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Welcome to the latest newsletter from Stewart & Co Limited In this newsletter:
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Employment Agreements
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Voidable transaction Often, when a company is short of funds, the director will make preferential payments to some creditors. Often, those same creditors have some degree of commercial power and therefore, effectively, the creditors are paid in preference to the general creditors. If the company subsequently goes in to liquidation, a liquidator has powers to unwind certain payments. For a transaction to count as being voidable, the liquidator must establish that the transaction enables one party to receive more towards satisfaction of a debt owed by the company than the party would receive, or would be likely to receive, in the company’s liquidation. The government has introduced a continuing relationship or running account principle to calculate whether a creditor has received preference. In simple terms, if in the six months before the liquidation, goods and services are provided to say a value of $10,000 and the creditor receives more than say $10,000, then excess can be challenged. It does not matter that the payments received during that period were applied to earlier invoices. A liquidator can in fact go back twenty-four months but normally six months is taken as the period. If, you have received sums from a debtor and a liquidator later challenges those payments and requests a refund, please contact us for advice.
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Statistics New Zealand The government website has a very useful area for business statistics. The reference is: www.stats.govt.nz. Various graphs and tables are available showing businesses by region, populations etc. This can be very useful if you were considering purchasing a business. For example, for a person interested in becoming a courier driver (an owner operator), you can use The Business Toolbox to see how the industry is performing. Using the industry profiler, you can then see that the industry is relatively steady in terms of numbers of business but business survival drops off very quickly. But it would appear that people join this type of business for a short time before exiting. There are also interactive maps which show the density of population, compare areas and you can even zoom them on various suburbs. If you are interested in marketing your business or perhaps even purchasing a business, you should take a good look at this site. There is no cost to using it.
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Cash is King You have probably heard this many times but what do you do when your business is having cash flow problems? The problem is due to the lag in time between when you pay your employees and suppliers and when you collect money from your customers. At its simplest, you need to delay outlays of cash for as long as possible while encouraging anyone who owes you money to pay as soon as possible. Managing Customers • Many business owners feel uncomfortable about debt collection. If that is the case, then get someone else to do it. While this may seem like an expensive option, it is much more expensive to have your business funding other people’s. You may be able to employ a part time Accounts Receivable clerk for as little as $20 an hour. Chances are they will put much more than that back into your bank account. • Consider the use of debt collection agencies to chase unpaid bad debts. Whilst agencies take a cut it may be better to lose say 25% of the debt as a commission than to collect nothing at all! • Offer discounts to customers who pay their bills rapidly • Ask customers to make deposits when orders are taken. • Require credit checks on all new on account customers • Issue invoices promptly and follow up immediately if payments are not made on time. Managing Suppliers • If you are being offered discounted products then think carefully. Why are they discounting those • Banks are wary of people who have to have money today (as this indicates a lack of planning) and
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Insurance Payouts – Certainty or Frustration? Five things to check with your insurance policies; 1. Policy ownership
2. Business Structure
3. Tax deductibility of premiums
4. Indemnity Income Protection
5. Non disclosure
Now is the time to confirm that you have your policies structured correctly and not be frustrated that failure to act causes you an avoidable dilemma. This information was supplied by Barry Day of Financial Success Group (2008) Ltd. Barry has a self assessment tool available free of charge. If you want a copy, please contact us.
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Bank RatingsWe frequently get asked our opinion on banks and investments. Under the new securities laws, we are unable to give investment advice and will generally refer clients to advisors who are qualified in that field.However, recently, we received from “Global Finance Magazine” a copy of their assessment of the worlds 50 safest banks. For New Zealand tax residents, the relevant banks in that top 50 were: Rank
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Shopping Mall Tax RefundsYou would all have seen advertisements on television and the booths in the shopping malls for companies such as NZ Tax Refunds and My Tax Refund where they offer a 'risk free no refund - no charge' service for filing tax returns for PAYE earners.
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