15% GST has arrived NZ

Waking up this morning came with a realisation of how fast September had flown by and how quickly the change to 15% GST in NZ had arrived. Many were predicting a spike in sales for retail businesses in September with consumers attempting to beat the GST increase, but it’s not certain that retailers saw this.

It would have been interesting to see council staff scurrying around hurriedly emptying parking meters, or large buckets of change from pokie machines being banked – so that the cash takings could be returned at 12.5% instead of 15%. Instead the most notable signs last night that things were about to change were the queues at petrol stations and supermarkets.

Talking to several business owners about the GST changes yesterday highlighted the fact that while many of us are on top of the change, there is still confusion as to what it means for businesses after 1 October and beyond. For businesses returning GST on an invoice basis, it’s generally a simple change, but it is important to determine ‘time of supply’ and be aware of exceptions. A handy place to look for answers to specific questions is on the GST Advisory Panel website – scroll down on their site for working examples.

Businesses on a payments basis need to enter invoices into their accounting system to make the ‘GST rate change adjustment’ based on total invoices outstanding. This adjustment is simply to make up for the difference in GST that will end up being paid for monies received from today (at 15%), where the initial invoice was issued at the old GST rate. For those still blissfully unaware or even slightly confused, we’ve put together a quick step by step working example.

Download the PDF

The rate change calculation is automatic for those on Xero, but for others on less intelligent software this will have to be a manual adjustment. Overnight we also adjusted the default GST rates to 15%, which you will have already seen this morning when you logged in. To see this and the other work we’ve done for you, watch our short video.

It’s not too late to switch to Xero and take the hassle out of the GST changes. Talk to your accountant or sign up here.

Tax changes show power of moving to cloud systems

Article published in one of our  local papers The Herald yesterday. Part of a GST series covering the rate change in New Zealand from 12.5% to 15%.  I wanted to talk about the benefits of the Government to make changes and bring up the Single Business Number …

It’s good that the Government has lowered income tax and raised GST – moving the tax base to be more consumption-based and rewarding those that save. But the big cost of the change the Government doesn’t see is the effort required by our 480,000 small businesses to manage the migration and the complicated transition rules.

The GST change has been a watershed event for cloud-based software in New Zealand. Cloud computing is where your business applications are hosted on the internet and you access them through any standard web browser. This is instead of managing your own software that’s tied to your local PC on the desktop. The GST change has highlighted a difference between desktop and cloud-based software.

Rather than every one of our busy small business owners having to find the right software update and then work through a complex set of steps, cloud based providers can make the changes on behalf of all their customers.

Cloud based solutions are often called a software-as-a-service model. Not only is software delivered over the internet, but services such as back-ups, upgrades and security are looked after for you by your own virtual IT department. What’s more the cost is spread over tens of thousands of users.

At Xero we were able to have a few of our smart people work out the GST rule changes, develop and test migration tools and then at midnight on September 30, and at a number of key times, customer data is updated automatically so that the GST change just works. Across New Zealand that saves productivity.

The GST change is just the beginning; the IRD’s Making Tax Easier initiative to move from paper-based systems to customer-focused online technologies, and other policy work, will result in a number of other accounting changes over the next few years. As the Government sees that cloud solutions take the pain out of change we hope it will move faster in making things easier for New Zealand business.

So cloud solutions solve some problems, but what are the other exciting opportunities that arise from having large and small business connected electronically? Already your bank transactions arrive automatically in your accounting system each morning and you can see real time gains and losses on foreign exchange transactions as currency rates are updated automatically each hour. We see a world not too far away where your invoices just arrive in your accounting system. No rekeying, no errors, invoices are already loaded ready to be approved.

We also see the ability for a plumbing company in Christchurch to benchmark themselves against an anonymous peer group of similar plumbing firms across the country. Your accounting system will automatically file your taxes and submit your statistics reports or ACC returns.

One of the next items of work the Government needs to consider for small business productivity is a single business number. In the online world having a unique identifier for each business is a key step in electronically connecting businesses large and small. Australia and most other countries already have a number. It’s likely to be the GST number and it would be great to see NZ continue its lead in small business technology by implementing this.

Small business contributes 38 per cent of New Zealand’s GDP. That’s $50 billion. Using cloud technology to improve the productivity and survivability of this vast but invisible sector is important for New Zealand. We can be proud that we already lead the world in small business software.

The modern practice

Today we’re announcing a new initiative for the accounting industry.

Right now Xero offers client side accounting, as well as accountant side features such as annual reports. We believe the ‘single ledger’ is a fundamental disruption to the accounting software industry because it provides huge efficiencies to the accounting practice and reduces cost dramatically.

Examples of what we’ve already delivered for accountants include Xero Partner Edition, Cashbook and recently Ledger – all these were developed based on partner feedback. We’ve also delivered the first part of Final Accounts (Reporting Codes), and those who’ve seen previews of Xero Final Accounts can’t wait for its release.

