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October 2006

Some customers are from Hell

  CUSTOMERS who complain can give you a valuable opportunity to grow your business for these reasons:
    I. If the customer complains, maybe many of your other customers are having the same bad experience and not telling you. You stand to learn something revealing about your business.
    2. If you can respond to a complaint by surprising your customer with the amount by which you exceed their expectations, you may be able to create a champion for your business. Imagine the customer who tells people: "Not only did she fix... but she went further and..." The complaining customer provides you with a great opportunity to show how much you care for your customers.
  However, really aggressive complainers can be a problem. You can deal with them in several ways.
    • Start by being professional. You will have no control over what the customer will say and the complaint might be made in public. Just be very careful what you say.
    • If the customer insists on letting off steam, let him. You won't score any points with your on-looking customers by arguing. It is better to let the steam out of the pressure cooker.
    • When the customer has had his say, do not respond by blaming your staff. This will only damage their morale. Besides, it makes your firm look spineless.
    • Try to negotiate a settlement. Here is your opportunity, if the complainant has a fair case (and many do), to go the extra mile and impress. Be quick to apply the solution. You do not want the problem to fester. Settling a justified complaint might mean a sacrifice on your part. Be prepared for this.
    • Empower your employees with the authority to make major decisions. The employee who can resolve a problem on the spot makes the firm look good.
    • If a staff member does not have the required authority to reach a settlement, she should immediately arrange for the customer to see the manager. Any delay while this occurs does not help to cool the situation. It might even turn into an opportunity for the complainant to start up again, so make it as short as possible. 
  When you encounter the customer who is not right (a rare occurrence) go through the same process. If you, as the manager, are caught with outrageous demands, you might have to tell the customer you have noted the complaint and want time to work out the best solution and you will get back to him by... Then find a way, later , of encouraging this person to go elsewhere, preferably, without leaving, him with a bad taste.

Can I claim this for GST?

  DO you ever wonder whether you are entitled to claim GST on a business cost? For example, what about a cost which is not claimable for income tax purposes, overseas travel or some expense which looks like a financial service?
  The answer is simple. Look at the bill you receive. Is it a Tax Invoice? To be one it must have, at least, the words Tax Invoice clearly printed on the document and show the firm's GST number.
  If you do not have a Tax Invoice for any item costing $50 or more, you are not permitted to claim GST. You will not be able to get a Tax Invoice for overseas travel because it is exempt from GST.
  A business cost, which is not a tax deductible claim for income tax purposes, may be charged on a Tax Invoice so GST could be claimed.

Use stories

  WHEN promoting your business, either by means of public speaking, newsletters, your website, blog, or any other means, remember the truism "A picture is worth a thousand words."
  We love to listen to stories. Use them as your pictures. Some of the most enjoyable speeches are just several stories strung together. 

KiwiSaver all go from 1 July 2007

  THE details of KiwiSaver have been finalised and it's all go from 1 July 2007.
  The Government made several last-minute changes to the law. One of these was to allow up to half of an employee's contributions to be applied to paying off their home mortgage. The Government included two conditions:
    1.The fund managers do not have to allow part of the contributions to be applied to the mortgage. They might not want to reduce the size of the fund they control, so they might not allow the worker to use some of the contributions to pay a mortgagee. Besides, paying money to mortgage companies will add to their administration costs.
    2. The bank supplying the mortgage does not have to agree to accept payments from a fund manager. 
  We were interested in a comment made by investment commentator Dr Gareth Morgan on Campbell Live, broadcast on 15 September. He said the best investment a couple could make was to pay off the mortgage on their house first. He would not want them to start other forms of saving until this was complete. He said paying off a mortgage is equivalent to investing at about 11 percent and he could not match this rate.
  If you agree with Mr Morgan, you could help your staff by choosing a savings scheme for your firm which will allow mortgage repayments. Your firm does not have to use a fund chosen by the Government.
  KiwiSaver will have a big effect on all businesses that employ staff. More information will come out over the next few months. We think it is too early to bombard you with all the facts. Our first newsletter next year will list the main points of the scheme.
  Employers are going to be deducting 4 percent of gross wages from employees' pay packets or 8 percent if the worker wants to save more. Although the scheme is voluntary, the Government has made it attractive for your staff, so many probably will join it.

