Beyond the Numbers Issue 10

04 Points for presentation Living Edge Interiors’ growth through diversification

10 Flexible when it counts How European Ceramics have grown the family business

I SSUE 10

LYDIA KO

On top of her game EXCLUSIVE INTERVIEW

12 ASB Showgrounds make the numbers matter NFPs rely on good reporting

We’ll help you reach your goals Whether your business needs a boost or is just starting to make waves, Hayes Knight has the expertise to help you reach your goals. We are here to help you navigate your way through tough business decisions on the path to success.

Reach for your peak performance - contact us today Visit hayesknight.co.nz

CONTENTS

The road to peak performance Hot on the heels of the Rio Olympic Games, we dedicate our latest issue of Beyond the Numbers to high performance. Although your business may not be on the road to Rio, undoubtedly you are aiming to be the best you can be. We know that clients share our pursuit of excellence; whether that means training and developing teams, reaching targets or overcoming hurdles – they are all reasons to celebrate success.

In this issue we are delighted to bring you an exclusive interview with Olympic silver medalist Lydia Ko who imparts her personal insights about what it takes to be on top of her game.

Hayes Knight is proud to support high performance sport in a number of ways. We continue to help aspiring sportspeople with their financial and accounting needs as part of the athlete friendly network through High

Performance Sport New Zealand.

We also have a long standing sponsorship arrangement with the

“In this issue we are delighted to bring you an exclusive interview with Olympic silver medalist Lydia Ko who imparts her personal insights about what it takes to be on top of her game.”

Harbour Sport Excellence Awards, as you can read about on our Hayes Knight News page.

As usual we have some great client stories covering their own pathways to success and we hope these stories prompt you to think about your own journey and what direction you wish to take. Remember that Hayes Knight is here to support you along the way, so get in touch if it is time to move your business up a gear or take a different direction.

We also continue to bring you tips and news that will keep you informed of the latest regulations, trends as well as our own views on topical matters such as the question of equality in the private vs public sectors in relation to reward and recognition, discussed in our ‘Radar’ feature.

So, dive in, get inspired and above all, enjoy the reading!

Andie Johnson Editor, Beyond the Numbers

features

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POINTS FOR PRESENTATION Homestaging company Living Edge Interiors is creating a niche in the top-end housing market

news, views & tools for success

ON TOP OF HER GAME An exclusive interview with young sports star Lydia Ko

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25 WAYS TO THINK DIFFERENTLY AND INNOVATE IN YOUR BUSINESS A tool to get you thinking more creatively

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IRD AUDITS AND RISK REVIEWS Changes in the way IRD goes about enforcing obligations

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

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FLEXIBLE WHEN IT COUNTS How European Ceramics adapts in an evolving market

MAKING THE NUMBERS MATTER ASB Showgrounds get analytical Cover photo: Lydia Ko

16 BOOKKEEPING

SERVICE HELPS BUSINESSES HIT THE GROUND RUNNING Improve your focus on growing your business

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HAYES KNIGHT NEWS The latest news from Hayes Knight

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RADAR – OPINION PIECE Public vs private sector challenges

Beyond the Numbers is published by Hayes Knight editor.

Andie Johnson Lewis Hurst hcreative.co.nz printing. Cube design.

3

BUSINESS STRATEGY LIVING EDGE

Points for presentation WORDS: Deirdre Coleman IMAGES: Jason Dorday

Homestaging company Living Edge Interiors is creating a niche in the top-end housing market. Guided by its passionate new owner Sharon Laffan, the company has grown, solidified its position and extended its offering in exciting new directions.

Have you ever walked into an open home, fallen in love with the interior furnishings and marveled at the owner’s sense of style?

Chances are, the furniture and accessories you covet don’t belong to the owner at all, but instead have been carefully selected by a homestaging company to create just the reaction you experienced.

With the booming Kiwi housing market, homestaging is on the rise. Agents and sellers now understand its value in enhancing the visual appeal of a property, says Sharon Laffan.

She’s seen the company grow from humble beginnings 16 years ago to become the country’s largest homestaging business.

Over more than a decade, Sharon has helped shape the development and growth of Living Edge. She’s been heavily involved in the buying of merchandise, as General Manager. So when the company came up for sale in 2014, the opportunity was too good to miss.

“I’m extremely passionate about the business and our goal to be the absolute benchmark in the industry,” she says.

“When we first started, there was only one other company operating in this space; now we’re competing against 30 companies in Auckland.”

Today, Living Edge has 20 staff, including a team of interior designers, its own fleet of vehicles and warehouse space. The bulk of the company’s furniture is sourced from overseas, with up to 5 containers of stock a year being brought in as a result of Sharon’s buying trips.

With a background in retail and merchandising, Sharon has developed longstanding relationships with real estate agents and developers. They make up a 4

large chunk of the company’s clients, along with aged-care providers, private residential owners and corporate clients, and the entertainment industry.

“Our furniture is unique and we have several different styles, all branded with our own label,” she says. “We’re focused on the high end of the market. We do a lot of properties in the $2 million plus range.”

Homestaging is a labour-intensive enterprise, with each property requiring 12-15 hours to complete from initial sales to selection of furniture and then installation.