As we provide more day-to-day requirements for accountants on the Xero platform, we’ve taken a good look at the other software they use to run their practices. We obviously need to coexist with these products, and used together, there’s a huge impact on productivity. This has lead to the initiative we’re launching today.

The Problem

Frankly, we were shocked at the software used by many accountants to run their practice and the acceptance of it. We’ve seen low quality and very dated solutions which cost tens of thousands of dollars for the software and servers. Further, we don’t believe the roadmaps of the incumbent vendors will take accountants down a desirable path. Under these vendor models, server environments will get more complex and expensive. This is the opposite to what’s happening with the Cloud. Cloud vendors like Xero manage complex applications for you and share the cost among a broader base. The Cloud approach delivers commodity pricing.

Accountants are not technology experts and it’s expensive and at times and mind boggling for them to work out what is the best set of solutions for their practice. We are technology experts. Not just in the small business space, but we have a very good understanding of mid market and enterprise solutions. Obviously we’ve been keeping track of what the big vendors are doing in the Cloud too.

The Challenge

Having taken the time to understand the requirements of our accounting partners, what they need includes: client accounting, final accounts production, tax filing, practice management, document management, customer relationship management, electronic marketing, office productivity, file storage and printing and a website. It’s a big list of applications that need to work together.

Subsequently we’ve formed a view of why the market is – as it is. In reality no one vendor provides all of those things. The accountant’s challenge has been to work out which products are best and pay someone to integrate all of those systems together. Accountants have told us this can be a real headache. What’s more you may have had to suffer bad service, not to mention great expense.

Accounting practices are small businesses themselves, so selling to you and supporting you is tough. Implementation projects tend to be a nightmare and the types of vendors that sell into the market are just not the ‘A’ team.

There is a better way. And it’s much cheaper.

The Solution

Together with a number of our partners we’ve come up with a selection of best of breed products that work well together. And we’ve really thought about how we bring commodity pricing to you – to save you money, not just headaches.

There is no perfect system – yet. But we’ve brought together a suite of technologies and supporting vendors who will commit to work hard for you so you have an integrated set of tools that will make your accounting practice hum.

One of our primary partners in launching this initiative, which we call the Modern Practice, is Microsoft. Microsoft is the largest software company in the world and you’re no doubt already using their products. They have commoditized a number of key services by moving them to the Cloud. This means you won’t have to buy and manage your own servers anymore.

The other missing piece has been web based tax. We’ve thought hard about developing this ourselves, but we also feel tax it is tied closely to practice management, plus it’s country specific. So we’ve decided to work with one of our great partners WorkflowMax, and provide them with some additional capital to develop a tax module. We announced that earlier today.

When can I have this?

Most of this is available today and we’re hard at work doing the bits that are missing. But we’re ready for you to start planning and moving straight away. If you are considering changing your server technology to anything else, we suggest you make contact immediately and we will explain why this approach is better. We’re initially starting in New Zealand, but will quickly add the appropriate partners in other countries.

Let us know what you think of this initiative or any questions by commenting here on the blog. You can also help us shape the Modern Practice by joining the conversation on our LinkedIn Group.


Simple inventory

Coming up with a solution so you can record purchases as well as sales has been a much requested feature. It leads the pack among a bunch of new things we’ve got in today’s release.

To help you monitor your inventory we’ve revamped Price List Items and given it a new name Inventory Items. Check out Help Centre to learn about using Inventory Items on invoices, bulk exporting and for importing. There’s also a brand new report.  Or for a quick overview have a look at the video below.

While Inventory Items isn’t intended to replace a complete inventory management system (check out these Xero Network Partners for that – Unleashed and SimPro) it does provide a simple means to track the movement of inventory in your business.

We’ve also released a whole raft of changes to support the increase in GST in New Zealand – a complete list of what we’ve done and what’s left to do is here . We’ve even created a handy FAQ to answer some of the questions that might be on your mind. For the Australians the killer feature is Westpac bank feeds.  For a full list of the changes see our  release notes.

Footnote: Don’t forget the Cheesecake

A few weeks back when we were discussing the features to include in today’s release – including the makeover of Price List Items. Craig our CTO bravely announced this would be a piece of cake (oh the irony) and that he would personally deliver this feature. What’s more, he’d stake his reputation on there being no more than 10 bugs raised by the QA team. The wager – a cheesecake.

The good news for Xero customers is Craig completed everything in record time. The bad news, for Craig, is that 12 bugs were raised. Unlucky.

