Getting paid faster

Reprinted from our April 2016 newsletter!

Cash flow is critical for small businesses and one of the best ways you can maximise your cash flow is to get paid faster and leave less sitting there in unpaid invoices you have issued.

Currently the average time it takes for a small business to get paid is around 40 days, although for business using Xero for invoicing this is less, closer to 30 days. That is consistent with what we experience.

getting paid

There are some simple things you can do to get paid faster:

  1. No surprises. Make sure your client knows what it will cost up front and when you will do the work.
  2. Invoice as you go rather than once a month. If you have finished the job then send the invoice while it is fresh in your, and the clients mind.
  3. Date your invoices appropriately. Larger organisations and government departments tend to pay on the 20th of the month after your invoice date, so using 30 April as an invoice date could result in you being paid a month earlier than if you used 1 May as the date.
  4. Make it easy for your clients to pay. Make sure you bank account number and payment instructions are easy to find on your invoices. With Xero it is straight forward to connect a payments gateway to take online payments.
  5. Regularly follow up your overdue invoices. You can use aged receivables reports or in Xero the Overdue invoices dashboard to see at a glance who is overdue. In Xero you can set automatically emailed invoice reminders triggered when an invoice becomes nearly due or overdue. For some clients though a phone call may work best. Around the 23rd of the month is a good time to follow up the overdue invoices as a lot of businesses have invoice runs that pay on the 20th.

In Xero you can add the accounts receivable days to your business performance dashboard to track how you are going.

business performance

Seminar Series – October 2015

We are running the following three FREE lunchtime seminars:

 

Seminar 1: The key numbers for your business
Tuesday 6 October 12:15 – 1:15 pm  – this seminar covers the following:

  • Accruals vs cashflow
  • How to get your money out of your business – drawings, dividends, salary
  • Shareholder current accounts –  drawings and funds introduced, what they mean and how they work
  • What can the financial statements tell you?
  • Effect of closing stock figures
  • Key ratios e.g. debtor days, gross profit
  • Effects of small movements
  • How to increase your income without working more – the power of leverage, claiming all costs etc

 

 

 

Seminar 2: Your Personal Finances
Tuesday 13 October 12:15 – 1:15 pm – this seminar covers the following:

  • Your approach / personality
  • Types of investment
  • How to get ahead
  • Budgeting – does it work?
  • Reducing your mortgage
  • Where to from here?

 

 

 

Seminar 3: Xero Update
Tuesday 20 October 12:15 – 1:15 pm – this seminar covers the following:

  • Using Xero to claim expenses paid for personally
  • On charging expenses to clients
  • Find and Recode
  • Inventory
  • Payroll
  • Repeating invoices, email templates and email reminders

 

Your presenters:

 
Baubre Murray FCA – Director of Dowse Murray Chartered Accountants – an accountant with more than 25 years experience working with business owners.

Martin Dowse BSC (Hons) – Technology specialist with more than 25 years experience working with technology systems

All seminars are being held at Level 1, 166 Featherston Street.  Note that this is in the meeting rooms on the first floor of our building, not in our own office.

Bring a friend but please RSVP as soon as possible as we have only a limited number of seats for each seminar.

RSVP by email to martin@dowsemurray.co.nz or phone us on 04 971-1600.

Looking forward to seeing you!

A really easy way to record and claim expenses in Xero

Xero is great – we are big fans of it here! But some bits are not quite as great as others, and the expense claims in Xero in particular have less greatness. They work but they are long winded, easy to get wrong and hard to fix if you do get it wrong. However the Xero app for iPhone/Android does have a neat feature where you can photograph a receipt and attach it to an expense claim all in one go so it is still tempting to use expense claims.

If you don’t need the create/submit/approve/authorise/pay workflow wrapped around expense claims then there is a better way. Really fast, really easy.