Living Edge has sought to extend its offering with complementary services. The company hires out furniture and supplies cutlery, towels and bed linen to CEOs relocating to New Zealand. It provides set furnishings for TV shows like Masterchef, My Kitchen Rules and X-Factor. Living Edge has also furnished backstage sets

for visiting rock stars, celebrity weddings and private parties, where security and confidentiality are paramount.

“We’ve experienced exceptional growth over the last four years,” says Sharon. “It’s been the result of a conscious effort to grow in the wider Auckland area. We also now sell our own branded furniture on our website. Our mid- to long-term plans are to increase the output of showhomes and launch online shopping via our website.”

When looking to purchase Living Edge, Sharon sought advice from Hayes Knight Director Brendon Cutler who carried out a valuation and prepared financial forecasts to enable her to obtain the necessary finance. The firm now acts as financial and tax advisor for the company, assisting with annual accounting and tax compliance, meeting regularly and providing a sounding-board for any decision-making.

“Brendon has been a great mentor and financial advisor, particularly during the sale and purchase process,” says Sharon.

“He’s pragmatic, highly responsive, and has developed a good understanding of the business.”

Brendon believes Sharon’s focus, coupled with her willingness to work hard, set goals and move forward with increased confidence, has taken Living Edge to a new level.

“Sharon should be really proud of what she’s achieved,” he says. “She’s done a great job to grow the company faster and more profitably than we forecast, while at the same time managing that growth conservatively. Sharon has a good business brain and listens to advice. I’ve no doubt Living Edge will continue to grow and refine its offering.”

Handling Success Setting goals, continually reassessing them, and managing your growth carefully are some of the keys to business success. Hayes Knight Director Brendon Cutler offers advice on growing your business: • Ensure you have a solid business plan and an integrated financial forecast • Understand your balance sheet and the impact growth will have on it – especially on your working capital • Be aware that issues around growth are often operational. Identify where your step changes should occur – at

what point do you need to purchase a new vehicle or piece of equipment or bring in a new person? How will you fund those, and what are the short-, medium- and long-term implications for your business?

• No matter how hard you work, you can’t do it all. Low-value tasks take up your time and can stall growth. Delegate them to an assistant so you can focus on more important decisions • Get your head around the numbers, or work with someone who can help you do this.

Living Edge Interiors owner Sharon Laffan

EXCLUSIVE INTERVIEW LYDIA KO

On top of her game INTERVIEW BY: Deirdre Coleman

She’s a household name in New Zealand and is a recent Olympic silver medalist. Lydia Ko is the Korean-born, New Zealand-raised golfing sensation who’s combined her stunning talent with equal doses of hard work and determination to become the LPGA Tour’s youngest ever winner at the age of 15.

Just a year before winning this LPGA Tour title, Lydia was attending Pinehurst School and balancing 30-40 hours a week of golf practice with her school work. Back in 2011 Hayes Knight sponsored the North Harbour Club AIMES Emerging Talent Awards and Lydia was among six North Shore locals recognised at the Awards. These annual Awards celebrate the achievements of outstanding young people in the arts, IT innovation and science, music, education, sport and service to the community.

A lot has happened in the last five years.

Having turned professional in late 2013, Lydia is now the world’s number one female golfer and most recently, a silver medalist at the Rio Olympics. We spoke to Lydia before the Olympics, as she prepared for the KPMG Women’s PGA Championship in Washington. Ahead of her lay a demanding 11-tournament schedule that included three majors, the PGA Championship, the US Open and the British Open.

What did winning the 2011 Emerging Talent Award mean to you?

It was a real honour to be acknowledged for what I was doing at that time. I hadn’t won anything like that before and I think that gave me a lot of confidence. It was a neat experience meeting others who were doing so well in different areas like music and business.

What’s it like as a young athlete trying to pursue your sporting dreams?

During the majority of my events when I was with the New Zealand team, I was with my mum. It’s always good to have someone who’s consistently there so your routines don’t change that much.

It’s hard sometimes; especially being from New Zealand. There are long flights to get to the US or Europe, and obviously that gets expensive. But I was able to get the right support and my team helped me through.

“Sometimes, even if you don’t end up winning, there’s so much you can learn from those experiences and you can get better and stronger from them.”

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Looking back now, is there any advice you would give your younger self?

I’m not sure I’d do anything significantly different. I feel like I’ve learnt from my lower points. Sometimes, even if you don’t end up winning, there’s so much you can learn from those experiences and you can get better and stronger from them. I love the quote ‘what doesn’t break you makes you stronger’. I feel like every moment has a purpose. Obviously there are moments when I think, maybe I could’ve done one shot better to win or get a better result, but it’s all a learning process.

What have been your top three ingredients for success?

The big thing for me was to get the right advice at the right time, and to have positive people around me, because sometimes when you’re in the moment you don’t realise exactly what’s going on. It’s always good to have people who can offer their thoughts and advice. Obviously, to have the coaches who will help you improve on whatever aspect you’re working on is essential. I’m currently the world number one golfer but there are still endless things for me to improve on.

