Beyond the Numbers Issue 9 by Hurst Design Co.

10 Keeping ahead

What the first 25 years has taught Urgent Couriers

14 Flying start How Cuesko was start-up savvy

I SSUE 9

Reverse engineering retail WALLACE COTTON AND THE REWARDS OF DOING THINGS DIFFERENTLY

16 We heard you

Responding to demand with two new services

Sell? Buy?

Time to weigh it all up? Sometimes navigating your way through business decisions is tough. For guidance contact Hayes Knight.

Business valuations â&#x20AC;˘ Due diligence â&#x20AC;˘ Sales & Acquisitions Visit hayesknight.co.nz

CONTENTS

Keeping you ahead of the game You may be just starting out in business, perhaps recently acquired another business or you may be in the process of getting your business fit for sale. There are so many possible scenarios involved along the business life cycle and each comes with unique challenges. It doesn’t matter whether you have been through a phase or scenario before; different markets, economic forces and other conditions, mean that outcomes will be different each time. The only certainty along the business life cycle is ‘change’. Be it changes in legislation, markets, technology or society – the best way to plan for the road ahead is to keep well informed and be prepared. This includes keeping abreast of data, competition, industry trends, economic developments and importantly, learning from the success, mistakes and lessons of other businesses. No matter where you are on the business

life cycle, in this issue of Beyond the Numbers, we have plenty to share about our clients’ stories that you may relate to. Wallace Cotton have a great story to tell about their winning formula for retail

“No matter where you are on the business life cycle... we have plenty to share about our clients’ stories that you may relate to.”

newcomer Cuesko, a quantity surveying firm, highlights what has been critical to their start-up success over the initial few years. This issue also brings you some informative articles that will help keep you on the pulse, looking beyond the numbers and at hot topics across a number of business areas; from big data and cloud computing through to looming changes in property tax and new resident director changes. Ultimately, Hayes Knight aims to equip you with the tools, insight and advice to be prepared for change and keep you ahead of the game. Enjoy the read.

success in this age of online shopping. Urgent Couriers chat to us about their evolution and how their business has morphed over the past two decades to keep ahead of trends. And relative

Andie Johnson Editor, Beyond the Numbers

features

MATERIAL WORLD The rewards of doing things differently with Wallace Cotton

news, views & tools for success

CALCULATING THE RISKS Launching a new business with Cuesko

ONE STEP AHEAD Staying ahead of the curve with Urgent Couriers

BIG DATA WHAT IS IT AND WHAT DOES IT ALL MEAN? The latest on this emerging mega-trend

GETTING SAVVY WITH THE CLOUD Can cloud software add value to your business?

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 in New Zealand is an independent member of Morison International and the Hayes Knight Australasian Group.

NEW PROPERTY RULES SET TO KICK IN FROM 1 OCTOBER Information on the incoming property rules

NEW RESIDENT DIRECTOR AND INFORMATION REQUIREMENTS NOW IN FORCE Requirements for New Zealand company directors

Cover photo: Bill and Paula Wallace Photo by Jason Dorday

NEW SERVICES Hayes Knight are bringing you two new services

HAYES KNIGHT NEWS

Beyond the Numbers is published by Hayes Knight editor.

Andie Johnson Lewis Hurst, hcreative.co.nz printing. Norcross Printing Group design.

BUSINESS STRATEGY WALLACE COTTON

Material world WORDS: Deirdre Coleman IMAGES: Jason Dorday

E-commerce is big business. Just ask online-only retailers like Amazon, beauty-products supplier Strawberrynet, and fashion marketplace ASOS. With everyone shopping online, retailers that don’t supplement their bricks-and-mortar stores with an e-commerce offering risk getting left behind. But one Kiwi company is successfully bucking that trend. Wallace Cotton is a bed linen, clothing and homewares brand launched in 2006 by Paula and Bill Wallace. It began as an e-commerce site with a mail order catalogue distributed to a few hundred friends and family. A decade later, Wallace Cotton has a nationwide presence and is poised to open its eighth store, with a ninth in the pipeline. “We were early adopters of e-commerce; online shopping was in its infancy in 2006,” says Bill. “We’ve moved in the opposite direction to many retailers who had the bricks-and-mortar presence first. From day one, we focused on building a quality database of customers. Prior to this business, we designed and supplied bed linen to some major retail chains that 4

“We’ve moved in the opposite direction to many retailers who had the bricks-and-mortar presence first.” started as mail-order, database companies, so we learnt how they did things. We knew that knowing our customers was vital to marketing to them effectively.” So why expand into traditional retail when others were moving online? Bill says customers began asking where they could see and feel the Wallace Cotton range. Six

months after the first catalogue, Bill and Paula opened a tiny store in Birkenhead. The business grew steadily thanks to word of mouth and targeted magazine advertising. A year later, the pair doubled the size of their first store and, in 2009, took a short-term lease on a store in Newmarket to test the retail waters in the busy shopping district. “Opening the Newmarket store coincided with the start of the GFC, but we did well and our confidence grew,” says Bill. “We’ve since renewed the lease twice and Newmarket remains our highest grossing store.” Wallace Cotton now has branches in Wellington, Takapuna, Ponsonby, Napier, Albany and Cambridge, and a nationwide presence in homewares stores from

