway.com

Hayden McGregor explaining why budget variances arise.

NUMBERS Summer 2013 • 3

3

THE IRONMAN When you think about an Ironman competition, you don’t necessarily think of your local accountant as made of iron. But, Staples Rodway Taranaki is producing a few tough athletes that are determined enough to challenge their bodies (and minds) with just such a test.

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ED EDEN, KIRSTEN KOWALEWSKI AND Amanda Gilmer, all accountants in the Staples Rodway Taranaki team, have entered in the 2014 Ironman New Zealand on 1 March in Taupo, the 30th anniversary of the event.

Staples Rodway Taranaki Director Daimon Stewart says his Ironman staff are being given plenty of support from the local office - support they’ll they need to complete the 3.8km swim, 180km bike ride and then the gruelling marathon to finish.

LEFT TO RIGHT: Jed Eden, Amanda Gilmer & Kirstin Kowalewski

4 • NUMBERS Summer 2013

“It’s great having people in the office with the ambition and drive to compete in an event as tough as this one, although the intensive training means I can’t “crack the whip” as much as I’d like,” he jokes. “The upside is that you also see that determination come through in their work.”

KIRSTEN KOWALEWSKI

JED EDEN

When you ask Kirsten why she contemplated entering the ironman triathlon she has a very simple answer: “Because Mum entered, and I couldn’t let her do one before I’d done one!”

Kirsten’s competitive spirit – good-natured, naturally – comes across quickly. She is so dedicated to her sport, that she’ll get up at 5am for a quick run, take a long lunch to get a swim in during the day, and then finish up the evening running around after her four year old son, Oliver.

Suggest to Kirsten that most women have a hard enough time keeping up with a four year old, let alone the extra-curricular activities she’s embarked on, and she just laughs.

Oliver is her occasional training companion, being pushed around in his stroller while mum runs. He coaches as well, telling Mum to run faster and swim further. Kirsten has been training for one sporting event after another for his whole life, so he’s grown up in the swimming pool and is now eyeing up running.

Kirsten is aiming for a time of around 14 hours, and brushes off the wear and tear on the body. Loss of toenails is ‘stock standard’ and part of the training process. But she says it’s been excellent having people in the office to chat to about it all, and the support she’s received from Staples Rodway has been phenomenal at helping push towards her goal.

And then of course there’s Kirsten’s main driving force for the finish line: Beating Mum.

Following parents who competed together in the Ironman triathlon in the 1990s means Jed has pretty big shoes to fill. He’s competing in his third ironman and has a target time of less than 10 hours. Getting that number out of him took a bit of coaxing - with Jed comparing it to asking someone how much they weigh.

With a four-year-old daughter, Annabelle, and another little girl due in January, Jed says he’s lucky to have an incredibly supportive family as well as support from the Staples Rodway team.

“They may not understand my madness but they coordinate their lives around the hobby,” says Jed He still works 45-hour weeks but the office gives him flexibility to ensure he gets home to spend time with Annabel - though some nights he might be in bed before her as a typical day starts with training at 5am. This also tends to include a lunchtime run or swim, basking in that chlorine odour for the rest of the day.

After finishing his first Ironman, Jed swore he’d never do one again. But here he is, on his third competition and sharing war stories with Amanda and Kirsten as they go through their strict training regime.

Jed says that they’re all getting something different out of the competition and doing it for different reasons. For him it’s a personal satisfaction thing, though the staying in good shape is a bonus.

AMANDA GILMER Amanda delights in blaming Jed for her entry in the 2014 Ironman competition.

A long distance runner for the past four years, Amanda was no stranger to a cheeky half marathon or even a full marathon, but hadn’t really considered the concept of an Ironman.

Jed slowly chiselled away at her resolve until she finally broke at the end of last year.

It may be a bit rough to lay the blame squarely on Jed’s shoulders, as the timing was also good with Amanda finishing her CAs and in need of a new challenge.