The most important thing has always been my team – my parents, my teacher, my coaches – and having my family to guide me through. They’ve helped me to be in this

EXCLUSIVE INTERVIEW LYDIA KO

position and it’s great to have that support around me. My parents are always with me, on and off the golf course, and my sister goes to the majority of the events I play.

The third thing to me is to have fun. If you’re not having fun, it’s not worth it.

How has going professional changed things for you?

I live in Florida now. That’s probably the biggest change for me. But I’m hardly ever at home. Most of the time, I’m living out of my suitcase. That’s just part of what I do – being on the road and playing tournaments.

The great thing about that is that I get to visit different parts of the world and experience different cultures.

What’s a typical day like for you?

It depends on the time of year and what tournaments I’m playing. When I’m home in Orlando, I’m either resting up for a few days, training with my coaches, or with my parents. In the off weeks I don’t like to play on the course much. Instead I work on different parts of my game. When I am home, I work out almost every day, but on the road, I just do warm-ups and light activation exercises. We play Pro Am most weeks, and the tournaments are usually four days, so we end up playing five or six rounds a week.

What’s it like as a teenager to be surrounded by adults most of the time at tournaments?

I’m getting used to it. When I was first on tour, I was probably the youngest one out there but now there are girls more my age and a couple of months younger. It’s good to no longer be the youngest. Golf’s a sport that anyone of any age can play. On tour you see girls from their teens through to their fifties – it’s one of the great things about golf.

Is goal-setting an important part of your career?

Yes. Obviously, I have some big career goals. The Olympics are a top priority for 2016. It’s the first time women will play golf in the Olympics and to represent your country on that stage will be a pretty special week. Ever since golf was announced at the Olympics I wanted to get on that team.

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Lydia Ko with her winner’s trophy from the LPGA Canadian Pacific Women's Open.

“…my favourite thing is when juniors come up to me and say ‘hey, you’re my role model’. I love hearing that; it inspires me to be a better player and a better person.”

I also like to set tournament goals when I get to an event and that changes from week to week. I don’t like to say ‘I want to win this tournament five times’ or whatever. That can get a little unrealistic because I could

be playing great, but someone else might be playing even better. It’s more personal goals that can make the overall outcome better by the end of the season, like working to improve the percentage of fairways I hit.

What’s your proudest achievement to date?

Tournament-wise, it would be my two majors, plus winning the National Open in New Zealand three times – those have been really proud moments. But for me, when I go to tournaments, my favourite thing is when juniors come up to me and say ‘hey, you’re my role model’. I love hearing that; it inspires me to be a better player and a better person. And if I can make a little bit of a difference, if one more junior can take up the game, I think it’s a good result for me.

25 Most of us will remember the now iconic TV and print ads from Apple in the late 1990’s which featured the slogan “Think Different”. The ads inspired people everywhere to become one of the crazy ones and to be innovative and look to change the world.

Fast forward to 2016 and innovation is even more important in a marketplace where consumers are looking for relevant brands that are not only creative but also switchedon about what they need. The most successful businesses also have one thing in common – they think differently.

We explore 25 ways for you and your business to think differently and be innovative.

01 02

INNOVATION

Ways to think differently and innovate in your business

Have more fun in the workplace

Don’t follow the pack. Be original.

Disrupt your industry

03

Make new mistakes.

Mistakes are healthy and normal

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Don’t think about what might happen, but imagine what you can make happen

05 06

Innovation requires no fixed rules or template

Swim in a different direction to others.

The water is also smoother away from others

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Innovation isn’t always about big changes to your business. It can be incremental changes to products or service offerings

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Add colour, photos and art, to your workspace. Regularly move team member’s physical workspaces and reconfigure whenever possible

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Take fear out of the workplace. A culture of fear is fatal for an innovative business

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Rotate employees into new areas, service lines or projects. Encourage teams to broaden their perspectives

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Add diversity to your workforce.

Diversity brings freshness of ideas and viewpoints

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Be courageous.

Going against the grain, looking at options and stepping out of your comfort zone requires courage

13 14

Ask the question “Wouldn’t it be cool if…”

Ensure a high level of personal freedom and trust. Give more time for your team to pursue new ideas and innovations

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Encourage communication in the workplace. Make it easy for this to happen across your business

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Ask the question - Why do we do this? Ask questions about everything. Then ask them in different ways

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Network. Share.

Collaborate. Mix and spend time with a diverse group of people with different backgrounds and experiences.

Learn from others

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New employees are a great source of new ideas. They also challenge your way of thinking and provide a new perspective.

Get new hires together and provide them the opportunity to share their thoughts

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Develop a process of trying out new concepts quickly and on the cheap.

Learn quickly what’s working and what’s not, then move on

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View challenges as opportunities. Each challenge or obstacle provides an opportunity to learn, grow and improve a weakness in your business

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Take notice of innovation efforts by your team. Encourage these wherever they arise. Reward your team for their efforts

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Encourage collaboration. Get your team out of their offices and silos. Encourage people from different areas of your business to meet frequently and informally

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Put innovation at the heart of your strategy

View customers as partners in your innovation process. Ask questions of them. Customers can be a great source of innovation ideas and concepts. Use this feedback before committing resources to a new service or product

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Be prepared for failure. Embrace and celebrate the fact you won’t always get it right. Failure occurs in 50 to 70 per cent of all new product innovations, even for the most successful companies. Companies who succeed at innovation don’t have a better rate of success than others – they have a LOT of ideas, and product innovations in the pipeline.