WALLACE COTTON BUSINESS STRATEGY

Tauranga to Invercargill. Bill says the opening of Wallace Cotton’s Ponsonby Central store in 2012 illustrated how its physical stores could become marketing tools. “It’s a very high-profile location and we saw a significant jump in brand recognition as a result. A lot of people said they didn’t realise we even had physical stores.” The company’s eighth store, soon to open at the new Northwest shopping centre, is a chance to test a mall location and introduce the brand to a new shopping demographic. “When we open in a new location, we already have online customers in that area,” Bill comments. “We survey our customers regularly and they always request more stores closer to where they are. That’s why we opened in Napier last year – we knew we had a strong customer base in the Hawke’s Bay. Again with Cambridge, we have a large Waikato customer base.” As more retail stores open, the online proportion of Wallace Cotton’s total sales is dropping, but e-commerce currently accounts for around 23%. “The web is still an important part of our future growth. These days, retailers need to be where their customers want them to be – whether that’s online, mobile, or social media. It’s a constantly changing

landscape, and meeting customers’ changing expectations is one of the challenges,” explains Bill. However, he believes that as long as they remain relevant and provide an experience customers can’t get online, retail stores will continue to play an important role. “They need to inspire and delight,” he says. “There’s evidence in the last 12 months of pure-play online retailers moving to open physical stores as well. The web is great but if you order something and you’re not completely sure about the colour, fit, or texture, you have to go through the process of returning it,” Bill explains. “Our stores and website work hand in hand. They support each other. Customers might research online and come into the store and purchase, or vice versa.” Hayes Knight Director Tristan Dean has

“These days, retailers need to be where their customers want them to be – whether that’s online, mobile, or social media.”

overseen Wallace Cotton’s accounting and advisory needs (including compliance, tax minimisation, structuring, asset protection, cashflow and growth management) since 2010. He says the Wallace Cotton story illustrates the benefits of planning for and managing growth. “They’ve had some really impressive expansion and haven’t been afraid to take a counter-cyclical approach. But they’ve done it in a methodical, well thought-out way,” says Tristan. “They want to grow and increase their stock and product lines, but you need cash to do that. We’ve been advising them on efficient ways to structure their debt, getting maximum tax benefits out of their borrowings, and making sure they’re always aware of and planning for the cash implications of their growth.” Wallace Cotton has considered opening physical stores in Australia where it also has online customers. But the challenging and competitive retail environment has made them wary. “That doesn’t mean we don’t have international aspirations,” Bill comments. “We’re currently investigating an opportunity to distribute our range in China where there’s growing demand for internationalbranded product. And in the medium to long term we’d like to replicate our business model, maybe in the UK.” 5

IN THE NEWS

Big data - what is it and what does it all mean?

You’ve heard the term “big data” but what does it mean for you and your business? Big data is emerging as one of the latest mega-trends and new technology is playing a key part in the growth of this phenomenon. One of the most well-known examples of the use of big data was President Barack Obama’s success during the 2012 reelection campaign. While the campaign was the most expensive in history, the win was attributed to complex analyses of big data and social networking to change people’s voting behaviour. Non-voters and those traditionally under-represented, like women and minorities, were able to be particularly targeted through the campaign. Big data is big business. It enables businesses to gather vast quantities of information to provide better insights and make better decisions. Businesses gather mountains of data every day on customers and transactions. Supermarkets, airlines, banks and telcos all collect valuable information from every sale, this is data no one else has on their customers. The key is turning this data into useful information by using analytics and gaining insight. Reports have shown that companies perform better when they make decisions backed by data. According to an Economist Intelligence Unit Report, company performance improves up to 26% over a three year period when using such insight. What used to be the domain of large corporates and governments due to scale of information and cost of analytics, now, thanks to falling technology costs and new tools that display complex databases in different ways, smaller companies can unlock many more secrets from data. A number of leading NZ companies have identified data as a key strategic focus for their business. Think Xero – fast growing technology company, every new customer provides valuable data as it builds a significant database of NZ SME businesses. 6

This data can be analysed and used to benchmark against other businesses in similar industries or geographical areas. A word of warning…data is all about information and information is power. But with great power comes great responsibility. With ever more data being generated, collected, harvested and processed, issues around data privacy and protection will only grow. There have already been cases

where businesses have crossed the line in how they use data, resulting in brand damage and customer attrition. Big data offers opportunities beyond just the business world. New Zealand companies could team up the power of big data analysis with social and environmental not-for-profit organisations to make a difference for future generations. Now wouldn’t that be something worthwhile to explore?

5 ways businesses can use big data Ultimately big data involves finding out more about your customers to improve your service, and provide a more relevant and personalised offering to build long term customer relationships. 1. PREDICT WHAT CUSTOMERS WANT BEFORE THEY ASK Predicting the future enables companies to push the right products, via the right channels, to the right customers. Online retailer Amazon has been at the forefront of this trend, cross-selling and upselling to their customers. 2. IMPROVE CUSTOMER SERVICE Big data can improve

customer service by providing the opportunity for companies to be better equipped at responding to customer needs. Treat your customers like individuals – just like the old days when the shopkeeper knew your name and your favourite product. Technology allows you to do the same with the likes of loyalty cards to gain valuable customer purchase information.

methods. Use these tools to compare your performance to others.

