SPRING NEWSLETTER

Robin Whalley

Associates Spring Newsletter

BLUE LAKE IN NELSON LAKES NATIONAL PARK

➢ Leading an effective boardroom culture is a fundamental enabler to adding value

➢ Boards have a key role in setting the tone for organisational culture & standards of behavior

➢ Mutual respect & clear separation of roles help underpin an effective board/management relationship

A combination of good structure and good culture create an effective board. In its Guidance on Board Effectiveness (2011), the Financial Reporting Council (UK) discussed the characteristics of an effective board:

“The board’s role is to provide entrepreneurial leadership of the company within a framework of prudent and effective controls which enables risk to be assessed and managed …

…An effective board develops and promotes its collective vision of the company’s purpose, its culture, its values and the behaviours it wishes to promote in conducting its business…

…An effective board should not necessarily be a comfortable place. Challenge, as well as teamwork, is an essential feature. Diversity in board composition is an important driver of a board’s effectiveness, creating a breadth

(spread of experience/skills), and breaking down a tendency towards ‘group think’.”

An effective board is not just a group of high performing individuals. It is a balanced team with complementary skills and a culture allowing them to work together to make effective decisions. Leadership from the chair and participation of every board member are crucial for effectiveness. A good chair may facilitate as much as lead directors to do their job.

Attributes of a healthy, constructive board culture:

➢ Dissent is not viewed negatively but managed with professional respect between board members

➢ Trust is fostered so disclosure and discussions are free and frank

➢ The board expects full information disclosure. An effective CEO provides timely, accurate and complete information to the board

➢ Bad news is communicated promptly and accurately - not filtered as it travels upward

➢ Effective directors are experienced in the rigours and subtleties of modern business

➢ Directors not limited to specialities

➢ There is flexible allocation and rotation of roles, board committee and project work – exposure to a range of company personnel

➢ Directors are challenged to present alternative scenarios and challenge their own positions/assumptions

➢ All directors contribute, no passengers

➢ Directors focus on the issue not the person

➢ Directors take responsibility for creating an inclusive culture that enables contribution with respect

Confidence in management is key. Directors take care not to undermine management both inside/outside the boardroom. Management has the same obligation.

Balancing performance and conformance enables the board to deal with important compliance, administrative and short-term performance issues, while allocating sufficient time to consideration of the company’s long-term future. Committees can assist with workload so the board focuses on strategic and core governance.

Full article at 2.1 Board Culture, The Four Pillars of Governance Best Practice, pg 54Institute of Directors in NZ 2017

It is believed these concepts can easily be applied to business owners, committees and other leader situations, ‘setting the tone from the top’

Risk and Reward Board Culture

SPRING NEWSLETTER 2

SLOW PAYERS COST YOU REAL MONEY

You know you have to get your debtors to pay, but do you understand the true impact of slow payers? Without a realistic picture of the direct and indirect costs of slow payment, you may be hurting your business by:

• Reducing your cashflow.

• Creating a snowball effect – if debtors think you’re relaxed about payment, you encourage them to be slow.

• Building up your debtors, leading you to let smaller debts slide.

• Chewing up valuable time & resources in managing slow payers.

What you can do

• If credit reporting information shows a customer is a slow payer, you can put tighter terms in place.

• Use online tools to manage receivables*.

• Be straight up about discussing alternate invoicing patterns, payment options and terms.

* For example: ARCollect, Innovative Online Debt Management (IODM), Credit2Control, and so on. Many believe the continued expansion of the financial web will help small businesses make smarter decisions, improve cashflow, get paid faster and access capital quickly. At the same time, traditional practices still go a long way to helping small business stay on top of debtor management.

If you don’t have large reserves of cash, you may want to reduce your terms to 10 or 7 days. You should also:

1. Be up front. Explain “how we do it here”. 2. Quantify fees in advance. 3. Bill regularly. 4. Bill as near as possible to the conclusion of work segments. 5. Where practical, present the account to the customer. 6. Provide payment options. 7. Consider fixed fees. 8. Follow up debts systematically and often. 9. Explain the value of the work. 10. Build a relationship and show your value.

In the case of debt collection costs, the Fair Trading Act requires you to disclose your terms of trade to customers at the time credit is given. Your terms of trade must include provision for the recovery of collection fees. Make sure your terms of trade are clearly identified on your website, invoices and statements.

Do large businesses really call the shots? Large companies are “killing” New Zealand’s small businesses by making them wait too long for payments.