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BUSINESS STRATEGY EUROPEAN CERAMICS

Flexible when it counts WORDS: Deirdre Coleman

Like most businesses involved in the construction industry, European Ceramics has had to adjust to the ebbs and flows of an ever-changing market. It’s an imperative that’s given rise to its mission statement: to ‘morph, adapt, change and evolve’.

If you’ve been to Smales Farm, Holy Trinity Cathedral, Botany Downs Shopping Mall, the ANZ Tower or Sky City Grand Hotel, you’ll have walked on or seen tiles supplied

by European Ceramics.

The family business founded 30 years ago, has built a solid reputation as the go-to supplier for quality natural stone, porcelain, ceramic, limestone, marble and granite tiles. It sources its stock from around the world and works closely with specifiers, providing product for large commercial developments, hotels, apartment blocks, aged-care facilities, group home builders and high-end residential projects.

Owner and managing director Jason McGranahan took over the company from his parents just as the global financial crisis hit. The economic downturn battered the building industry, but European Ceramics weathered the storm, thanks in part to its reputation and track record.

“It was a difficult period for the industry but the longstanding relationships we have with key developers and specifiers helped us get through,” says Jason.

“We’ve been involved in some of the most prestigious projects in New Zealand and we’ve been operating in this space for three decades so we have a lot of experience 10

“Managing cash flow and building the company’s cash reserves are priorities.” and expertise. Our clients come to us for exclusive and custom-ordered product ranges, so that sets us apart.”

In 2015, Craig Stachurski became a partner in the business and this has further solidified their future. Jason and Craig bring two different points of view that effortlessly blend together, creating a more dynamic approach to business.

In the interests of ongoing improvement, the company recently undertook a full review of its operations and systems. This resulted in it taking on Hayes Knight as its accounting supplier and working with Scott Travis and Jaimee Hart.

“We wanted fresh approaches to every area of the business and to keep up with innovation and technology,” says Jason.

“Having an accountancy firm that supported this vision was paramount. We’ve been working with Scott, Jaimee and the

team now for over a year. Hayes Knight have added value to our business while offering advice from an outside perspective. They’ve helped us with financial reporting, tax, forecasting, due diligence, and shareholding advice, all resulting in better overall business performance. It’s essential for us to have accountants assisting us on a pragmatic, nononsense basis. Scott and Jaimee fit that bill with their practical advice, taking a genuine interest in our business and keeping an eye on what’s best for European Ceramics.”

Scott and Jamiee worked to identify areas where European Ceramics could improve its operations.

“They have a solid business, but Jason was looking at ways to improve things from an efficiency point of view, and around how the business was financed,” says Jaimee.

She has begun working more closely with Jason and his team to provide advice regarding cash flow reporting and stock management. Managing cash flow and building the company’s cash reserves are priorities. The challenges lie in establishing how much to invest in stock, what type of products to buy, and keeping stock levels manageable to ensure the business is healthy from a cash perspective. Having an awareness of the hidden costs of holding

EUROPEAN CERAMICS BUSINESS STRATEGY

stock, such as insurance, financing costs, storage, obsolescence, damage and leakage provides additional motivation to manage stock levels effectively, and look after the bottom line.

The business operates in a fluid, design driven market where trends can change quickly so staying in tune with these and aligning product offering is a critical function of the management team.

In order to generate growth, European Ceramics has focused on three important areas.

“Doing quality work for quality clients is their goal,” says Scott. “While it’s vital to make the most of a buoyant market, you don’t want to just grab at anything.

Jason either looks to work with clients he’s successfully worked with before, or conducts due diligence on prospective clients so that he is comfortable with the level of risk”.

Fine-tuning payment terms has seen clients pay for products before or when they’re shipped, meaning European Ceramics isn’t left to carry the cost. This is particularly important in large transactions.

“With our AAA credit rating, international suppliers are eager to secure our business and provide generous payment terms,”

says Jason. “We review foreign exchange rates daily and secure forward rates, which gives us time to manage creditors and debtors effectively, and to offer our commercial customers alternative payment terms. Our market is predominantly specification, so our procurement is mainly indenting products on order.”

While growth is important, lessons learnt from the GFC mean that Jason prefers a measured approach rather than growth for growth’s sake. Becoming a large organisation with big overheads and too many staff, and taking on the risk profile associated with that isn’t Jason’s goal, adds Scott.

“It certainly looks like there is a lot of blue sky on the horizon in the construction

“Rather than stripping out the profit as you go, it’s about creating a business that’s resilient and able to respond to changes in the market.”

industry, however at some point the market will ease so the business needs to be robust and agile enough to cope. Having us on board has given Jason the confidence to seek more growth knowing the core business is in good shape. He’s also looking to build equity in the business for the shareholders so that the balance sheet is more robust and the company can take those curves in the economy. Rather than stripping out the profit as you go, it’s about creating a business that’s resilient and able to respond to changes in the market.”