3. BENCHMARK

Most companies will have data on their existing customers. Before you head off and leap into a big data project, use the data you already hold on your customers – it will be cheaper and quicker.

Benchmarking is a powerful but often underutilised tool to gauge and improve business performance. New technology has improved data collection

4. IDENTIFY CUSTOMER PAIN POINTS AND ELIMINATE THEM Most companies should know what their customers pain points are, however you can use data to help solve customer frustrations and improve the overall customer experience. 5. BEGIN WITH YOUR EXISTING DATA

IN THE NEWS

Getting savvy with the cloud The latest computing buzz word seems to be “the cloud” and when it comes to accounting software there is no exception. We ask Jaimee Hart, Senior Manager Business Services at Hayes Knight about this; is it just the latest fad or is it something that can really add value to your business?

Why consider using cloud based products? Technology is now a huge part of most people’s lives and it’s here to stay. For businesses, the pace and way business is done is changing, and cloud products are a big part of what’s enabling the change. Cloud products can be used anywhere and anytime as long as there is an internet connection. This takes away the issue of the business’ and the team’s physical location and the concept of standard business hours. It allows business owners, accounts staff, the sales team and external accountants like us to access real time data quickly and easily. What are the key advantages? There are significant advantages to businesses using cloud software, such as, owners being able to track how their business is going at any time, from any location including abroad. Similarly staff can work flexible hours from home rather than being forced to fit into the old fashioned working model of 9 to 5, Monday to Friday from the business location. From a hardware perspective, companies don’t need to invest in having servers or worrying about backups. The pricing is

often better suited to managing cashflow with a small monthly fee rather than a large upfront investment that you usually find when purchasing traditional desktop software. The software is also updated and improved without the user needing to do anything.

ability to go beyond the numbers and help them make sense of it all and use the data to help them improve and grow their business. The true magic occurs when the business owner or manager can react and make decisions quickly, as they have valuable information at their fingertips and advice to help them analyse it.

“The true magic occurs when the business owner or manager can react and make decisions quickly.”

Should all businesses consider using a cloud based accounting system? With new technology there is always an adjustment to change. I hear a lot of people say, it can’t do this, or we don’t have time. We’ve been using cloud software with clients for many years now and every year the functionality, ease of use and valueadded benefit increases. There is a lot of competition in the market when it comes to cloud providers, and it’s great to see, as it spurs each one on to make their product better, which is fantastic for all users.

What is the key to getting the most out of it? It’s all well and good to have access to real-time data from anywhere in the world, however, the data needs to be accurate and up to date. The key to optimising cloud based software is to have a bookkeeper that is accurate and timely in keeping the system up to date. Owners and managers also need to have someone that has the

Cloud based systems do add significant efficiencies and have many benefits as detailed. The best approach is to talk to your Hayes Knight Advisor regarding your needs and current system and they can help you choose the best option. 7

BUSINESS STRATEGY VILLA MARIA

TAX MATTERS

New property rules set to kick in from 1 October

Big returns to IRD means land transactions are increasingly being targeted by the IRD... below we explore how legislative changes may affect you. Over the years we have regularly advised clients on tax issues that may arise as a result of a property transaction they are doing. Tax legislation currently contains a raft of measures specifically aimed at the taxation of land transactions. However these rules have not necessarily been consistently applied, nor until recently, have they been actively policed by Inland Revenue. As a result of targeted Government funding, the Inland Revenue has in recent years been more active with property transactions. Budget 2015 allocated a further $29m to the Inland Revenue to assist with targeting land transactions. To date it has already been proven that targeting this area produces a big return to the Government in terms of identifying tax discrepancies. There has however still been a view that the Government has not been doing enough to target “property opportunists”. In particular, there has been a perception in the Auckland market that foreign investors have been buying and selling property which in turn has attributed to pushing up housing prices. The Government has finally conceded that new measures need to be introduced to bolster the existing land taxing provisions. These new measures will operate completely independently of the existing rules. Once enacted, these changes will apply to residential property bought on or after 1 October 2015. The proposed changes (which some are suggesting are a dressed up capital gains tax) will introduce a “brightline test” that will tax any profit on the sale of residential property where the property has not been owned for 2 years. The date of acquisition and date of disposal for the purposes of applying these rules have been specifically defined. There will be exceptions to this brightline test where the property is the seller’s main home, inherited from a deceased estate, or transferred as part of a relationship property settlement. Clearly it seems there is some

complexity around this, particularly in relation to the “main home”. Anecdotally, if the media is to be believed, some buyers are already looking to get a jump on these rules by bringing forward purchasing their property before 1 October 2015. Whilst it seems there is an expectation some people may work around this magical 2 year period, in a wider context, a process will be put in place that will easily capture land transactions as they take place.