The need for a policy or terms of trade is crucial when it comes to smaller business working with larger companies. For example, New Zealand’s largest firm, Fonterra, changed its payment terms for contractors and suppliers last year, so now it can take a small business between 60 and 90 days to get paid (D Birch, SmartAR, Accelerate, July 2017).

According to a recent report from Dun & Bradstreet, larger companies were the slowest to pay, averaging 8.1 days later than normal (NB: This varies from year to year based on the size of the firm).

payment:

• Make sure you have a clear and signed terms of trade agreement.

. Could diversity be your lost business opportunity?

1-in-3 customers with a disability has ceased a transaction with an organisation because they were not treated respectfully or fairly (Australian Human Rights Commission’s (HRC’s) report, Missing Out: The business Case For Customer Diversity).

24% of NZ’s population has identified as disabled (2013 Disability Survey), companies should be very aware of how they interact with this and other often underserviced groups.

“A big question for any organisation is can they afford to ignore their diverse customers and in doing so, is there a hidden impact which accumulates over time,” says Cindy Hook, CE of Deloitte Australia. While companies may look to accommodate the diverse needs of their employees, it seems they’re failing to give customers the same consideration. Only 46% of the 1200 customers surveyed agree organisations try to understand the needs of diverse customers, eg, people from non-Anglo Celtic backgrounds, LGBTI (lesbian, gay, bisexual, trans and/or intersex), and people with disabilities.

About 1-in-4 of those surveyed said they had been underserved and their needs unmet – a lost sale in effect. That figure rose to 39% for customers from Indigenous backgrounds and 35% for people with a disability. For LGBYI customers it rose to 42%. Customers in these groups are twice as likely as the general population to dissuade others from using a product or service if a company has negative reputation with diverse customers. However, they will also be advocates if they have a positive experience

SPRING NEWSLETTER 3

CHANGES TO ‘SAFE HARBOUR’ RULES As part of the changes to the provisional tax rules, the Bill increases the current ‘safe harbour’ threshold at which UOMI (interest) applies, from $50,000 to $60,000, and extends the safe harbour to companies. This will apply from April 1 this year (for 2018 Tax year)

In the past UOMI has been ‘seen’ as unfair, because even if a business paid the correct amount of provisional tax during the year it could still incur the interest.

The safe harbour threshold basically means that if you pay provisional tax using the Standard uplift method (last year’s tax bill, plus 5%) and your tax bill is less than $60,000, you won’t be hit with interest (UOMI), as long as you pay any final balance by your terminal tax date.

If your tax liability is $60,000 or more, and you have paid provisional tax for the year based on the standard method, the IRD will not charge UOMI at the first and second payments. The final balance will be due at your third provisional tax date. IRD interest applies on any underpayment of tax from the third provisional tax date

Before the third provisional tax payment we can assess your year’s trading and work out how much tax you need to pay. Please let us know if your income increases at any time during the year!

The amendments have 3 requirements: 1) need to pay the 3 instalments under the standard method to use the safe harbour; 2) prohibit a taxpayer who has a provisional tax interest avoidance arrangement from using the safe harbour and 3) you cannot change to the estimation method if you have paid the first 2 instalments under the standard method.

In addition, there are new rates for UOMI. As from 8 May, they have changed to:

• Underpayments - 8.22% (down from 8.27%). What you pay on money you owe to IRD.

• Overpayments - 1.02% (down from 1.62%). What IRD pays you on money it owes to you.

It’s important you pay the uplift amount on the provisional tax dates required or you’ll run the risk of incurring UOMI. IRD will charge UOMI on the uplift amount or a third of the actual liability, whichever is the lower amount. Late payment penalties will also apply if payment is not made on time.

Volatile or seasonal income means you may prefer to use the estimation or GST ratio methods to calculate your payments – in which case you will be subject to the same provisional tax rules as before.

The new pay-as-you-earn option, the accounting income method (AIM), which IRD hopes will address those issues, is not available until 1 April next year (to coincide with the start of the 2019 tax year).

Until then, it is important to talk to us if you are going to have trouble meeting your provisional tax obligations.

Litigation funding: friend or foe?

The litigation funding industry in NZ is less developed than it is overseas. This is changing, and litigation funding is on the rise.

Directors can be targeted in these cases, as can others who have the perceived ability to pay via their insurance policies, eg large organisations and professionals.

