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Chartered Accountants &
Business Advisors

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WELLINGTON

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WELLINGTON

Ten Tips to Improve Your Habits, and Your Business

19 Nov 2021 | Biz Strategy

Your habits are running your life – make sure they’re good ones!

We talk a lot about using your business as a tool to create the lifestyle you desire. Knowing where you want to go and creating a solid roadmap to get there is only the first step, albeit a very important one. But the next step – doing the work – is what trips many people up.

It’s easy to blame our outer circumstances for standing in our way of progress. But it’s often our own behaviour patterns that are holding us back. It’s also our behaviour patterns that get us to the finish line – if we can implement good ones.

We all have habitual patterns in our personal life and business practices. James Clear, author of the New York bestseller ‘Atomic Habits’ says,

“By the time we become adults, we rarely notice the habits that are running our lives. Most of us never give a second thought to the fact that we tie the same shoe first each morning, or unplug the toaster after each use, or always change into comfortable clothes after getting home from work. After decades of mental programming, we automatically slip into these patterns of thinking and acting.”

It’s worth considering that instead of having to make major changes to achieve success, you may just need to upgrade your habits and behaviour patterns.

But how do you do that? First, you need to identify those bad habits, then you need to disrupt them, and start forming new habits.

 

Step 1: Identify Your Bad Habits

Observe your habits for a few days. Do you distract yourself with social media to avoid doing something you dread, like paperwork or marketing? Or do you procrastinate on upgrading old equipment or outdated processes because it’s easier to avoid fixing them? Perhaps you’re among many business owners who are in the habit of not delegating.

Also write down the triggers that lead to a habit kicking in, as well as the ‘reward’ they provide.

Each habit has a trigger – when X happens, then you’ll do Y. For instance, when you sit down to do your paperwork, you suddenly feel tired and think you’ll just take a little break, and while at it, you’ll check what’s going on on Instagram. Similarly, every habit started because you got some type of reward out of it. Maybe you’re avoiding feeling uncomfortable when not delegating, because you find it hard to tell people what to do. Or you think it would be quicker to do yourself, rather than teaching someone, saving you time in the short term (but certainly not in the long run!) 

Write down a few habits you can identify that are directly impacting the success of your business and keeping you from moving forward. Maybe you already know what it is. And maybe it’s just one big bad habit!

 

Step 2: Disrupt Your Patterns and Form New Habits

Now that you’ve identified the habits that you’re ready to kick to the curb, the fun part starts: disrupting your behavioural patterns. 

A desire for change isn’t enough to create lasting improvement. Desire provides the fuel, but the effective application of it requires day-to-day action and creating new associations. 

In his book, James Clear outlines how to create good habits and break bad habits by inversion.

How to create a good habit:

(Trigger) – Make it obvious.
(Craving) – Make it attractive.
(Response) – Make it easy.
(Reward) – Make it satisfying.

How to break a bad habit (inversion):

(Trigger) – Make it invisible.
(Craving) – Make it unattractive.
(Response) – Make it difficult.
(Reward) – Make it unsatisfying.

Using the distraction of social media as an example; you can disrupt the trigger by removing the app from your phone, or unfollowing groups that are wasting your time.

“To change a habit, make a conscious decision, then act out the new behaviour.” – Maxwell Maltz

 

Ten Tips to Reboot Your Habits

  1. Identify the bad habits that need disrupting. 
  2. Be clear on what the outcome is that you want. When the reward is clear, you’ll be more intentional and motivated.
  3. Change the association of the outcome of the bad habit from a reward, to an unacceptable result.
  4. Pace yourself and start with one habit at a time. This will help to build momentum, rather than tackling too many and getting discouraged.
  5. Set your intention first thing each morning. What is your mini-goal for that day? Write it on a sticky note and keep it visible, like on your computer screen.
  6. Invest in your self-improvement by following business success groups and reading entrepreneurial books.
  7. Create reminders that are in-your-face unavoidable, such as pop-up calendar prompts, or something that forces you to take action. Get creative.
  8. Stay accountable. This could require involving a colleague or your spouse, a business coach or your accountant to help keep you on track.
  9. Monitor your progress. Review your accomplishments at the end of each week or month, and observe what new behaviour helped you achieve them.
  10. Be transparent with your team that you’re on this journey of shedding bad habits and creating better ones. Inspire them to bust their old habits too.