“They’ve over-achieved their budget for last year and have a good number of jobs lined up, including a lot of big developments,” says Jaimee. “Jason is positive but realistic. His philosophy is very much ‘plan for the worst but hope for the best’, however having Hayes Knight work alongside has provided more clarity”.

With this in mind, discussions with Hayes Knight about strategy and future planning are high on the agenda. Jason’s vision is to stay innovative and keep the business future-fit. His goal is to balance work and lifestyle and to grow wealth while protecting the company’s assets – he knows that keeping flexible is key to remaining on the right track.

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BUSINESS STRATEGY ASB SHOWGROUNDS

Making the numbers matter WORDS: Deirdre Coleman IMAGES: Chris Louffe

One of Auckland’s premier events venues, ASB Showgrounds operates as a not-for-profit organisation, providing a top-class community facility and bringing significant revenue to the city.

It’s been an important community asset for over 100 years, but the ASB Showgrounds in Greenlane continues to flourish, hosting multiple large-scale local and international events, attracting around 1.1 million visitors a year, and injecting an estimated $22 million into the Auckland economy.

The iconic exhibition space, formerly known as the Auckland Showgrounds, has

facilities flexible enough to host exhibitions, trade and consumer shows, cocktail functions, banquets, corporate events, conferences, meetings, concerts and even stock-clearance sales.

A 1970 Act of Parliament amalgamated the A & P Association of Auckland and the Auckland Manufacturers Association (now the EMA) to form the Auckland

“Everything we make is reinvested into running and developing the facilities.”

ASB Showgrounds CEO Mark Frankham

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ASB SHOWGROUNDS BUSINESS STRATEGY

Agricultural and Industrial Shows Board.

It now owns the facilities and operates the ASB Showgrounds on land rented from the Cornwall Park Trust.

ASB Showgrounds CEO Mark Frankham says that as a not-for-profit, the organisation’s mandate is to provide a community facility and to give back to the community.

“Everything we make is reinvested into running and developing the facilities. The venue and our customers are our number one goal. We run a very lean organisation, with just 18 fulltime staff.”

In addition to its commercial events, the Showgrounds provides free facilities for charitable and community organisations, such as the police for bomb squad training, ambulance services, and sports and school groups.

In 2006, ASB Bank became the Showgrounds’ first ever naming rights sponsor. Three years later a muchneeded $32 million upgrade included construction of a new 6000m2 pavilion and improvements to the Logan Campbell Centre, funded partly by contributions from the New Zealand Government, the ASB Community Trust, ASB Bank and Auckland City Council.

“The redevelopment was about futureproofing our spaces and facilities. It’s been very successful – it’s led to increased business and attracted more high-profile international events,” says Mark. “In the last eight years, exhibitor numbers have grown considerably. Average utilisation is around 65%; and up to 85% in some months”.

“We’re a top-class facility with a AAA health and safety rating and our focus is on delivery and operations. We’re now looking at a further redevelopment, extending our existing building, improved air conditioning, creating a new turnaround area – that’s all really important moving forward.”

KEEPING TRACK OF THE NUMBERS In August 2011, ASB Showgrounds brought in Hayes Knight to manage its financial requirements. Mark now works closely with Nicola Pollard and Tristan Dean. Their role initially involved assistance with basic tax compliance, GST, preparation of monthly accounts and reconciliations, but Nicola says that has expanded as the business has changed.

In late 2014, Hayes Knight began offering ASB Showgrounds a customised board report pack that combines basic financial

information with more technical details and KPIs. “It gives the board really powerful information to make decisions, track how things are going, and understand the drivers behind their business,” explains Nicola. “Sometimes having an independent view helps you identify areas for improvement, evaluate where you’re leaking cash and see where it’s worth spending more.”

Capturing information around usage of its various spaces and halls was an important requirement for ASB Showgrounds, she says. Having previously worked at London’s Wembley Stadium, Nicola has experience in the specialist area of event-based reporting, so was well placed to assist.

“The Logan Campbell Centre is a particularly large space…the board wanted to see utilisation for that centre reported separately, so we devised a measure with graphs comparing it to previous years,” says Nicola.

Mark mentions that the board report pack is particularly valuable in terms of time-saving and the clear presentation of information.

The report pack can evolve over time as the requirements of the board changes.

Mark and Hayes Knight have also recently developed a new report to look at the Royal Easter Show as a standalone event, which has been added to the report pack to track the impact it has had on the Showgrounds’ financial results.

“We have directors from many different companies, some with more accounting knowledge than others. The board report pack combines all our critical information into one document that everyone can understand,” Mark says. “I used to spend six full days pulling it all together before every board meeting. When it was such a manual job, it was easy to make mistakes.

Now we’ve automated and restructured it all, which frees up my time to concentrate on the business.”

Having met with the board to understand the information they required, Nicola and Tristan customised the report pack accordingly and presented it back to them.

“It’s a service we are keen to offer to more of our clients,” says Tristan. “We can take what their processing staff have done and put it together into a nice visual document that the board will find useful and relevant.”