“…a process will be put in place that will easily capture land transactions as they take place.” This is to be done by way of requiring buyers and sellers to provide a NZ IRD number as part of the land transfer process. In addition, non-residents will need a NZ bank account number in order to be able to obtain an IRD number. A non-resident for the purpose of being issued with an IRD number will be defined as an offshore person. In essence, this will be a person who is not a citizen or permanent resident, and will include a citizen who has been out of New Zealand for 3 years. All non-resident buyers and sellers must also provide their tax identification number from their home country along with current identification such as a passport. These requirements are now contained in the Taxation (Land Information and Offshore

Persons Information) Bill introduced on 22 June 2015. This information will be collected by conveyancers from property vendors and purchasers and provided to Land Information NZ which in turn will provide the information to Inland Revenue. As a further measure, consideration is also being given to whether withholding tax should be deducted from the proceeds of sale by a non-resident, unless that person can prove the property was their main home. It seems this measure is being considered to counteract the difficulty of recovering and policing tax on land transactions when the vendor is located outside NZ and may be situated in a country to which enforcement is problematic. The way the withholding tax is likely to work is the tax would automatically be withheld where a non-resident sells a residential property. The non-resident would then need to apply for a refund from Inland Revenue of the withholding tax if, for example, they can prove the property was used as their main home. As it stands however, we are still light on the detail as to how this withholding tax may actually work. There is therefore a lot more work that is required before any withholding tax measure is introduced. Any such changes are unlikely to be introduced until mid-2016. On 24 August 2015, a Tax Bill containing these changes was released. Commentary to the Bill, released at the same time has sought to clarify how these rules will be applied. If you would like to discuss any property transactions you may be involved with, please contact either Phil Barlow or Shelley-ann Brinkley.

“…the Inland Revenue has in recent years been more active with property transactions.” 9

BUSINESS STRATEGY URGENT COURIERS

One step ahead WORDS: Deirdre Coleman IMAGES: Jason Dorday

Keeping up with customers’ changing needs and new ways of doing business is essential for a company’s long-term viability. But the businesses that really thrive are led by CEOs who don’t just want to keep up, they’re always looking to stay ahead of the curve. Among them is Steve Bonnici. The founder and CEO of Urgent Couriers has adopted an ethos of innovation, diversification and sustainable business practices. Having worked in the courier industry for five years during the 1980s, Steve was in his mid-20s when he backed himself to go it on his own. In 1989, he founded Urgent Couriers and has nurtured the company through the subsequent economic upswings and downturns. Keeping the business going through tough times has required both nimble thinking and a sustainable business model. Thanks to developments in technology like email and e-commerce, the last decade has seen Urgent Couriers’ customer base change completely. The delivery of documents between professional services firms once accounted for 70% of business. It’s now shrunk to around 20%. “Lawyers were once our biggest clients,” says Steve. “Now it’s physical product. You have to change and reshape yourselves to take advantage of that. Diversification has been our mantra for the last few years.” In 2011, Urgent Couriers diversified into trucks, buying Inter City Couriers with its fleet of four trucks. Now there are ten servicing a growing division dedicated to quickly transporting pallets of product. In 2014, Urgent Couriers consolidated its Kingsland office and Morningside warehouse into much larger premises in Penrose. The company has introduced a new service to meet the rise in online shopping. Urgent Tonight provides fast and convenient same-evening home delivery for online purchases.

“Diversification has been our mantra for the last few years.” 10

With this purchase of the Penrose warehouse, Urgent Couriers successfully entered the third party logistics market. This new vertical integration of storage and distribution has been another significant growth area, says Steve. Clients include organic soft drink Karma Cola, for which Urgent does all the Auckland distribution, as well as online companies selling cosmetics and tech products. “Our niche is really those that need fast picking, packing and real accuracy down to individual item picks. Not all are online businesses, some are B2B companies. There’s been a trend away from having your own big shed and making it a variable cost, so you can seasonally adjust your lease costs based on how much storage space you require.” Despite the imperative to adapt to shifting consumer demands, Steve has stuck to some key non-negotiables. During the global economic downturn, some of his business decisions weren’t the most profitable, but they were based on more than just money. Among them is his stance on paying his drivers fairly. As contractors, courier drivers receive a fixed percentage of the fee for each delivery, and Steve has long campaigned to change industry attitudes and protect drivers’ livelihoods. “The biggest ongoing challenge is that our industry doesn’t pay its drivers responsibly,” he says. “Couriers are contractors so they’re not covered by minimum wage legislation. When clients negotiate hard to get courier fees down, they’re effectively negotiating for a pay cut for the drivers. We’ve taken that seriously. It’s probably impacted our growth – and it eroded our margins during the GFC – because we don’t take on clients who aren’t willing to pay enough. That’s been our biggest challenge and a soap box I’ve stood on for a long time. Paying your drivers well is the right thing to do, and it ensures a better quality of driver who likes to come to work and provides a better service.” Another business fundamental for Steve is environmental sustainability. Urgent Couriers was an early adopter of low emission vehicles and became New Zealand’s first carbon neutral courier company in 2007. “We paved the way in that area, and it helped differentiate us in a crowded market,” he says. “We’ve also shaken the industry up to the point where there’s now another carbon neutral courier company. If we hadn’t taken that stance, that wouldn’t be the case.” Urgent Couriers’ innovation extends to its focus on cutting-edge technology. The company has a dedicated development team and builds its own software. It’s

URGENT COURIERS BUSINESS STRATEGY Urgent Couriers CEO Steve Bonnici.