 

Need Help With Disrupting Bad Habits?

It may surprise you that, as accountants, we talk about helping you with developing better habits. But it’s actually not that strange. Our role as accountants has evolved to support the dreams and challenges of business owners – to be business advisors; to be your confidant – and forming better habits in business is a crucial part of it.  

We are by no means perfect when it comes to following only good habits – but the best guides are often those who struggle with the same obstacles and have learned how to overcome them. Let us help you to define what success means to you, create a roadmap with you to get there, and then start implementing. Your dream is worth it!

 

Limitation of Interest on Residential Property and a ‘New Build’ Definition

22 Oct 2021 | Tax Updates

You may remember the bomb that the government dropped on us back in March: Interest expenses you may deduct from residential rental property will now be limited and the period for the bright-line rule is extended. They’ve taken a few months to suss out the details, and we finally have more information for you.

But first, a quick reminder of why the changes were proposed.

The government believes that by limiting the deductibility of interest, it will make residential property a less attractive investment option. They hope that this would level the playing field for first home buyers, which is why the change is only on residential property, not commercial.

They still want to encourage the supply of new housing because of the housing shortage we’re experiencing, which is why they introduced some exemptions for purchasing new builds as well as for property development.

The bill has not been passed yet, they expect this to be done by early 2022, so technically these may still change. The public will still have the opportunity to give feedback on the proposed bill.

There are two important dates to note:

  • 1 October 2021: This is when the new rules came into effect.
  • 27 March 2021: Different rules apply depending on whether you bought your property before or after this date.

Let’s look at some of the most important changes.

 

1. Limitation of Interest Deductions Allowed

There are no major changes from our previous blog. In summary, the following changes came into effect from 1 October 2021:

  • If you bought a property after 27 March 2021: No interest can be deducted.
  • If you bought a property before 27 March 2021: The interest deductibility will be phased out between 1 October 2021 to 31 March 2025.

Any interest incurred up until 30 September 2021 will be 100% deductible, but going forward a lower percentage will apply until it’s phased out completely. See the table below for these percentages:

24 - Phasing out interest deductions

IRD estimate that they will generate additional tax revenue on these changes as follows: 

  • 2022 – $80 million
  • 2023 – $200 million
  • 2024 – $350 million
  • 2025 – $490 million
  • 2026 – $650 million

As you can imagine, these changes add a layer of complexity, so if you need any help with working out how much you can and can’t deduct, get in touch with us to help. You can also find more information on IRDs info sheet.

 

Which Exemptions Are Available? 

There are a few exemptions to the rule. These include: 

  • the main home, even if part of the main home is rented out to a flatmate or boarder
  • farmland
  • commercial accommodation (hotels, motels, hostels, but not short-stay accommodation provided in a residential dwelling like Airbnb)
  • certain Māori land
  • emergency, transitional, social and council housing
  • care facilities, retirement villages and rest homes
  • employee accommodation
  • student accommodation
  • land outside of New Zealand

There is also an exemption for companies where less than 50% of their rental portfolio makes up residential property, with the majority being commercial rentals. 

There’s also an exemption for property development and new builds, which we discuss in more detail below. 

For a complete list of these exemptions, have a look at this info sheet.

 

Will You Be Able to Deduct the Interest Later? 

Yes, but… 

Any interest that you’re not able to deduct in the coming years can be deducted when you sell the property. However, this is only if the profit on the sale is taxable (see bright-line rules below) and the deduction may be limited to the gain. 

If you don’t need to pay tax on the sale, you will lose the interest deduction.

 

2. Exemptions for New Builds & Property Development

New builds and property development will be exempt from the law changes, in other words, you will still be able to deduct interest you paid from your rental income.

 

Property Development Exemption 

There is an exemption available for property development: 

  • Land business exemption: This applies if you hold land to develop, subdividing land, and land-dealing transactions.
  • Development exemption: This applies while you’re developing property.