Craig and QA Tester Susanne

Fully automated bank reconciliation

I have been working over the last few weeks on setting up ‘rules’ inside the Xero banking module on my own practice accounts and a number of clients. Today for the first time when I imported a bank statement I did not have to categorise ANY transactions. There was a rule in place for everyone.
All debtor and creditor payments were applied to the correct accounts. The credit card payment was transferred to the credit card account, the loan repayment went straight to the loan account and the bank charges were posted straight to the P&L. In busy offices I have often spent a full working day at a bank reconciliation with my pen ticking away at every line when I posted it and then again highlighting every line as I reconciled it. This bank rec involved no pink highlighters, no inky fingers and no half day bent over a paper bank statement. It was fully automated.

Does this mean book keeping is dead? For technology savvy clients the answer is yes. For the old fashioned Irish accounts ‘clerk’ with his red ledgers and tippex we could be waiting a few decades.

If you are interested in automating your accounts process please contact

ralph@domybooks.ie or call Ralph on 0863336665

Fully automated bank reconciliation

Fully automated bank reconciliation

Segway owner killed on a segway

The multi-millionaire owner of the Segway company died in a freak accident yesterday when he rode one of the high-tech two-wheel machines off a cliff and into a river.

Businessman Jimi Heselden, 62, plunged off cliffs and into the River Wharfe while riding around his North Yorkshire estate on a rugged country version of the Segway.

He bought the firm in December 2009 and was using one of the machines – which use gyroscopes to remain upright and are controlled by the direction in which the rider leans – to inspect the grounds of his property.

A spokesman for West Yorkshire Police said today: ‘Police were called at 11.40am yesterday to reports of a man in the River Wharfe, apparently having fallen from the cliffs above.

‘A Segway-style vehicle was recovered.

‘He was pronounced dead at the scene.

‘At this time we do not believe the death to be suspicious.’

His death comes just a week after he became one of the UK’s most generous philanthropists, having given away £10 million to a charity foundation he set up in 2008.  He had previously given £13 million to the same foundation.

Mr Heselden was worth £166 million and ranked 395th on the Sunday Times Rich List – above X Factor boss Simon Cowell.

The ex-miner made his fortune with Leeds-based defence company Hesco Bastion.

The company pioneered ‘blast walls’ – steel-mesh baskets – which replaced sandbags as protection for soldiers on the frontline in Afghanistan and Iraq.

But Mr Heselden was also an extremely generous philanthropist and in 2008 he set up Leeds Community Foundation with a £10m donation, which he topped up with a further £3 million in 2009 and another £10m in September this year.

Read more: http://www.dailymail.co.uk/news/article-1315518/Jimi-Heselden-killed-Segway-accident.html?ITO=1490#ixzz10j9AaI6g

Numbers up at the ploughing championships!

Things are looking up! On day one at the European Ploughing Championships currently taking place in Athy, County Kildare there was an attendance of 66,000 This figure represents an increase of over 20,000 on day one last year.

The event is very popular with farmers and other agri businesses being europes biggest show in relation to agriculture. Notoriously hard workers its a good sign for the economy when farmers decide to take the day off and socialise.

Farmers attending the festival received confirmation from an early visitor, Minister for Agriculture Brendan Smith, that they will receive early payment of their single farm payment from Brussels on October 18th.

The payment, totalling €600 million, was not due to be paid until December 1st, but Mr Smyth successfully argued that it should be paid early because of the poor weather conditions encountered by Irish farmers late last year and early this year.

Registering as a charity – FAQ's

I have found the information available on-line in relation to tax exemption for charities and non-profits hard to find and difficult to read so I hope to answer some common questions below

Q1: Does a body have to register as a Company with the companies registration office to avail of a charity tax exemption?

A: No. A body can be either be incorporated (i.e formed as a company) or be unincorporated (i.e. established by a constitution rules or a trust)

Q2: What is an unincorporated body?

A: An unincorporated body could be a trust, a society or an association. In legal terms this is no more than a group of people acting together, where they are all collectively responsible for what they do.

Q3: Is an audit required?

A: In the event of a body registering as a company limited by guarantee then yes an annual audit is always required. If a body stays unincorporated and its annual turnover stays below €100,000 then there is no legal requirement for an audit. An audit maybe required by agencies providing funding or financial institutions though.

Q4: Are charities VAT exempt?
A: There is no general exemption in respect of VAT for charities although there are some specific reliefs available from VAT

Q5: Are charities CAT exempt?
A: A gift or an inheritance which is taken for a charitable purpose will be exempted from Capital Acquisitions Tax to the extent that Revenue are satisfied that it has been, or will be, applied to purposes which are charitable in law.

Q6: What financial statements should be prepared?
A:Financial statements normally include a Statement of Income and Expenditure as well as a Statement of Assets and Liabilities.

If you require any further information please do not hesitate to contact ralph@domybooks.ie

Obviously no financial or legal decisions should be made without seeking independent professional advice.

The currency of innovation

As someone who is fascinated with the subjects of innovation and good ideas, I thought this was a brilliant video summary of Steven Johnson’s new book, Where Good Ideas Come From.