BUSINESS STRATEGY URGENT COURIERS unusual for the industry (not to mention costly), admits Steve, but it’s enabled Urgent Couriers to stay ahead of the competition. In 2011, Steve and his team developed a new cloudbased CRM (Customer Relationship Management) system called Exsalerate. It was originally created to meet Urgent Couriers’ needs but Steve realised it could be an ideal business. Exsalerate combines a range of forecasting, reporting and tracking tools designed to optimise the sales process and improve client retention. “We needed a reliable CRM system but we couldn’t find what we wanted at a reasonable price point,” Steve explains. “In 2010 when we first started looking, all the CRM systems out there were expensive and complicated. For us, even as an $8-9 million turnover business back then, I couldn’t justify that. I knew there would be other SMEs in the same position so I thought, why don’t we build one ourselves? It can’t be that hard.” While not initially built as a Xero add-on, Exsalerate has been on Xero’s catalogue since May 2014, and around 80% of sign-ups are now via Xero.

“We’ve also shaken the industry up to the point where there’s now another carbon neutral courier company.” “We wanted to keep it really low cost and not get too technical. But our thinking quickly changed as we realised the power of these sorts of programmes is actually about who you integrate with,” Steve comments. “Our first test clients were other business owners I talked to who were willing to give it a whirl,” he explains. “Naturally, we weren’t going to sell it to Urgent Couriers’ New Zealand competitors so we took it to some courierowners conferences in the US and sold it up there. They all said the same thing: ‘we should be using a CRM system but they’re all too complicated and expensive.’” Revenue from overseas sales of Exsalerate recently surpassed New Zealand revenue. While the exchange rate has played a role, Steve says SMEs understand the Exsalerate structure, which isn’t based around individual contacts but around businesses. “When we built it, we didn’t look at everyone else’s and the features they had or we’d just be a poor relation of existing systems. We built it to satisfy our own needs,” he says. While it’s still early days, sales are steadily growing and the potential for the software is significant. Having fine-tuned the system, Steve is finally ready to offer Exsalerate to Urgent Couriers’ customers. He’s also now working with Brendon Cutler, Business Advisory Director at Hayes Knight, to introduce it to Hayes Knight’s clients. 12

Top. Steve next to one of Urgent Couriers’ low emission vehicles. Bottom. Things are always on the move at the new Penrose warehouse.

“Steve has a real entrepreneurial outlook,” says Brendon, “but he’s incredibly personable and he cares about his team and customers. He’s always looking to grow and improve his business and this CRM product is just another example of that. We believe that Exsalerate is full of potential, so we’re collaborating on this project and looking at new opportunities through our international affiliates and our contacts with firms in Australia and further afield.” Steve says this willingness to help businesses explore new opportunities is one of the things he likes most about working with Hayes Knight. “They’ve always been a really good firm to deal with, and I like their progressive, proactive approach to working with their clients in ways that extend well beyond just doing our annual accounts.”

GOVERNANCE

New resident director and information requirements now in force Unlike many other countries including Australia, there has historically been no requirement for a New Zealand company to have a New Zealand resident director. This has made it relatively easy for non-residents to set a company up in New Zealand and not have to engage a person in New Zealand to act as director for the company. The Companies Amendment Act (No 4) 2014 was enacted on 24 June 2014. This legislation has increased the information requirements and strengthened the registration process of New Zealand resident companies. The intended result of the changes is to strengthen the integrity of the registration process, increase investor confidence in our capital market and provide further protection against inappropriate use of New Zealand companies. DIRECTOR RESIDENCY Effective from 1 May 2015, all newly incorporated New Zealand companies will be required to have at least one director who: • Is resident in New Zealand, or • Lives in an enforcement country and is a director of a company registered in that enforcement country. As noted above, this criteria is an “or” therefore having a New Zealand resident director is not critical provided a director satisfies the alternative criteria. At present only Australia qualifies as an enforcement country. There may be an option for companies to appoint an ‘alternate director’ who is resident in New Zealand to help satisfy the new requirements. For companies incorporated prior to 1 May 2015, there is a 180 day transition period, meaning these companies have until 28 October 2015 to comply with the resident director requirements. The resident director requirement does not apply to companies incorporated overseas but are required to register with the Companies Office in New Zealand.

