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Eye on the festive season

2020 has been challenging for many within our local business community. Riding the highs and lows of a pandemic has definitely tested resilience and the survival of businesses throughout the country.

As the end of the year nears, the Christmas holiday period brings about its own set of financial considerations for employers to focus their attention on, and is an appropriate time for us to highlight these following points:

A time to acknowledge and give thanks

Christmas is normally a time when many employers and business owners like to acknowledge and reward staff for their efforts throughout the year, and often clients and customers too with gifts and celebrations.

The degree and scale to which businesses approach such events and activities this year may look a little different, however it is important to still be aware of the various deductibility rules that apply. These will be subject to either entertainment tax or fringe benefits tax, and it can get a little confusing. To gain a better understanding of the rules, please reach out to your trusted adviser.

Other useful resources can also be found at the following links:

www.bdo.nz/en-nz/insights/retail-franchise/a-gift-worth-giving

www.ird.govt.nz/income-tax/income-tax-for-businesses-and-organisations/types-of-business-expenses/entertainment-expenses

Reminder to diarise tax payments

The second provisional tax payment for the 2021 tax year (for businesses with March balance dates) and GST payments (for the period ending November 30, 2020) will be due on January 15, 2021, closely followed by the employer deductions payment (PAYE) on January 20, 2021.

This can often be a strain on cashflow and for some businesses can be difficult to pay. Confirm now what these amounts will be and, if you believe you will not be in a position to pay these liabilities, you should contact your trusted adviser or accountant to discuss options for payment arrangements with the Inland Revenue. Be proactive.

Public holidays over Christmas and New Year

The Christmas and New Year public holidays fall on a Friday and Saturday this festive period. If the public holiday is normally a working day for your employees and your business is closed, then employees are entitled to a paid day off at their ordinary rate of pay.

If your business remains open and employees work on the public holiday which is a normal working day for them, they are entitled to:

• be paid at least time-and-a-half for the hours worked on the public holiday, and

• a paid day in lieu (alternative holiday), to take later, even if they only worked part of the public holiday.

If the public holiday is not a day that employees would normally work, they will only receive payment of time-and-a-half for hours worked on the public holiday.

Public holidays that fall on a weekend, ie Boxing Day December 26, 2020 and the day after New Year’s Day, January 2, 2021, are “Mondayised”. The same rules apply, but employees only get the public holiday once. If you require further clarity on these points, please seek advice from someone experienced in people/employment-related matters.

The following website link may also provide further useful insights:

www.employment.govt.nz/leave-and-holidays/public-holidays/

Cash will always be King

At a time when many businesses are still struggling with cashflow, it is essential that employers stay very focused on maintaining a strong working capital position that allows them to continue to operate over this time.

For many retailers, this period either makes or breaks the year from a sales point of view, while for other businesses it is a time of outward cashflows for expenses such as holiday pay.

Look at your short-term cashflow forecast now up to the end of March 2021 to confirm your banking requirements and to help avoid any surprises. If you face a shortfall compared to your target, include some ways to deal with it — ie reviewing your stock holding and discounting or clearing stock so you can realise some cash.

Strategic Planning for New Year and beyond

Whilst the lure of the sun and surf provides an ideal opportunity to take a much-needed break with family, in terms of what it means for your business, it is also a time to take stock, reset and strategically plan for the future.

Consider the following three-step process as a start:

• where are you now?

• where do you want to be in three to five years?

• what is your plan on how to get you and your business there?

Embracing new technology and systems

A key lesson from the global Covid-19 pandemic this year is that businesses which have embraced digital technology solutions, and adopted streamlined processes and systems, have been able to pivot and reposition themselves to seize new opportunities.

This is the new norm now and to ensure we have a sustainable business community for years to come, we need to reshape and rethink our conversations by being open-minded to consider new possibilities. Technology is central to this and by connecting with your trusted adviser who has expertise in information systems, they will be able to work alongside you to determine a tailored solution that best suits you and your business.

Consider this to be one of your New Year’s resolutions — it will be a decision you and your business will not regret.

Steve is an associate at BDO Gisborne and heads its business transformation team, which works closely with clients to assess, recommend and implement tailored digital-technology solutions based on the unique requirements and needs of businesses.

SURF’S UP: The festive season provides an opportunity to take stock, reset and plan strategically for the future — as well as a much-needed break with family, and maybe some time at the beach.
Steve Ostler