This time the challenge needed to be a physical one instead of mental which the Ironman has provided. Amanda has a swimming background from childhood, but cycling was a whole new sport.

She says it’s an expensive pastime but rationalises it by saying she’s not spending money on going out any more as she has to be in bed far too early.

She’s also become an expert in anti-chafing cream and an authority on cycling gear - anything to make her ride time just that little bit easier.

She and George (yes, Amanda’s named her bike) spend a lot of time together out on the road, with the aim of getting below the 14-hour mark in March. Amanda says it better be worth it, as she can no longer wear heels to work because of the tight calf muscles caused by the regular 12 to 18 hours of training every week.

In terms of her training/work/life balance, Amanda still works her usual hours, plus a bit of over time here and there, with Staples Rodway providing flexi-time to make training easier.

She also says the staff are a great support crew while at work – they know when to give her a smile, or when to laugh if she’s hobbling into work, and most importantly, they know when to leave her alone if she hasn’t had enough sleep!

Amanda says the most important thing about doing something as strenuous as an Ironman is to keep it light. She says you can’t let it get to you, and a bit of comic relief goes a long way.

www.staplesrodway.com

NUMBERS Summer 2013 • 5

FIT FOR THE FU

UTURE

Article by Gareth Hoole & Jackie Russell-Green STAPLES RODWAY AUCKLAND gareth.hoole@staplesrodway.com jackie.russell-green@staplesrodway.com

The transition to the new year is an ideal opportunity for reflecting on the past and planning for the future of your business. Staples Rodway has developed an exciting new tool to help businesses test their fitness and examine how well they’re placed to take advantage of the opportunities that economists agree will be available in 2014.

I

T FEELS LIKE A VERY long time since 2008 brought the most far-reaching and significant economic downturn of our lifetimes. Since then there has been a slow improvement in economic conditions, but it’s been a stop-start, fitful recovery. However, economists finally seem to agree that the coming year will bring good economic growth. This means that New Zealand businesses, for the first time in a number of years, now find themselves in the position of looking forward to the possibility of a brighter future.

This prospect of brighter economic times ahead, particularly when combined with the transition from one year to the next, provides an ideal opportunity for businesses to assess how ready they are to take advantage of future opportunities.

There are several factors that are widely recognised as characteristics of businesses that are well placed to take advantage of opportunities for consolidation or growth as those opportunities arise. These factors include: A good understanding of the financial position of the business and the factors that drive its profitability.

Appropriate sources of finance that assist the business to meet its objectives, and the capacity to access additional funding to take advantage of new opportunities in the market.

An understanding of what customers are seeking from the business and mechanisms for staying on top of changing customer expectations and identifying potential new customers.

The ability to meet financial obligations, including taxation obligations, as they fall due.

Effective systems and processes that enable consistent performance.

Appropriately skilled and experienced staff who move the business in the desired direction.

A focus on the future including, where appropriate, an understanding of when the owner(s) will want to exit the business and the manner in which they will want to do that (such as handing the business on to the next generation of the family, selling the business to employees, a key supplier, customer or competitor, or selling it in the open market).

Assessing whether your business is fit for the future can be difficult. To help make the process easier, in 2014 Staples Rodway will launch a questionnaire that will enable businesses to assess how well they’re placed to take advantage of future opportunities.

The confidential survey will take about 20 minutes to fill out and will enable businesses to benchmark themselves against similar-sized businesses and identify improvements that could make a big difference to business performance.

Look out for your copy of our questionnaire in the first 2014 edition of Numbers. In the meantime, if you’ve got any questions, call Gareth, Jackie or your usual Staples Rodway contact.

www.staplesrodway.com

NUMBERS Summer 2013 • 7

OPTIMISE THE SALE OF YOUR BUSINESS Article by Zane Sherry BAKER TILLY NZ TRANSACTION SERVICES zane.sherry@btts.co.nz

A structured process when selling your business can help result in a successful outcome for all parties, as the recent sale of a New Zealand-based specialist e-commerce vendor illustrates.