If a company is found to be in breach of the new resident company requirements, the Registrar of Companies has the power to remove the company from the register. DIRECTOR INFORMATION In addition to providing the residential address details of each director, companies are now required to provide the Companies Office with details of the director’s date and place of birth at the time of appointment. These details are not made publicly available. Existing companies are required to provide this information in relation to any changes to directorships or alternate directorships from 1 May 2015 or on the company annual return filed after 1 July 2015. ULTIMATE HOLDING COMPANY INFORMATION The board of directors is now also required to advise the Registrar of the name of any ultimate holding company, the country of its registration, the registration number or code (as applicable) and its registered office. This information needs to be provided on registration or within 20 working days of any change. These details are made publicly available. Existing companies are also required to provide the Registrar with this

information in the company annual return filed after 1 July 2015. A further amendment to the Companies Act provides the Registrar with enhanced powers to de-register companies. The Registrar may de-register a company, if there are reasonable grounds to believe that: • the company is not carrying on business; • there is no proper reason for the company to continue in existence; • the company has failed to respond to a request from the Registrar for certain information; • one or more of the directors or shareholders has intentionally provided the Registrar with inaccurate information; or • the company, or one or more of the directors, or shareholders has failed, in a persistent or serious way, to comply with the duties relating to the company under the Act or the Financial Reporting Act 1993 (“FRA”). If you have any queries regarding changes to director requirements or would like to find out about our new directorship service for companies that don’t have a resident or alternate director, please contact your Hayes Knight Advisor. 13

BUSINESS STRATEGY CUESKO

Calculating the risks WORDS: Deirdre Coleman IMAGE: Jason Dorday

If ever there was a good time to launch a business in the construction industry, now would be it. With the Christchurch rebuild and rising demand for Auckland residential development, the dark days of the GFC are in the past. But for the directors of quantity surveying firm Cuesko, success wasn’t just a matter of good timing. Founding directors Vince Baldwin, John Giles and Greg Cutfield started the company less than three years ago out of a small office on Auckland’s North Shore. The trio had previously worked together and their skills and business values were aligned, says Vince. Despite never having been involved in establishing a new consultancy before, they had built strong industry relationships and had combined experience in commercial and civil construction of 44 years. “We always backed ourselves,” says Vince. “We set short, medium and long-term goals and our business plan outlined how we wanted to operate and be perceived in the industry. That’s been our guide since we started. We took on a few loss-leading projects in the beginning to build some brand awareness and we didn’t draw salaries for a few months.” Their strategy worked. In its first financial year, Cuesko posted a turnover of $1.3m (this increased by 230% to $3m for the 12 months ended March 2015). Just a year after it launched, Cuesko opened a Christchurch branch, where new director Kean Mitchell manages four staff. Its Auckland office now has 11 staff working out of new premises in Albany, and Cuesko is looking to grow its recently opened Wellington office. But before any of this could happen, the directors needed accounting advice and approached Hayes Knight Business Advisory Director, Scott Travis, for help. “We were looking for an accounting 14

practice large enough to provide the services we needed as a start-up but also those we’d need in the future,” explains Vince. “We didn’t just want to be a name or number to them – we wanted a more personal and local relationship. Scott immediately understood us and Hayes Knight has been such a good fit that they’re now also our personal accountants for all the directors.” Scott and his team runs Cuesko’s monthly accounting, but Scott says advice and assistance around the ownership structure, governance, cashflow management and growth strategy were important additional services the directors required. Early on, Scott spent time with the directors to understand their individual circumstances and put together an ownership structure that takes into account their personal lives outside Cuesko. This involved the formation of trusts and the ownership of the company by the trusts for asset protection and tax management. “They’re responsible business owners who take a structured approach to their growth and seek advice when they need it,” says Scott. He attributes Cuesko’s success partly to the amount of time the directors put into planning up front, and then the structure of ongoing checks and balances that enables them to manage and measure their growth on a monthly basis. Despite being less than three years old, Cuesko is in robust shape with many large clients and long-term projects on its books, including Auckland Airport, Infratil, Auckland Transport, Hobsonville Land Company, IAG, Metlifecare plus several banks and private developers.

“We put the effort in, and we proactively look out for our clients’ interests – that’s created a lot of repeat business.”

CUESKO BUSINESS STRATEGY

Cuesko Managing Director Vince Baldwin

“While we had a fairly good idea of how we were going to grow the business, we’re probably two to three years ahead of where we thought we’d be,” admits Vince. “The booming building industry is part of it, but we often work weekends to meet timeframes. We put the effort in, and we proactively look out for our clients’ interests – that’s created a lot of repeat business.” Cuesko’s heavy investment in IT means staff nationwide can access its centralised software system, and regular video conferences allow management to discuss marketing plans, targeting clients and revenue forecasts. “We have many processes in place to

forecast resources months in advance and identify and circumvent potential challenges. As quantity surveyors, we’re used to doing a lot of forecasting and crystal-ball gazing. We’re also fairly conservative in our approach to the business and our mantra is: driving informed decisions.” Work-life balance is a critical component of the directors’ business plan, and they’re working towards adding another layer of senior staff to manage future growth. “We haven’t set the business up to work our lives away,” jokes Vince. “Our business plan includes having fun and enjoying activities outside of work. Eventually, we’ll sell down our stake in the business to others and

adopt a less hands-on, more advisory role.” But with quantity surveyors currently on the skills-shortage list in New Zealand, recruitment has been an ongoing challenge for Cuesko. “With our forecasting, we’re projecting turnover through to 2017 now,” comments Vince. ”We have a good idea of what we’ve got on the table and how we’re meeting our revenue targets.” Vince Baldwin knows the cyclical nature of the construction industry, and when another dip eventually comes, he feels Cuesko’s diversified project portfolio and forward planning will help industry-proof the company. 15

NEW SERVICES

Hayes Knight are excited to launch two new service lines Our new services not only mark growth for Hayes Knight, but also growth opportunities for our clients that sign up.