For any of our small business clients with a version of Xero that has invoicing (i.e. not the cashbook version you can only get through accountants) we recommend they use a accounts payable invoice (aka bill) to record expenses they pay for personally and then “pay” it from funds introduced as detailed in our FAQ here.

You can drive this all from your phone very easily, all you do is snap a photo of any receipt(s) you want to claim and email the photo to the unique “files” email address each Xero organisation has – set your Xero files address up as a contact on your phone first.

files

When the email arrives the attachment is automagically saved into an files inbox in Xero. Then when you have a bit of time and want to process your expenses you logon to Xero, go to the files inbox, tick all the photos of receipts sitting there and take the option to Add to new / Bill.

inbox

 

Complete the bill using the handy preview of each receipt on the left and making sure it is set to be tax inclusive.

bill

Then the last step is to approve it and pay it from Funds Introduced.

paid

I process my receipts every two months when I do the GST return, dating the bill and payment the last day of the GST period to make sure it is included in the return.

If you don’t have a version of Xero with invoicing then there is an option to create a spend money transaction instead of a bill – you would need to set up a dummy Petty Cash bank account in Xero and periodically clear it out by doing a receive money from Funds Introduced but it should still be pretty quick to do.

 

What is the best payroll system for small businesses in New Zealand?

We have had a number of clients call us lately asking if they should be looking at using Xero Payroll so I thought it about time that I summarised what I have been telling them in one relatively concise post. If you want more detail contact us.

With sick pay, holiday pay, termination pay, PAYE, student loans, and Kiwisaver deductions payroll can be a very complicated thing and if you get it wrong and miss a payment to IRD you are looking at a $250 late payment penalty plus the hassle of fixing up the mess. So using the right payroll system can save you a lot of time and gnashing of teeth.

Broadly the choices are:

  1. Do it all manually using the IRD calculators
  2. Use a DIY payroll system that does the calculations for you and tells you how much to pay your staff and IRD – Xero payroll falls into this category
  3. Use a full service payroll provider that does it all for you
  4. Thankyou payroll

Manual payroll 

You use the IRD calculators to figure out how much you pay your staff and what you need to pay IRD for PAYE etc; You pay your staff and on the 20th of the next month you pay IRD the PAYE, and file with them two forms, the IR345 employer deductions form and IR348 employer monthly schedule. If you have a login to IRD’s myIR you can file these electronically.

DIY payroll

There are a number of desktop and online systems here of which Xero is one. The systems provide a workflow that helps you manage paying staff and a calculator that works out how much you pay your staff and IRD, and what you to put in the IR345 and IR348 forms. Some of these payroll systems (e.g. Xero) also provide export files that you can upload to myIR for the IR 345 and IR348 forms, and batch files you can upload to the bank to pay your staff and IRD.

Xero Payroll is a good online full feature DIY payroll and getting better all the time. Another good option is Flexitime, with Flexitime you do get the option of allowing them to manage your PAYE filing and payments if you want.

Full service payroll

Now things start to get easy. When you sign up with a full service payroll provider you give them direct debit authority to your bank account. You fill in or check the time sheets for the employees and authorise the pay and the payroll provider does the rest. They direct debit the full amount of the pay from you on the due date and pay the staff. On the 20th of the next month they pay IRD (having already taken the PAYE $ from your account when the pay went out) and file the IR345 and IR348 forms for you at IRD.

We use and recommend online providers Smartpayroll and iPayroll.

Thankyou payroll

Thankyou Payroll gets a category of its own as it is just a little bit different.  It is very like a full service payroll except rather than direct debiting the full pay amount from your bank account you make the payment to Thankyou payroll each pay period. They still do the form filling and paying IRD. Updated: There is also a direct debit option, see Hugh’s comment below.

So which payroll is right for you and what will it cost?

The short answer is an online full service payroll or Thankyou Payroll are the best, and the best value, and these are the ones you should look at.