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AKER TILLY (NZ) TRANSACTION SERVICES were appointed to act on behalf of the vendors and manage the sale process. The referral came through Baker Tilly’s affiliation with Staples Rodway – we are Staples Rodway’s specialist Mergers and Acquisitions division.

As part of our preparation for selling, we conducted an in-depth analysis to gain a thorough understanding of the business including its strategic position in the market, relationships with customers and suppliers and intellectual property owned.

The significant strengths of the business quickly became evident. It is the leader in its industry in New Zealand with strong brand recognition, a specialisation in e-commerce and as well as a strong bricks and mortar presence. It is also highly profitable with good growth, consistent gross margins and efficient overhead structures.

The business came onto the market at a time where the demand for e-commerce capability is growing. The Nielsen Online Retail Report found more than half the population (54%) aged 18+ have shopped online in the last 12 months and this is expected to increase to 60% at the end of 2013.

The New Zealand Retailers Association estimates online purchases in New Zealand to be worth $5 billion.

Not only do consumers turn to online retailing because they can usually get a better price than in store (74%) but also shop outside business hours

8 • NUMBERS Summer 2013

(63%) and save time visiting stores (56%). The adage “adapt or die” remains true as businesses are being forced to develop an online presence or risk losing market share to those who do.

Given the considerable strengths of the business and solid growth within the market we targeted strategic purchasers. Strategic purchasers can see the benefit of acquiring a target business such as distribution channels, cross-selling opportunities, achieving economies of scale and elimination of a competitor and are therefore prepared to offer a higher price than value buyers.

Through extensive market research we identified a list of strategic purchasers, both here and overseas, that we believed would gain considerable value in the opportunity.

With our vendors permission we then set about contacting those we believed were the most qualified.

Within a relatively short timeframe we received an offer from one of the companies identified in our initial list and it was subsequently accepted by our vendors.

The due diligence and contract documentation process was completed quickly and efficiently which was made possible by the strong systems and processes within the business and also because of the capable teams involved in the transaction.

The vendors were very pleased with this result and we are proud to have played a key role in such a successful transaction.

PARK Article by Jon Robertson STAPLES RODWAY CHRISTCHURCH

& FLY

jrobertson@srchch.co.nz

Staples Rodway is working with Airpark Canterbury, a business offering a cost-effective carparking alternative for Christchurch flyers.

A

IRPARK CANTERBURY WAS OFFICIALLY OPENED in December 2012 to give the people in Christchurch and Canterbury a secure, cost effective option for airport car parking, with a strong emphasis on first class service.

However, in reality the directors Graeme Harris and Murray Smith really started the ball rolling in early 2007, when they first identified an opportunity in the Auckland market. Between 2007 and 2012 both Graeme and Murray spent hours upon hours carrying out their own due diligence exercise, from counting cars parked, to speaking with people parking their cars at the airport, to approaching potential financial backers, all with the view to give themselves the peace of mind that their idea could be turned into a viable business.

Staples Rodway first got involved with Graeme and Murray in August 2011, via Graeme Harris and Murray Smith a telephone call from one of of Airpark Canterbury. their friends Alan at ANZ, who is also one of my clients and referrers of work. Alan explained to me that Graeme and Murray saw a real opportunity with the forecasted post-earthquake rebuild work in Christchurch, to open up a “park & ride” airport carparking business. Alan also mentioned that the lads are a bit different (in a positive way!) and were looking at a non-conventional way of starting their business.

How this was relevant to Staples Rodway is that our normal accountancy model of billing based on time spent on the job went out the window. Instead, we negotiated with Graeme and Murray a “success” fee, based on whether or not they would secure an external financer. At first this was debated fever-

www.staplesrodway.com

ously amongst the directors, as it was a very unusual approach to adopt with a new client, but the open-mindedness of our director group allowed the arrangement to go ahead. We put a lot of faith in Graeme and Murray’s own due diligence process, and their incredible drive and work ethic to get the business off the ground, and they did not disappoint.