Imagine having bookkeepers who can help your business with all your day to day accounting needs, getting things done correctly and efficiently while you focus on growing your business…our new Bookkeeping service offers just that. We have also launched a Virtual CFO service designed to provide clients with expert advice and assistance without the overhead.

Bookkeeping Do you find doing the accounts processing, GST and payroll compliance to be a nuisance and not adding value to the business? We have noticed that more and more clients require assistance with day to day accounts processing and bookkeeping work. Some view this type of work as administrative and a hassle and not an important part of their business. We however believe it is important that this key function of your business is maintained in order for your business to be successful. Running a business means making good decisions quickly and it is difficult to do this without accurate and timely financial information. That’s why we have put together a team of highly competent bookkeepers to help our clients be on top of their game. Our bookkeepers are experienced, proactive, efficient and flexible so they can fit in with each client’s needs. For a cost effective set monthly fee or hourly charge, they will take care of the day to day bookkeeping work so you are freed up to run the business and can feel confident making informed decisions based on sound and timely information. Improved cashflow without the drama and stress! To discuss Bookkeeping services for your business get in touch with Jaimee Hart or your Hayes Knight Advisor.

Did you know?... Knowledge Shop, a subsidiary of Hayes Knight, acts as “big brother” to a large number of smaller accounting firms and provides a Q & A service along with regular training, newsletters and resources for accountants.

Virtual CFO Small to medium sized businesses often have the misconception that they’re too small to have the luxury of advice, support and the experience of a Chief Financial Officer or Financial Controller. We believe that all businesses can benefit significantly from having someone with that level of experience and knowledge supporting them. To fulfil this need, we have developed a new Virtual CFO service. Virtual CFO services allow businesses to access the expertise of a CFO without having the overhead of employing one. Not every business is the same, so we will tailor make a package that ensures the specific business needs are met in an efficient and cost effective manner. Virtual CFO services are wide ranging and can offer: • Management and board reporting • Greater flexibility and responsiveness without employing staff • Business performance improvement and turnaround work • Providing analysis and insight • Advisory Board support • Cashflow planning and bank negotiations • Forecasting • Strategic planning • And much much more! If you would like to explore how a Virtual CFO could benefit your business, contact Jaimee Hart or your Hayes Knight Advisor.

HAYES KNIGHT NEWS

Spotlight on… JAIMEE HART

Senior Manager, Business Services

type of client assistance. My work also involves the more typical accounting and tax type work.

Jaimee joined Hayes Knight in February this year. With solid experience, including time with one of the “big four” accounting firms, she is a welcome addition to the Business Services team. We spend a few minutes getting to know Jaimee…

What is the general nature of your clients business? I work with a range of clients, from small start-ups to large companies with strong growth and they’re across a range of industries.

Where did you work prior to Hayes Knight? I worked at two large, well-known firms – firstly, KPMG for 6 years and then Grant Thornton for 3 years.

How would you describe the way you work with clients? My style is down to earth. I get stuck in…always do my best to take worries away from my clients and just get things sorted for them. I want them to feel like I’m part of their team and that I have their best interests in mind.

What type of accounting activities do you get involved in at Hayes Knight? I have a wide range of experience including business valuations, financial and management reporting, assisting clients with buying and selling businesses, due diligence, forecasting, doing turnaround work and helping with cash flow issues. In my role at Hayes Knight I draw upon this experience, providing the same

What are the aspects of working for Hayes Knight that you have enjoyed most so far? The team at Hayes Knight have a strong focus on providing quality advice and services to clients and really strive to add value wherever they can.

Meet our female experts

For accounting expertise and leading business and taxation advice, contact our team today on 09 414 5444. www.hayesknight.co.nz

HAYES KNIGHT NEWS

New aquatic addition to high performance hub at AUT Millennium

Hayes Knight have been an official partner of High Performance Sport New Zealand (HPSNZ) as part of their Athlete Friendly Network initiative since September 2012. In May this year, the National Training Centre for HPSNZ opened a new Aquatic Centre at their AUT Millennium base on Auckland’s North Shore. HPSNZ Chief Executive Alex Baumann says “the addition of the pool adds significantly to the high performance hub at AUT Millennium, which already houses our National Training Centre where many of New Zealand’s top athletes train. Having that mix of high performance and community facilities within the AUT Millennium precinct means New Zealand’s next sporting stars can rub shoulders with the champions they look up to.” As a HPSNZ partner, Hayes Knight is proud to provide accounting and taxation services to aspiring athletes.

LAUREN BOYLE WINS SILVER AT WORLD CHAMPS In related news, HPSNZ athlete and Hayes Knight client Lauren Boyle has recently won silver medals for the 800m and 1500m freestyle final at the World swimming championships in Russia. Lauren Boyle now has produced five of the ten Swimming World Championships medals that New Zealand has earned in the history of the championships, and as such is the country’s most successful female swimmer. Well done Lauren.