“In the last eight years, exhibitor numbers have grown considerably.”

ASB Showgrounds in numbers

18,000m2

event and exhibition space

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separate spaces

5,000

seating for banquets

3,000 seat theatre

$32 million

cost of most recent facility upgrade

80+

events hosted in 2016

130,000

visitors to Royal Easter Show in 2016

650,000

visitors attracted to Auckland for the venue’s top 14 events in 2015

78,100

visitor nights generated as a result

$22.41 million increase in regional output from these 14 events

$17.48 million contribution to Auckland’s GDP

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TAX MATTERS

IRD Audits and Risk Reviews

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TAX MATTERS

Over the last 20 plus years there has been a distinct change in the way Inland Revenue goes about its audit and review “obligations”.

In years gone by, most businesses could expect to be audited every 3 to 5 years. This is no longer the case. Audits are being undertaken on a more “risk based” approach and most often, the audit selection process may be as a result of a database “trawl” to see whether specific taxpayers are outside of Inland Revenue’s parameters.

It is also evident the Inland Revenue is keen to target its audit activity based on a “biggest bang for buck” approach. This may be at the expense of some taxpayers getting away with things that may not be technically correct, however, clearly Inland Revenue are only funded for a certain level of resource (i.e. in terms of auditors) and therefore it is impossible to audit all cases.

With the continuing significant business transformation project that is underway at Inland Revenue, some of the errors that have previously gone without audit, conceivably may be picked up in real time without the need for intervention by an auditor. This will be assisted by a ‘state of the art’ IT platform Inland Revenue will be transitioning to over the coming years.

As accountants, we often see GST being overlooked as a “high risk” area by clients.

However, care should always be taken if you are filing a GST return that results in a refund that is outside the norm for your business. This may be the case when a specific transaction has occurred during the period. If you are unsure as to whether the return is correct you should seek advice before you file the GST return. As once you have filed the return you will be deemed to have taken a tax position. Where a mistake becomes problematic is when Inland Revenue can impose a shortfall penalty (often 20% of the tax shortfall amount) and use of money interest. It is therefore often very costly if you get this wrong.

Outside of audits, it is becoming more common for certain taxpayers to have risk reviews undertaken. A risk review is not an

“…Inland Revenue is keen to target its audit activity based on a “biggest bang for buck” approach.” audit (even though it might feel like one at times!) however items identified in a risk review may in some cases result in an audit being commenced. Please make sure you get your Hayes Knight advisor involved in this process so that we can respond to the Inland Revenue in the most appropriate manner. In this regard there is some advice that might be “privileged” or “confidential tax advice” which should not be provided to the Inland Revenue.

Some large companies and high net worth individuals can now expect to have to complete an annual risk review questionnaire.

In a wider context there is also some onus on the Commissioner to be seen to be actively targeting segments of the community that are not paying their fair share of tax. In recent years we have seen this with the instigation of specialised property teams at Inland Revenue who are targeting property transactions.

This activity has been highly lucrative for the Government and there has been a significant return on dollars spent to conduct this activity.

Another area currently being targeted is the “cash economy”. This has resulted in an increased focus on the hospitality industry and the targeting of geographical areas in New Zealand where the cash economy is considered to be more prevalent (e.g.

Queenstown and Auckland).

Tradespeople have also been targeted.

Most people would have been on the

receiving end in a transaction where the tradesperson has offered a “cash price”.

Inland Revenue has regarded this as an entrenched way of trading in some businesses such as tiling, gib stopping, plumbing and building. Part of their task is therefore to educate taxpayers that this activity is not acceptable to Inland Revenue.

Inland Revenue has actively targeted industry bodies to make sure this message gets filtered through to its members.

For both tradespeople and the hospitality industry, some of Inland Revenue’s audit activity has been unannounced visits on site. Make sure you seek advice if they turn up unannounced. As a client of a “tax agent” (Hayes Knight), Inland Revenue should be dealing directly with the tax agent in the first instance rather than directly with the taxpayer.

With the hospitality industry, Inland Revenue uses some industry measurements (e.g. GP margin) to determine whether they think there is undeclared income. These may NOT always be right.

Inland Revenue’s audit and review activity is not going to go away. This is part of their mandate laid down by the Government.

Many clients will go about their business and never see an Inland Revenue auditor.

If, however, you are selected for an audit, or are part of the Inland Revenue’s “risk review” selection, please contact your Hayes Knight advisor or the tax team directly.

“Another area currently being targeted is the “cash economy”. This has resulted in an increased focus on the hospitality industry…”

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BOOKKEEPING

Bookkeeping service helps businesses hit the ground running Many new businesses attempt to cut down on costs by trying to do as much as possible themselves.

Bookkeeping and completing the monthly accounts is no exception. There are plenty of hidden costs associated with taking on too much and teaching yourself skills in areas that you don’t really enjoy; as was discovered by one of our clients that purchased a business in Albany last year.