To say Graeme and Murray are extremely passionate about their business is an understatement of the highest order. They live every day to ensure that Airpark Canterbury is growing at the necessary rate to achieve their goals. To ensure that their focus is on the business 100% they need assistance in the background with the payment of wages, preparation of GST returns, monthly reporting, and other accounting/administrative tasks. This is where Staples Rodway as a full service firm can really help. The accountancy profession often bandies around the term “value added” services, which are those services over and above the preparation of annual financial statements and tax returns, but our relationship with Graeme and Murray allows us to do just that. Graeme and Murray have proven to be excellent clients and we are proud of the relationship we have forged, as they include us in their business management and decision making processes, which is very rewarding. We are excited about how Airpark Canterbury is progressing and are looking forward to working with Graeme and Murray in the future to help them achieve their goals.

NUMBERS Summer 2013 • 9

ARE YOUR CHILDREN

FINANCIALLY INDEPENDENT? Article by Louise O’Brien STAPLES RODWAY AUCKLAND louise.obrien@staplesrodway.com

Parents never stop caring for their sons and daughters, but when should they stop paying for them?

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RECENT SURVEY IN THE UNITED Kingdom found about two thirds of parents are planning or giving their children over the age 18 financial help. One third of parents also expect to support their grandchildren.

More than half (52%) believe it is their duty as a parent to financially support their children while 35% worry that without help, their children will suffer and not achieve their full potential. Slightly more than 37% think that the state of the economy means their children will not be able to fund themselves straight away.

The main areas of mentioned in the survey were: Weddings University fees Car Home deposit Help with repaying the mortgage When I looked at that list I thought it was reasonable as I would be prepared to give my children money for at least three of the five items. My husband and I did a quick tally of what this could mean for our retirement plans.

University fees $3O,OOO x 3 Weddings $15,OOO x 3 Home deposit $5O,OOO x 3 TOTAL

= = = =

$9O,OOO $45,OOO $15O,OOO $285,OOO

It’s clear that helping out our children is going to have a significant impact on the amount we accumulate for our retirement. Whatever your numbers look like, you can plan and save for those events.

What can really wreak havoc on your retirement plan is the unexpected and ongoing financial demands that children can place on their parents. That may not be the norm but its clearly no longer an exception.

We have three costly teenagers and we’re probably not alone in hoping that when they leave home they will support themselves. By “supporting themselves” I mean they find a way to pay for their board, food, transport and other daily expenses without having to ask for regular top ups from Mum and Dad. Hope is not really enough though.

How do we take steps to ensure that our children are equipped to be financially independent and no longer a drain on our finances?

At some stage along the way kids need to learn how money works. There is no substitute for earning it themselves and making their own decisions about what to do with it.

In September this year Westpac surveyed its New Zealand customers with children between the ages of 4 and 18 with 540 responses published in a report called Westpac Money and Kids Report. In more than half of the families surveyed (55%) the kids didn’t get pocket money with those who did, starting around the age of 6 at an average $10 weekly for kids under 12.

The time spent on chores for pocket money was 2.4 hours per week and the most common jobs were: Clean bedroom Do dishes Help clean the house Fetch groceries from car Take out rubbish Do laundry Wash car Mow lawn Based on the results of this survey Simon Power General Manager Business Bank, Private Bank, Wealth & Insurance at Westpac, concluded that “Kiwi kids aren’t getting the life lessons on understanding money, how to save it and as associated work to reward ethic.” Furthermore, “Doing chores at home for pocket money is one way a child can start to understand how to earn money, save it, value it and a lot more.”

I’m not sure about the pocket money idea. 2.4 hours per week seems a pretty measly contribution to all that needs to be done in a household. Having experimented with different strategies with our teenagers, the removal of privileges if they are not pulling their weight seems to work a lot better than the promise of rewards.