Celebrating our client successes Five Wallace Cotton stores (see earlier feature article) were judged finalists in the Retail New Zealand 2015 Top Shop Awards. Three of these five finalists were placed runners up in the Home and Garden category at the awards ceremonies in Auckland and Wellington. Great recognition for the top quality presentation and customer service in their stores. Well done! Our congratulations also go to leading menswear business I Love Ugly, who took out two recent awards in the Newmarket Business Excellence Awards – International Retailer of the Year Award and Sustainable Business of the Year Award. And lastly congratulations to boutique ice cream business Ginelli & Sons who won two gold and four silver awards in the 2015 NZ Ice Cream Manufacturers’ Awards.

Team spirit In July, the Hayes Knight team enjoyed a night out together over a Japanese Teppanyaki dinner. The fun evening included the chef tossing pieces of food from the grill that the team had to try and catch with their mouths. Let’s just say that drinking sake and playing that game is not a good combination! 18

Presenting with the Tax Commissioner In May 2015 our Tax Director Phil Barlow was asked by the NZ Institute of Chartered Accountants to present with Naomi Ferguson, the Commissioner of Inland Revenue. The Commissioner was addressing members on the Inland Revenue’s “Business Transformation” project. This is the biggest project of its kind for the Government. Phil gave a practitioners view on what the proposed changes will mean for practitioners and their clients.

OPINION

Radar By Tristan Dean, Business Advisory Director

Please Bill, no tax cuts

When presenting this year’s budget, Bill English announced that tax cuts could be on the cards for next year. It is hardly a coincidence that a tax cut would arrive in an election year, putting more cash in the back pocket of voters just as they are heading to the polling booths. It was around the time of the 2010 election when National put through the last round of tax cuts, which amounted to about $41 a week for people earning over $70,000 and around $29 a week for people earning $48,000. At the same time GST increased from 12.5% to 15%, which took away some of the benefit. The total annual cost of the income tax cuts was apparently estimated to be around 4 billion dollars. It is hard to imagine the government raising GST again in the near future, so any income tax cuts are likely to be in isolation this time around and I suspect smaller than the last tax cuts made in 2010. If we took an educated guess and said that tax rates may be dropped by 2% across all the lower tax brackets, while leaving the top rate at 33%, someone on $70,000 a year would gain about $1400 a year, or around $25 a week. This benefit would apply if you earned $70,000 or $500,000. While many reasons could be given for such a tax cut, one of the most common is that it stimulates people to spend more (and thereby encourages the economy) – basically that it alters behaviour. While I recognise that $25 a week may make a real difference for a single income family living on $70,000 – for the likes of David Hisco (ANZ CEO – who earns over $4 million a year), the $1400 a year would likely go completely unnoticed. For people earning over say $120,000 a year, the reaction from the majority would likely be the same – basically no discernible difference in the way they spend money. My question is then simply why do it? Why give a tax cut across the board, costing millions of dollars a year when I suspect that a lot of people won’t care or even notice a few extra bucks coming in each week. In fact, when talking to many business people in New Zealand I find that most would actually prefer that the government put more targeted money into child poverty, health care or education. It would also be great to see the government start making annual contributions to the superfund again, which have now been on hold for about 6 years. Not contributing to the super fund is just digging a bigger hole for the next generation to

fill in and the government are not forecasting to start contributions again until 2020. In my opinion, if National are intent on tax cuts, then the answer lies in being much more targeted with who receives them. People earning the average wage in New Zealand are not living a glamorous lifestyle therefore a few extra dollars a week would really help. So let’s consider giving those people some tax relief without also giving it to the people who don’t need it and won’t even notice it. This is reasonably easily done by playing with the way the tax brackets work or just implementing a simple tax rebate system as has been used in the past.

“Please Bill, by all means give a tax break to those in need, but leave it at that rather than trying to buy votes. I’d have more respect for a National government that kept my tax cut and put it to good use somewhere else.” Unfortunately, this doesn’t sound like a National Party approach given that their most loyal support is generally from people earning $70,000 a year or more. There is also the argument that the people paying the most tax should be given the tax benefit as well, as they are doing the most to drive the economy forward. However, my argument is that those people generally don’t need it and as a country we can’t afford it. The current personal tax rates are pretty favourable when compared to Australia and there are just too many things that need attention in New Zealand to start handing out a few bucks a week to people who don’t need it. So please Bill, by all means give a tax break to those in need, but leave it at that rather than trying to buy votes. I’d have more respect for a National government that kept my tax cut and put it to good use somewhere else. 19

Take off with a Virtual CFO

Your journey to business growth and profitability starts here with our Virtual CFO service. We now offer access to a level of expertise that would not otherwise be possible for many businesses. A virtual CFO is a business advisor who becomes an extension of your own team, providing strategic advice, financial management resources, best practice systems, analysis, reporting and supporting the needs of your organisation on a day-to-day basis. •

Cost effective - fixed monthly price or hourly fee, tailor-made packages

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Greater flexibility and responsiveness without employing staff

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Access to expertise across the full breadth of our services

Propel your business performance - contact us today Visit hayesknight.co.nz