There are no specific legislative/regulatory provisions governing litigation funding in NZ. Anyone in NZ can call themselves a funder.

Large litigation funders are often backed by hedge funds, private equity firms or wealthy individuals attracted to investing in substantial return areas.

DirectorsBrief Issue3 2017 – Please contact us for the full article if you would like more information about this

Inland Revenue Webinar

IR Business Transformation for Bookkeepers

When: Mon 4 Dec. Time: 2:30 - 3:15 PM.

COST: FREE

Presenter: Rachael Hopkinson, BT Account Manager for Professional Bodies, Inland Revenue

Bookkeepers will find out about the changes planned for 2018 including:

• - PAYE filing

• - Payday Reporting Proposals

• - myIR enhancements

LEARNING OUTCOMES

Bookkeepers will have a better understanding of the changes planned for 2018, and what they will

need to do to prepare. COST: FREE.

http://www.cchlearning.co.nz/events/1302-ir-business-transformation-for-bookkeepers/

Please copy/paste above link for more information and to register

SPRING NEWSLETTER 4

Du Changement chez les consommateurs francais

Selon les statistiques, les habitudes de consummation alimentaire des Francais sont en train de changer. Ils vont moins dans les supermarches et preferent faire leurs courses sur les marches pour acheter des produits frais. Ils boudent le lait

(-8%) et le sucre (-6%). Les consommateurs veulent aussi acheter moins et mieux. Ils se tournent de plus en plus vers le bio, qui continue sa progression (+20% en un an).

Carole Bachelet, Bien-dire no.113, July-August 2017

(for those who do not speak French … According to the statistics, the consumption habits of the French are changing. They buy less from supermarkets and prefer to buy fresh produce at the markets. Their consumption of milk (-8%) and sugar (-6%) is declining. Consumers also want to buy less and better. They are turning more and more towards organic, which continues its progression (+20% in one year))

This is a trend also reflected in Nelson … with our market garden shops out in Hope/Richmond busting at the seams with customers.

Business Perspective

SPRING NEWSLETTER 5

Rohingya Refugee Camp

By Jimmy Griffith (ShelterBox)

Name: Guljar, 40 years old

No husband (he died 5 years ago)

Children: two girls, 15yrs & 12yrs & one son, 9yrs

Oldest Daughter has one child, 18 months old.

In Myanmar they had a home and a small farm with a few animals. Life was good for them until they became concerned for their safety.

They decided to leave. At midnight they cooked up all the rice they had along with some pickle. They left in the early hours of the morning under the cover of darkness.

They headed for the mountains. They couldn’t take the roads as they knew this could lead to trouble for them. Guljar travelled in a large group of 20,000 to 30,000 people, as there was safety in numbers. If you were in a small group, you would probably be attacked.

It took them 3 days to just go up the mountain which had no tracks to follow while carrying what they could along with a small child.

As they were running out of food other people supported them if they could and as they passed houses some of these people helped as well.

They found a place in the river that they could cross that wasn’t too deep.

Guljar and her family spent their days and nights out in the open until they were given a 3m by 5m small plot of land beside many others. The land was kindly given by the Bangladesh government for over 600 000 Rohingya Refugees. Guljar was given black plastic sheeting, bamboo poles and rope so they could make their shelter. They are so grateful for everything they are given. Unfortunately, there are no trees around which makes it very hot under the black plastic with the extreme sun (33-36 degrees), also when it rains they leak.

When it rains the ground turns into mud, so they need to stay inside which they find cramped and very hot.

The people in the camp are concerned because the cyclone season is coming soon.

SPRING NEWSLETTER 6

Disclaimer

This publication has been carefully prepared, but it has been written in general terms only. The publication should not be relied upon to provide specific information without also obtaining appropriate professional advice after detailed examination of your particular situation.

We have been asked by the cluster meeting (where all the NGOs meet so we can work together) to please help the people by giving materials that will last against the weather as the ones they have now won’t last. This isn’t a problem for Shelterbox. The problem we all have is our resources are stretched with man-power and finances all over the world at the moment.

So, I’m very grateful for everyone that has helped.

Jimmy quote.

“As I look around I see thousands of shelters everywhere. Just imagine, if I was to take my home town Nelson, New Zealand of 60 000 people and times it by 10 and

just put everybody together in a small space with no toilets or running water. Add in extreme heat and rain which causes more hardship.

Now you have a ticking time bomb for diseases. Now you can imagine some of the challenges we face at the Rohingya Refugee camp.”