I also think that the psychological impact of earning money outside the home, away from Mum and Dad, is much more powerful than the pocket money effect and having their own money finally gives kids some control in their lives - which is what everyone wants and needs. You can’t forbid them from blowing it all on lollies, phone credit, clothes and parties, it’s theirs! That’s the way it should be too.

Psychologists Edward Deci and Richard Ryan developed the Theory of Self Determination. According to their research, people are driven by the need to grow and gain fulfilment. Gaining mastery over challenges and taking on new experiences are essential for developing a cohesive sense of self. The theory holds that every person has three basic needs in order to be happy. They must feel: COMPETENCE – mastery of tasks and learning different skills CONNECTION – a sense of belonging and attachment to other people AUTONOMY – need to feel in control of their own behaviours and goals I suspect we’ve all heard the term “helicopter parenting”. Mums and Dads hover noisily over their little darlings, closely supervising and controlling all that occurs below. Unfortunately this can detract from children’s autonomy not enhance it. Financial independence is just one of many competencies our children should master.

So where does all this lead us on our quest to farewell our children on the doorstep of the family home, confident that they won’t be coming back – at least not for money?

Step 1 Provide as much opportunity for them to earn and spend their own money while still at home. People learn best from first-hand experience.

Step 2 Let them think you are poorer than you really are. Let them feel the desire to do or have something they never did as a child.

Step 3 Let them fall, then let them work out how to get up again. Try the submarine parenting approach – close by but out of sight.

Step 4 Put money aside that you’ve agreed as a couple to contribute to your children’s future but don’t tell them about it!

NUMBERS Summer 2013 • 11

GOING SPARE WHAT ARE YOUR OPTIONS FOR SAVINGS & INVESTMENT?

12 • NUMBERS Summer 2013

Article by Wayne Powell STAPLES RODWAY ASSET MANAGEMENT wayne.powell@staplesrodway.com

Many of us have been faced with the quandary at some stage - where do I park some spare cash? It is money that you will need sometime in the future for a specific goal or a yet to be defined objective but it’s enough money to make you feel that you should “do something” with it.

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UTTING FUNDS ON BANK TERM deposit means that you need to keep QUICK FEATURES COMPARISON on top of changing interest rates to ensure that you don’t miss out on some return when the deposit rolls over. Also what length of time do you tie your money up for? Quite often what appears to be the SRIM FUND OF PIE FUNDS BANK TERM DEPOSITS best rate turns out to be not the best when rates rise and you are locked into a lower rate. $10,000 Varies from bank to bank Minimum deposit Nagging away in the back of your mind is the knowledge that there are some investments which have the potential to provide 0% 0% Entry fee a better return than cash deposits but how do you access these 0% investments? Will using these investments mean that you have to Varies from bank to bank Exit fee keep track of various markets, currencies and tax issues?

Capped at 28% Maximum rate 33% Tax We have established a unique fund that addresses these and many other issues associated with investing money. SR Investment YES Ability to add investment NO Management Limited have developed a Fund of PIE Funds, which Regular or ad-hoc contributions provide access to a wide range of asset classes, exposure to a number of specialist underlying fund managers, active management YES Ability to withdraw NO Regular or ad-hoc withdrawals to keep up with changing market conditions, a PIE structure with the associated potential tax benefits and the option to draw regular YES Income withdrawals Usually only at maturity income all wrapped up in one convenient fund.

Ad-hoc withdrawals What considerations are important for you? The following are Potential for capital gains NO just some of the issues to be considered: YES What are my priorities?

Diversified investment exposures NO What is my risk profile?

YES What is my investment time horizon?

Periodic rollover not required NO What level of liquidity is required?

YES What is the cost of running the investment?

Normal timeframe Short/medium How easy is the investment to operate?

Medium/longer What is the expected return?

Return volatility Interest rate dependent What are the tax implications?

Low How flexible is the investment?