After a few months of learning to do their day to day processing in MYOB, they came to their senses and realised that it wasn’t their strength and it was taking their focus away from the important aspects in the business such as growing sales, improving the culture, processes and systems. Luckily Hayes Knight had just launched their Bookkeeping service and as a result of engaging help in this area, they have since been able to concentrate on enjoyable tasks that can really add value to their business.

Now a member of the Hayes Knight Bookkeeping team looks after all the day to day processing, including preparing the monthly profit and loss report that is required by the franchisor. Leaving the professionals to keep the accounts under control means that the bookkeeping is done in a more efficient and timely manner; saving the client time and money overall.

Another common scenario that has affected some of Hayes Knight’s clients is having a key team member leave at short notice or suddenly fall ill and they are stuck without anyone in-house to handle essential day to day functions like payroll and invoicing. The Hayes Knight Bookkeeping team has come to the rescue plenty of times by providing interim cover while staff are on leave or they recruit replacements.

Sometimes clients just need temporary help by boosting resources to get them through a busy period.

Since Hayes Knight launched the Bookkeeping service in late 2015, the offering has really taken off as clients are appreciating the convenience and benefits of receiving quality accounting, tax and advisory services as well as having their day-to-day bookkeeping needs met, all under the one roof. The demand for this 16

• Monitoring accounts receivable and

“Leaving the professionals to keep the accounts under control means that the bookkeeping is done in a more efficient and timely manner…” popular service is growing and there are now five members of this specialised team.

Here are some tasks the Bookkeeping service can help with, each tailor-made to fit the needs of individual businesses: • Raising sales invoices

following up overdue payments

• Entering supplier invoices and reconciling to supplier statements

• Processing supplier payments • Helping with cash flow management • Reconciling bank accounts • Processing payroll • Completing PAYE returns • Completing GST returns • Completing FBT returns • Collating records for the year-end accounts process

• Monthly reporting

If you need to improve your focus on growing and developing your business, contact Hayes Knight today to see how we can help you take the headache out of the bookkeeping.

HAYES KNIGHT NEWS

Spotlight on…

SHELLEY-ANN BRINKLEY

Associate, Hayes Knight and Director, Knowledge Shop We spent a few minutes talking to Shelley-ann Brinkley, an associate with Hayes Knight who has been with the firm’s specialist tax consulting team for more than 8 years. Recently Shelley-ann became a director of Knowledge Shop, the Resource Centre for Professional Accountants.

Knowledge Shop is a sister company that offers accounting and tax training, expertise and advice to other accountants in public practice throughout the North Island. Here are her answers to some of the questions we asked her about Knowledge Shop and working at Hayes Knight…

What do you think particularly attracts accountants to becoming members of Knowledge Shop?

While Knowledge Shop provides a wide range of benefits, including practical help desk support, standards, procedures and working papers, quarterly face-toface training and monthly newsletters to keep members up to date with technical changes, it is primarily our Q&A service and our training sessions that our members really rate us for.

Through our Q&A service, members can access our technical expertise to address their client’s issues, with virtually all questions being answered within 24 hours – meaning members can provide a timely response to their clients.

While there is always a technical aspect to our answers, of equal and often greater importance to our members is the practical aspect of the answer. It’s no good just giving the ‘what to do’; members also need to know the ‘how to do’. And with our training sessions, in addition to our

technical tax and accounting topics, we also expose our members to our network of experts in other fields; from lawyers, employment specialists, health & safety specialists and financial advisors, through to the IRD, banking experts and economists.

How does your role as Director of Knowledge Shop assist the rest of the work you do for Hayes Knight?

I regularly keep members up to date with changing tax law through either training sessions or monthly newsletters. This means my team and I are constantly upskilling on recently enacted tax changes or those that are on the horizon. This is critical when advising clients, especially in the area of tax efficient structuring.

Through Knowledge Shop we come across a myriad of issues including situations where the application of the tax law gives rise to an anomaly. My fellow Knowledge Shop Director, Phil Barlow, chairs the IRD/CAANZ tax committee and this allows us to raise these anomalies with IRD officials to achieve clarity, and in some cases, revised policy.

For my Hayes Knight clients, being exposed to so many different issues through the Q&A service means 9 times out of 10, I have come across a similar issue before and can quickly either resolve the issue or provide effective solutions.

What is the main trend you observe in the area of tax law at the moment?

By far this would have to be international considerations.

In business terms, the world is shrinking; workers are extremely mobile, markets can be anywhere in the world, and that means businesses will sooner

or later need to concern themselves with international issues.

We have seen this recently in terms of BEPs and FATCA, not to mention transfer pricing. As New Zealand businesses seek to expand offshore, they may also need to navigate foreign payroll and GST rules, tax residency issues for not only the principles of the business but the entity itself, and double taxation of business profits. From 1 July 2016, even New Zealand consumers are having to consider their GST obligations when they purchase services on-line from a non-resident.

Clients need to be considering these issues, among others, and seeking advice, ultimately at the planning stages of their expansion. If they have already taken their business offshore it may be too late to put the most effective commercial and tax structure in place, from both a New Zealand and overseas point of view.

What do you enjoy the most about working for Hayes Knight?