Accounts receivable = sundry debtors

  SOME of our clients have difficulty with the concept of accounts receivable, otherwise known as sundry debtors. This is the money owing to the business at balance date.
  It is money earned but not yet paid to your business. If you write out invoices in April for work you have completed in March (assuming, a March balance date), you must add these sales to the the business income for the year. Income is taxed on the basis of your earnings, not the money you have received.
  You might also have earned money in earlier months which has not been paid to you by balance date. This is also part of accounts receivable.
  To muddy the waters, the GST law and the Income Tax law are in two separate watertight Acts of Parliament. If you are on a payments basis for GST, you do not have to include accounts receivable in your GST return. It follows that any expenses incurred before your balance date which are paid after balance date are tax deductible. We call these accounts payable or sundry creditors.
  It all evens out.
  While it is true your income is increased by the amount owing to you, these earnings are not counted twice. When we come to do the next year's accounts, the first thing we do is deduct last year's accounts receivable from your sales figure. Inland Revenue cannot tax you twice on the same income.

Tax calendar

November 7    2nd instalment 2007 Provisional Tax (March balance date)
                       2006 Terminal Tax (October balance date)
December 7    3rd instalment 2007 Provisional Tax (December balance date)
January 15     GST November 2006 
                       2006 Terminal Tax (December balance date)
February 7      2nd instalment 2007 Provisional Tax (June balance date)

Beware UOMI:

  IF you expect your business taxable income to exceed $112,000 for the 2007 financial year (31 March for most) for the first time, contact us for a tax estimation and save 13.08 percent interest. 

Overseas chip tip

  UK credit cards now have chips in them. This could cause you some trouble.
  Our banking advisor says: "There have been isolated reports of some overseas card- holders being told by shops that if they do not have a chip and PIN card they will not be able to use their cards. This is incorrect. You will be able to use your cards as normal in UK shops. If a retailer does not accept your card, insist that the new rules specifically exclude overseas cards and urge the retailer to insert the card into the terminal. It will read the card and instruct the retailer to ask you for your signature."

A guarantee to delight

  "WE are absolutely committed to your enjoyment and satisfaction when you dine with us. So if you are not delighted with your meal it will be replaced without question or you will not be charged." Baguette, Racecourse Road, Brisbane.
  Notice: If you are only "satisfied", Baguette will honour the guarantee. They expect you to be "delighted".
  We also noticed, they don't interrupt your conversation to ask how you like your meal, nor do they loudly ask if you want more wine. They are discreet.
  It is another example of how a firm has successfully made itself different from its competitors.

In brief

Play safe on the internet

  Ever thought of having two credit cards, one for normal purposes and the other for the internet? The second one should be set with a low limit, so if anyone gets hold of your account number and tries to defraud you, the loss will be quite low. Enjoy making purchases over the internet and feeling more secure about giving out details of your credit card. If you want to make an unusually large purchase, top up your account in advance to cover it. A variation is Westpac's Titanium SideCard, which has a reducing daily purchasing limit.

Ask for references

  The following is the text of an email received recently. "Hope that everything is well with you. I was hoping that you would be able to provide me with a testimonial for the overload work I did for you while your secretary was away. If you do, then I hope you don't mind me putting it on my website or publishing., it publicly. If you ever need any help, please send me an email." Do you ask for referrals? If not, why not?

Add to your AA test

  Websites such as The Dog and Lemon Guide might be able to supply you with a run-down about the car you are thinking of buying. Referring to a high- profile, expensive brand of car, The Dog and Lemon had this to say: "Avoid like the plague". Its report listed engine problems, electrical problems etc. Five dollars spent on a report off the web could be an excellent investment.

She left it too late

  A CLIENT in her early 60s sought advice from us about family trusts. Her husband had just been diagnosed as having Alzheimer's disease and the prospect of long-term care was looming. She could see their retirement nest egg melting away.
  However, even if she was prepared to pay large amounts of gift duty, we could do little to help her.
  If you think you should have a family trust to protect your wealth, start learning about family trusts now and make a decision. Don't leave it until it's too late.

Is an ex demo car a good buy?