Mindful of investor requirements, at SR Investment Management Limited we looked for a common sense investment in a volatile world, with low risk access to global markets while keeping costs down and proThe SR Fund of PIE Funds is designed to be a suitable option for a wide range of viding the potential for tax savings and the result is the SR Fund of PIE Funds. investors, including newer investors with $10,000 upwards to invest and estabTwo fund options are available, the Conservative Fund with the option for regular lished investors with $500,000 plus to manage. In either case, the SR Fund of PIE withdrawals and the Balanced Fund which is focused more on growth.

Funds offers good diversification, exposure to local and world markets, an efficient tax structure and lower fees when compared to a personalised managed portfolio.

For more information about the SR Fund of PIE Funds and to download a copy of the Investment Statement visit www.srim.co.nz or contact Wayne Powell at Staples Rodway Asset Management Limited (09) 309 0491.

The information, investment views and recommendations herein are provided for general information purposes only. To the extent that any such information, views and recommendations constitute advice they do not take into account any persons particular financial situation or goals and accordingly do not constitute personalised financial advice under the Financial Advisers Act 2008.

www.staplesrodway.com

NUMBERS Summer 2013 • 13

NOT-FORPROFITS UNDER THE SPOTLIGHT Article by Lisa Stirling STAPLES RODWAY TAURANGA lisa.stirling@staplestga.co.nz

& Jackie Russell-Green NATIONAL TECHNICAL MANAGER jackie.russell-green@staplesrodway.com

Recent economic uncertainty and upcoming changes to the financial reporting and audit requirements for not-forprofits make this a particularly challenging time for a sector that makes an important contribution to the lives of New Zealanders. National Technical Manager, Jackie Russell-Green, and Tauranga audit partner, Lisa Stirling, examine some of the issues that face not-for-profits as a result of those changes.

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EGISTERED CHARITIES IN NEW ZEALAND are currently required to file an annual return, with an attached copy of their financial statements, with Charities Services. There is currently no requirement for those financial statements to be audited or reviewed, although some charities’ constitutions or rules documents, and some funders, require an annual audit.

NEW AUDIT AND REVIEW REQUIREMENTS The New Zealand Government has recently announced new assurance requirements for registered charities. This assurance can be in one of two forms: An audit, which is a reasonable assurance engagement designed to provide a high, but not absolute, level of assurance. It results in a positive statement in the report produced by the assurance provider (such as that the information subject to audit is free of material misstatement).

A review, which is a limited assurance engagement designed to provide a moderate level of assurance. It results in a negative statement in the report produced by the assurance provider (such as that, on the basis of procedures which do not provide all the evidence that would be required in an audit, nothing has come to the reviewer’s attention to cause the reviewer to believe that the financial information does not present a true and fair view of the matters to which it relates).

An audit provides a higher level of assurance, but is more expensive, than a review.

The new assurance requirements for registered charities will be as follows: Registered charities with annual expenditure of $1 million or more will be required to have their financial statements audited by a qualified accountant Registered charities with annual expenditure of $500,000 or more will be required to have their financial statements reviewed by a qualified accountant.

These new requirements will come into effect for financial years starting on or after 1 April 2015. From 2016, Charities Services will monitor the financial information lodged by charities with their annual returns.

CHANGING FINANCIAL REPORTING REQUIREMENTS In addition to new assurance requirements, changes to not-for-profits’ financial reporting requirements are also being introduced as part of a suite of new financial reporting requirements for all entities in New Zealand.

Currently, all entities in New Zealand report under either New Zealand equivalents to International Financial Reporting Standards (“NZ IFRS”) or New Zealand Financial Reporting Standards and Statements of Standard Accounting Practice (which are collectively referred to as old generally accepted accounting practice, or “old GAAP”).

In the future, for-profit entities that have statutory financial reporting obligations will continue to report under NZ IFRS, but public benefit entities (“PBEs”) such as not-for-profits will report under standards based on International Public Sector Accounting Standards. Public sector PBEs, such as government departments, will report under slightly different accounting standards than not-for-profit PBEs. In addition, financial reporting requirements will be based on a tier structure, with more comprehensive and demanding financial reporting requirements applying to organisations with public accountability and to larger organisations.

