Gunson McLean Ltd

Using cashflow for cost control

Aug 23, 2022

Whether your business is in growth mode or recovery mode, cashflow is a vital part of staying in business. 

 

Profit, your bottom line, income streams and outgoing expenses all have importance when we are back to “normal” (however “normal” is going to look) so now more than ever cashflow and keeping everything running should be the priority. Regular cashflow forecasts will help you keep that in focus. Here’s why:


Cost control

If you can't reach your targets for income, reining in your costs may give you a little extra head room to manage cashflow while you plan your next move.


Visibility on outgoings

Cost control can be a challenge when it’s hard to pinpoint hidden costs or where established ways of doing things cost more money than they should. You may also have been coping with unexpected expenses, as you’ve adapted your business for unplanned circumstances.

Improving business practice - It's more than just keeping an eye on outgoings (though that's important). It's about looking at each aspect of your business and business systems (or the gaps where there should be business systems) to see if poor practice is driving costs up unnecessarily.


It can be useful to break it down

 You can look at cost centres such as office supplies or freight. Or you can look at what those costs do for your business. It can help to analyse costs in terms of cost of sale and overheads.


Cost of sale and overheads

Cost of sale (also known as Cost of Goods Sold or COGS) is how much it costs you to make a sale. In a business which sells products, COGS is based on the price paid for the product, plus any costs necessary to put the merchandise into inventory and make it ready for sale, including shipping and handling. You can even break it down to calculate the cost of sale of individual units.


Overheads are general business expenses

They can’t be tracked directly to sales. Overheads are what it costs you to open your doors (whether online or actual) every morning.


What’s your plan?

  • Talk to the team - Analyse your costs and involve your team, including frontline sales staff.
  • Negotiate with suppliers - Can you work with your providers to ask for discounts or more favourable payment terms on either cost of sale or overhead expenses?
  • Reduce unnecessary expenses - Now might be the time to trim every expense that’s not related to your core product or service.
  • Advertising - It might be false economy to cut back on advertising, as customers are online looking for bargains and price-checking alternatives. Targeted campaigns might work better.
  • Prioritise - Can you pinpoint the products most likely to bring the fastest or best return and hold back on products that are slower to sell?
  • Promote or discount - If you have old or slow-moving stock, can you discount it and convert old stock to cash? If you can attract customers now, you may be able to use it to spotlight your other products.


Every dollar you can pull back from your costs can go straight into cashflow. Talk to us if you'd like to review your costs and your systems to keep costs under control. Whether your sales are boom or bust, you want to make sure that your costs aren't holding you back.


25 Apr, 2024
From 1 April 2024 “Electronic Marketplace” transactions will be subject to GST in New Zealand, even if the person delivering the service, is not GST registered. This legislation was passed in 2023, and although National campaigned on repealing this law if they got into power, they confirmed in December 2023 that they will now leave the legislation in place. The new legislation covers more than just properties, it also covers Uber and Uber Eats, for example. But we are just focusing on the property implications and what it means if you own or rent out a room, bach, or an investment property. If you have booked a property for a work or family trip any time after 1 April 2024, you should also continue reading, as there are possibly implications for you too. So, what does the law say? That platforms like Airbnb, Booking.com, Expedia, Vrbo etc. are required to charge GST on all transactions and pay this GST over to Inland Revenue (IRD) where the owner of the property is: GST registered: Pay 15% to IRD. Report your income as zero-rated on your GST return. This ensures the income is declared and you do not pay the GST twice. It also means that you claim your GST on expenses, and will likely receive refunds each GST return. NOT GST registered: Pay 6.5% of the GST to IRD and pay the remaining 8.5% to the property owner. If you are not registered for GST there is nothing for you to do. You only qualify for an exemption if: your income from these activities is over $500,000 per year: or you had more than 2,000 nights booked in a year. This means that all these platforms are frantically updating their software to allow for the collection and payment of GST to IRD. Here’s what we do know: Expedia : They have NOT been able to update their software and will be removing ALL NZ listed properties from 1 April 2024, unless you qualify for the exemption above. If you have a property listed on Expedia, they possibly may remove it. There is no clear guidance as to what happens if you have bookings for the future but we suggest you contact your guests. Be careful how you do this though, as it’s against Expedia’s rules to make contact with guests outside of their system. If you are travelling and made a booking on Expedia, you may also have an issue - contact your host to work out what to do. Vrbo (ex Bookabach): While owned by Expedia, they have upgraded their software and will be able to cope with the new GST. But be aware, from 1 April they will automatically add 15% GST to all bookings. So, this will increase your nightly rate by 15% and make your property more expensive. You will have to manually update your rates to reflect this change. Airbnb: They, too, have decided they will add 15% GST to every booking from 1 April 2024. Their system says they are not yet set up to deal with NZ GST. Booking.com: They have not yet provided guidance on what they are planning to do. Will they be like Expedia and just stop supporting NZ properties or will they be like Airbnb and just add 15% to all bookings? So, a warning, if you are not GST registered, and you have not told your platform provider, it appears they will default to adding 15% GST to your property and pay this 15% to IRD. How you get your 8.5% back remains a mystery. If you are planning on booking accommodation, be wary of using Expedia or Booking.com, as a booking after 1 April 2024 could potentially cost you 15% more! In any event, landlords and holiday makers should revert to their booking platform for the latest information and policies. If you want to know more please reach out to us.
23 Apr, 2024
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18 Apr, 2024
Finding the right staff for your business can be tough. Hiring can be challenging, but the right team can really support the growth of your business. Attracting the right staff starts with writing a recruitment ad that makes your role stand out in the crowd. Here are three ways you can make your job ad more appealing: Sell the role Rather than beginning the ad with the job description or a list of requirements, start with what makes the job most appealing. Is it the industry, location, pay, or perks? Be up front with the advantages so that it’ll grab people’s attention and encourage them to read further. Keep it short and sweet While it can be tempting to write a novel so that it paints your business in the best light, it’s better to keep your job ad short and sweet. Aim for a maximum of 700 words that are straightforward with readable language, and avoid adding unnecessary words or repetition. Avoid meaningless clichés Every job ad mentions their amazing team, or how the environment is fast paced. Everyone says they’re offering a ‘competitive salary’. All jobs are looking for self-starter’s or those who can hit the ground running. Rather than using the same phrases as everyone else, be different. What can you write that makes your business stand out from the crowd – you could provide the actual salary, for instance. Describe the job, the team, and the environment clearly and accurately. This helps the candidate get a genuine understanding of the role and that’s what piques their interest – not the same phrases that everyone else is using. Hiring  Now that you’ve attracted the right person for your team, make sure you cover your bases when hiring (especially around trial periods). If you need help with employment contracts or other employment-related questions, let us know we’re here to help.
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