  COMPANIES that have cars available for private use are subject to Fringe Benefits Tax (FBT), which is based either on the cost of the car or its Tax Book Value (the amount it is stated to be worth in the company accounts).
  If you choose to pay FBT based on Tax Book Value, your FBT reduces as the Tax Book Value reduces.
  New cars have a higher depreciation rate than second-hand ones. They are depreciated by 36 per cent, instead of the usual 30 per cent, of the reducing value each year.  Thus the Tax Book Value reduces faster for a new car. Therefore the FBT, when calculated based on the Tax Book Value, also reduces faster on a new car. If you buy an ex- demonstration car, it is second-hand and you will not be entitled to the 20 per cent extra depreciation (30 per cent, not 36 per cent).
  Do your arithmetic. If you are using Tax Book Value for calculating FBT, you could be better off buying a new car rather than a second hand-one which is close to the new price. You might need to see us for an explanation of how the new FBT rules work and to help you choose the better option. 

Your business can run better without you

  WE talk of business success, but what about business succession?
  Very few people plan their exit from their business.
  When should you start planning for someone to take over from you? If you subscribe to the Stephen Covey concept of "begin with the end in mind", you should start planning, your exit before you even start your first day in your business.
  Common problems caused by not having someone able to do your job include:
    • Feeling trapped in the business with no easy way out.
    • Your staff have no choice but to come to you when important decisions need to be made. The business remains totally dependent on you
    • You can rarely take time off for a proper holiday and even if you do get away, you can't stop thinking about how the business is surviving without you.
    • If you sell, you might get less for your business or be asked to commit to a period where you have to work in it to train the new owner.
  Plan for your succession by having someone else able to do your work, and enjoy these benefits:
    • You can focus on more important strategic issues, rather than being bogged down by urgent day-to- day tasks. You can then be more effective and make the business more profitable.
    • You can take holidays when you like, because you know the business can run without you. This allows you to come up with new ideas to improve the business.
    • The business has a value in its own right. You have choices. You can sell the business or you can continue to own it and derive the profits.
    • It will sell for a higher price and will be easier to sell.
    • Your life is freer of stress.
  Should you start your succession planning now? We think so.
We acknowledge assistance from Progressive Business Solutions Limited for this article.

They did it their way

  BRIN and Page founded Google. They focused on perfecting their search engine at the expense of making a profit. This drove their two venture capitalists, who could see themselves losing their money, to distraction.
  What if perfection was never achieved? One venture capitalist decided Google needed a general manager and persuaded the principals to appoint one. However, Brin and Page refused to do so until they met someone who fitted their culture, seeing business as they did.
  You might remember Yahoo and Ultavista. Google took over as the leader because it worked out how to make its search engine produce far better results than its competitors. One big firm after another switched to Google.
  The company took a novel approach to earning money.
  While other search engines sold advertising, space, Google split their page into two thirds search results and one third advertising. They then arranged the advertisements according, to the number of hits and charged for each hit. At last money started to flow in to Google, and when it did, it came in very large quantities.
  Occasionally, competitors will try to build up valueless hits to put their foes out of business, but it still pays for Google to give away credits when this happens rather than change their method of charging.
  Brin and Page, in spite of pressure from their financiers, put quality before profit. They added to their success by reviewing the way aearch engines charge and they found a new and more profitable approach. They did it their way.

The most expensive

  SELFRIDGES, in London, is selling sandwiches at £85 each. Two slices of bread encompass loads of filling.
  What makes these sandwiches so special?
  This is what you get:
  Wagyu beef specially grown in Japan for its flavour, foie Bras, black truffle mayonnaise and other high-priced ingredients. It's a big, sandwich weighing almost 600gm.  Selfridges, of course, hopes to sell a reasonable number to make a profit, but even if it doesn't, the free publicity will handsomely repay any losses on the sandwiches.
  Can you create a novel news item for your business? Newspapers are always hungry for a good story. You provide the story and the newspaper gives you invaluable publicity. You and the newspaper both win.

All information in this newsletter is, to the best of the author's knowledge, true and accurate. No liability is assumed by the
author or the publisher for any losses suffered by any person relying directly or indirectly upon this newsletter.
You are advised to consult professionals before acting upon this information.

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About Us

We are a friendly two partner practice with approximately eleven staff located on Apollo Drive, Mairangi Bay. Our clients are varied and our skills range from business structuring to trusts to Look through companies and tax planning.
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63 Apollo Drive, Mairangi Bay, Auckland
P: 64 9 478-5292
E: jmv@jmv.co.nz
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