For not-for-profit entities, the new suite of accounting standards will come into effect from 1 April 2015. In the meantime, the following financial reporting requirements apply for all PBEs, including not-for-profits: If the entity is a:

Then:

PBE that is not publicly account- Apply NZ IFRS PBE with differential able and either all of its owners are reporting exemptions members of its governing body or it’s not large PBE that was applying old GAAP at Apply old GAAP 30 June 2011 (or was established on or after 1 July 2011), is not publicly accountable and is not large Any PBE that doesn’t fit into one of Apply NZ IFRS PBE the two categories above NOTE: Publicly accountable = at any time during the current or preceding reporting period, the entity was an issuer, or the entity has the coercive power to tax, rate or levy to obtain public funds.

Large = exceeds any two of the following three thresholds: (i) total assets of $10 million; (ii) total turnover of $20 million; (iii) 50 employees.

NZ IFRS PBE = NZ IFRS for PBEs (in preparation for the introduction of PBE-specific standards, NZ IFRS has been split into different suites of standards, one of which specifically applies to PBEs).

For most not-for-profits this will mean continuing with their current financial reporting format until 1 April 2015, when new standards will come into effect.

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IT’S NOT JUST ABOUT THE NUMBERS THOUGH Although financial management and accountability are important, they are not the only factors that drive success. In the not-for-profits that Staples Rodway works with, we have identified three other key factors that have a significant impact on an organisation’s effectiveness. Those same factors are also important determinants of success for businesses.

Clarity of purpose The first factor is clarity of purpose. Those organisations that understand exactly where they fit into their environment, and what they uniquely bring to those who use their services, tend to be the most successful.

For not-for-profits, one of the most effective ways to make sure that you have a unique place in your environment is to regularly compare your mission statement/objective (as expressed in your constitution, trust deed or rules document) to what you actually do on a day-to-day basis and what those who use your services need.

Where there’s a gap between purpose, practice and need, a successful organisation will move quickly to identify what changes it needs to make and then make those changes. Understanding your reason for existence, and being comfortable that it meets Charities Services’ interpretation of what constitutes a charitable purpose, is also essential to maintaining your charitable status.

Quality of governance The second factor is quality of governance. The board/committee of a highly functioning not-for-profit is usually characterised by having: A commitment to achieving the organisation’s purpose in the most efficient manner possible The ability to strategise, to change as required and to explore new things, such as alternative funding sources Members with a diverse set of management skills, including good financial management skills, who are prepared to ask important questions and make tough decisions A commitment to putting in place, and monitoring compliance with, effective internal controls A commitment to meeting the requirements of funders and regulators An understanding of the difference between governance and management and a commitment to allowing managers to manage.

People management The final factor is people management, as those who have used an organisation’s services remember the people they dealt with rather than things like the organisation’s mission statement.

Effective people management involves having clear and reasonable expectations that tie into the organisation’s purpose, clearly communicating those expectations and providing staff and volunteers with the tools that they will need to enable them to meet those expectations.

CONCLUDING THOUGHTS Although businesses and not-for-profits typically have very different objectives, there are surprising similarities between the characteristics of a well-run business and a well-run not-for-profit. One of the key characteristics of a successful organisation is the ability to respond to changes as they arise. Not-for-profits will need to prepare for upcoming changes to financial reporting and assurance requirements to enable them to meet their new statutory obligations.

From 1 April 2015 not-for profits will need to prepare their financial statements under a new suite of accounting standards and may have statutory assurance obligations. Not-for-profits should start preparing for these changes as soon as possible, so that they can ensure the smoothest possible transition to meeting their new obligations.