Manual payroll costs nothing but your time (and any penalty payments if you get it wrong). If you pay one or two people on salary and you do it via AP (same amounts each month) and you have a good 20ths of the month process and you always file things on time with IRD and you love doing paperwork then this is the payroll system for you.

Xero payroll is interesting but it still needs you to do the uploading and paying.  You can add payroll to starter, standard or premium plans for $10 for the first user per month, and $1 per month per extra user (all plus GST). At the time of writing this Xero don’t have a dedicated payroll helpdesk, if you need help it is via email to their normal helpdesk.

Who should use Xero payroll? If you have Xero already, and really want to hang onto your PAYE $ until the last possible minute, and you are disciplined about filing and paying IRD on time then Xero payroll is a good option.

If you are considering Xero payroll also look at Flexitime. There is a comparable basic $10 per month plus $1 per employee per month (up to 10 employees) plan with email support, or $20/$2 with telephone and email support and more features.

Full service payrolls are definitely the easiest and least risk. They do it for all you, no risk of missing payments to IRD. For Smartpayroll and iPayroll it will cost you around $25 – $35 a month for up to 10 employees. They also have very good email and telephone support help desks – invaluable if you have to work out termination pays or anything out of the ordinary. They also integrate with Xero.

Who should use a full service payroll? Anyone who has to pay staff should. They easily pay for themselves in the time they save you, even at minimum wages.

But there is more – Thankyou payroll is very close to being a full service payroll and it is free. The catch is that you have to transfer/DD the full pay to them three days before it gets paid, so they hang onto your money for a bit longer. If you are a charity, or donate regularly to one, or pay a small fee, then you can get next day payroll processing. Thankyou payroll also have a helpdesk.

Who should use Thankyou payroll? If you pay staff it is worth a look – the price is right and we have had good feedback from clients of our using it.

thankyou

The things that are important to us

Every accounting practice is different – these are the things that are really important to us:

It’s all about people

It isn’t about selling products or services, it is about helping people and making a difference. Clients, staff, our families, suppliers and the public – we treat people the way we would like to be treated and if we do this well the dollars and cents fall into line.

Responsiveness

An absolute priority is being responsive to our clients, answering phone calls and emails promptly and providing timely and understandable information.

Pro-activeness

If we see things that are not right, we will alert you and help you fix them. If we think you can improve or develop your business we will talk to you. We won’t hard sell or tell you how you must run your business, that’s your job and you will know a lot more about it than us, but we are happy to share with you what we have learnt over the years.

One thing we focus on is minimising taxes for our clients – why should anyone pay more than they have to? And if a client comes to us with out of control tax debt – we sort it out.

Being up to date

To be able to provide the best service we need to be up to date with accounting and taxation rules, best practices, and technology. Baubre is a member of the Chartered Accountants Australia and New Zealand Council, their NZ Regional Council, the NZ National Public Practice Advisory Group, and has been a member of the NZ Special Purpose Financial Reporting Group. We were very early adopters of Xero (2007) and have had a lot of ongoing input to Xero since then. Martin is currently a member of their Global Advisory Council.

Using technology effectively

Technology has been a huge time saver for us and our clients – but it has to be simple and good value technology. Often when clients move to us they are still using old desktop accounting systems and a manual payroll system. Just by moving them to Xero and an online payroll provider saves them many hours each week.

One size does not fit all

Accounting is not a sausage factory. While we streamline and automate where we can every single client is different and this requires experienced and appropriately skilled staff to make the right decisions to get the best result. Our staff are qualified Chartered Accountants and we do all accounting work in-house, we don’t outsource our accounting work to third parties.

Price is what you pay – value is what you get (Warren Buffet)

We strive to provide the best service and the best value. We publish our rates on our website, tell you what your job will cost and when we will do it, and we stick to it. We don’t charge you every time you pick up the phone and call us or email us.

We don’t use paid advertising either, all our clients come from referrals or via our website. If you have friends that we can help or if you would like to talk to us about other ways we can help you then we would love to hear from you!

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