That’s a difficult one; there are many things I enjoy about working for Hayes Knight; the highly-skilled team and the camaraderie among us, interesting clients and the technical challenges they present, the fact that no two days are the same, the forwardthinking vision of the directors, the worklife balance…but, if I really had to choose, it would be the latter.

I am very fortunate that the office is only minutes from my home and family, so precious time is not spent crawling in Auckland traffic, and I get to spend my work time with a great bunch of people, doing challenging work with interesting clients.

Ordinary or extraordinary... we cover all tax matters Our specialist tax consulting team can help regardless of how simple or complex your tax issues are.

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11/08/16 10:04 AM

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HAYES KNIGHT NEWS

Acknowledging sporting heroes in Harbour Sport Excellence Awards

Hayes Knight sponsored the Sporting Acknowledgement Awards at the Harbour Sport black tie event held at the Bruce Mason Centre in Takapuna. Brendon Cutler, Business Advisory Director (pictured far right and far left in images above), was there to congratulate the thirteen recipients for their exceptional achievements and contribution to sports.

New identity unveiled for Morison KSi In March this year we announced a merger between Morison International and KS International (effective from 1 April 2016) – forming Morison KSi. Morison KSi is a global association providing quality, border-free professional services. The 163 members are dynamic, ambitious and independent firms, specifically chosen because of the quality and energy of their people and practice. Together, they offer partner-led and cost effective global reach across 375 offices in 87 countries, representing a combined revenue of US$1.03 billion. Morison KSi has just recently unveiled its new identity, including the logo pictured above and a new website is coming soon.

Hayes Knight is proud to be a member of this new association. We will continue to update and provide insights on the latest news to help you benefit from our growing global connections.

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Hayes Knight is back in Newmarket On 1st June 2016 Hayes Knight acquired the accounting practice of Trust Accountants. As part of this purchase we have also taken over the lease and are excited that we now have an office located at 31- 33 Great South Road, Newmarket. This office will assist further growth and expansion for Hayes Knight in the wider Auckland region and complements our existing premises in Albany.

Our new office has ample parking and will provide new meeting facilities for our many city-based clients. We look forward to meeting you in our new office soon.

OPINION

Radar

By Tristan Dean, Business Advisory Director

Public vs private sector challenges

Every now and again the media picks up on a story involving a government agency, council or charity supposedly spending up large on staff entertainment, big salaries or ‘perks’ and the cry goes up about the inappropriateness and wastefulness, given that it was public money, or money destined for worthy causes. Even when the spending specifically relates to celebrating a great success, or a significant milestone, the public still often views it as being an unnecessary extravagance.

I recently discussed this issue with a trustee of a large charity and they obviously felt that they were constantly in a no-win situation. To attract and retain good professional staff they are continually competing with corporates, while at the same time there is an expectation from donors that the organisation is run on the smell of an oily rag. Another recent example of the same issue came from a friend of mine who works for a state owned enterprise. They had been given a budget for an annual social event of just $20 a head, with partners being able to attend if they paid their own way. Ultimately they were able to get creative and pull something together, but they still generally felt undervalued and that management were being miserable; exactly the opposite of what a team social event aims to achieve.

Meanwhile, in the average corporate, there is no issue with putting on social events for staff. In fact, Friday night drinks and a couple of decent work do’s a year, at a cost of $100 plus a head, is often seen as the norm from both management and team perspectives. On that basis, if you work for a charity, council or state owned enterprise, you’re fresh out of luck, while if you work for a corporate, it’s party time!

At the same time, charities in particular are expected by the public to keep wage costs to a minimum, and there is a perception that those working full time within them should be ‘doing their bit’ by accepting less than a market wage. This adds to the problems faced by charities in keeping good professional people long term.

The fundamental problem with what I have outlined above is that just about everyone, regardless of who they work for, has a need to feel recognised and rewarded (both in monetary terms and in other ways) for the work that they do. If councils and charities are so

tight-fisted that they never splash out on even modest entertainment for their employees, while at the same time they potentially pay less than market wages, they’ll struggle to retain good people as a result. Regardless of how altruistic people are, ultimately most need to be recognised and rewarded to remain motivated in the long term.

Happy, motivated employees are productive employees – it has been proven time and time again.

Often a part of keeping morale up involves the employer providing a few drinks and the occasional night out, or rewarding the team in other ways that invariably involve

“Regardless of how altruistic people are, ultimately most need to be recognised and rewarded to remain motivated in the long term.” cost. Long term, the costs (both directly and through lost productivity) of continually replacing and training people becomes enormous, so it is false economy to avoid spending on the team, if doing so creates a better work environment.

In my view, the New Zealand public need to recognise that in order to operate efficiently and economically long term, the people working within publicly accountable organisations (charities, government agencies, councils) need to be rewarded in the same manner that people in private corporates are. Ultimately when these public organisations lose their good people, it is the general public that loses out.

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Feeling swamped? We have the solution...

Let us take care of your day-to-day bookkeeping needs such as raising sales invoices, processing supplier payments, payroll, monthly reporting, GST & FBT returns, bank account reconciliation, assistance with monitoring cashflow, and much more.

Contact us about our bookkeeping service today Visit hayesknight.co.nz