NUMBERS Summer 2013 • 15

HEALTH & SAFETY CHANGES PLACE MORE ONUS ON BUSINESS LEADERS Article by Julie Rowlands STAPLES RODWAY TARANAKI julie.rowlands@staplestaranaki.co.nz

The government has made major changes to New Zealand’s health and safety workplace legislation in a bid to address New Zealand’s relatively poor workplace safety history. Julie Rowlands, Lead Organisation Development consultant at Staples Rodway Taranaki, outlines what these changes mean to business owners and managers and explains how an effective safety culture can be a powerful tool to improve quality, engagement, productivity and financial performance.

O

UR WORKPLACE SAFETY RECORD IN this country does not rank well internationally, while the Pike River disaster prompted a number of recommendations and a commitment from Government to improve this country’s performance in a critical area.

The key factors driving the changes legislation are: The Government has committed to implementing the recommendations of the Royal Commission on the Pike River Coal Mine Tragedy by the end of 2013.

The independent Task Force set up to produce a Health and Safety Report, concluded that workplaces across the country are “not fit for purpose” and called for “urgent, broad based change.”

The Government has set a target of reducing workplace fatality and serious injury rates by 25% by 2020.

WorkSafe New Zealand has been established to lead change implementation.

The first priority is the amendment of current Health and Safety legislation.

What does this mean for you and your business?

The reality is that there is far greater onus on Directors and Senior Management. As a Director or Senior Manager you are expected to exercise proactive due diligence to ensure that your business is meeting stringent health and safety obligations. Failure to comply will mean significantly tougher penalties.

Senior Managers must take a strategic look at Health and Safety as it can no longer be considered as just a compliance cost or as something that can be simply delegated. The 140 Chief Executives who attended the Business Leaders Health and Safety forum acknowledged the importance of Health and Safety and stress that there is a strong need to create effective safety cultures within New Zealand workplaces. Suffice to say, Health and Safety can no longer take a back seat.

The good news is that other than saving lives and reducing injuries, evidence from New Zealand’s Ministry of Business, Innovation and Employment clearly shows that a mature and strong safety culture improves productivity, increases job satisfaction and enhances business reputation. Furthermore, OSHA cites that effective Health and Safety programmes reduce illness and injury by 20% to 40% and realise a return of $4.00 for every $1.00 spent.

As a guide to reviewing your Health and Safety culture and the ‘way you do things’, here are a number of questions that help identify potential weak spots in your organisation:

16 • NUMBERS Summer 2013

Do you have a strong and honest reporting culture?

Do you care about ensuring your workers are home safe every day?

Do they think you care?

Do they care?

Are all employees committed to their own safe practices and will they report unsafe acts?

Is there clear engagement and participation?

Is there effective risk and hazard management?

Is there strong and visible leadership in health and safety in the business?

Do identified safety improvements get attention?

Are incidents investigated rigorously and are actions taken?

Are there measurable goals?

Do you have the right people with the right skills and motivation managing Health and Safety?

Putting staff through Health and Safety training, or merely having good health and safety systems is enough.

How do you build a mature safety culture and what do you need to do?

Many businesses, particularly those in the SME don’t have the capacity or resources to address the issues that these questions may identify. However, Staples Rodway’s Human Resources and Organisation Development consultancy team has significant experience in the field and is available to assist with: Reviewing and assessing your current culture, in particular the commitment to Health and Safety.

Building and developing cultures that reflect the vision, direction, strategies and values of the business, including the drive for a strong safety culture.

Developing skilled and motivated leaders who reinforce a strong Health and Safety culture and deliver against KPI’s.

Building mutual and individual accountability, and engagement of your team/employees.

Fully integrating Health and Safety management systems into the business.

Developing a culture where reporting of events is expected and habitual.

Developing strategies and action plans to deliver the change that will be required.

If you are a business leader and need to make critical Health & Safety decisions please contact Julie on 06 757 3155 (Taranaki) or Andrea Stevenson & Bonnie Lejunen on 06 878 7004 (Hawkes Bay) to discuss and plan your next step.

NUMBERS Summer 2013 • 17

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