The second exemption applies from the time you’re starting to develop the property until you either sell it or receive the code compliance certificate (CCC). After you receive the CCC, the property becomes a new build, and the next exemption will apply.

 

New Build Exemption 

This exemption applies to any self-contained residential properties that received their CCC on or after 27 March 2020. 

The property will be classified as a ‘new build’ for 20 years from the date it received its CCC, and the exemption includes the initial owner as well as any subsequent owners in the 20-year period. 

It’s also good to hear that this rule includes prefabricated, modular, and relocated homes. Additionally, it also includes the conversion of existing houses into multiple dwellings, as well as commercial buildings that are converted into residential housing. 

For more details about the property development and new build exemptions, have a look at this info sheet.

 

3. Changes to the Bright-Line Property Rules

The sale of property is mostly non-taxable since we do not have capital gains tax in New Zealand. However, if you sell property within a certain period, you may have to pay income tax on the gain you make. This is not new, as it was first introduced in 2015. However, this period has now been extended from 5 to 10 years.

24 - Brigth-line rule

The rules are a bit different for new builds purchased after 27 March 2021: 

  • The period will only be 5 years
  • You must buy the property within 12 months after it received the code compliance certificate (CCC)
  • It must still have a CCC by the time you sell the property

You can find more details about the bright-line property rules here.

 

Where to from Now? 

As you can see, these rules can become complex and may be difficult to apply. There are lots of subtle nuances that you may not know about if you’re trying to figure it out for yourself. The notes above are guidelines and cover only the most important points. It cannot be relied on as final advice. 

Rather, come chat to us to help you analyse your unique situation and to make sure that you are treating your transactions correctly for tax purposes.

How to Build an Effective Management System

17 Sep 2021 | Biz Strategy

After a tough year, it’s often challenging to keep the spirits up and keep your employees motivated and productive. We see this trend every year, and usually it passes – once the team is back from their summer break, their spirits are high and they’re eager to work again. 

But what if this is a constant problem you’re battling with? What if motivation and productivity are low even in the best of months? 

“You don’t build a business, you build people, then people build the business.” – Zig Ziglar

If you have a problem in your business with keeping people motivated and productive, it may be because you don’t have an effective management system in place.  

Many business owners never think of implementing a management system, so in Part 1 of this blog, we’ll have a look at what it is, why you need it, and how to spot if your management system is not working as it should. If you’re not sure what we’re on about or how you’re faring, then make sure you read the whole blog. 

In part 2, we get down to business and show you step-by-step how to create an effective management system. If you’re already convinced that you need to up your game, then skip ahead to part 2.

PART 1: Management System 101

‘System’ can be defined as a set of processes, tools, people, and strategies that all work together.

A management team is one thing, but what is a management system? As the word implies, it’s the interconnection of the team and the system which is needed to steer the business in the right direction – in line with your strategic objective.

A management system is the foundation for how everything in your business operates, so it deserves careful consideration when creating it, and also with updating it for inevitable changes.

 

Why Should You Have a System for Management?

Systems empower managers to thrive and know where they stand in the overall vision of your business.

A management system provides structure, which promotes higher output and accountability. The structure also gives them room to be more innovative and creative – a must for any business that wants to survive and thrive in our constantly changing world.

In our blog, Why You Need to Work On Your Business – Not In It, we talked about how important processes are to help you to transition from working in your business (doing), to working on your business (leading).

Together with a management system, your business will hum like a well-oiled machine.

 

Signs Your Business Lacks a Management System

The tell-tale indicators include:

  • You can’t rely on your team to handle operations without you, leaving you with little freedom to lead or grow the business.
  • You constantly have to micro-manage or train people, or complete tasks yourself to ensure they get done properly.
  • Your team lacks clearly defined roles of responsibility and accountability, and the default go-to person for every little thing is always you.
  • You have no department or middle managers, or staff with enough technical or management skills to shoulder responsibility.
  • In other words – you guessed it; you’re caught in the ‘doing’ role to compensate for an ineffective team.

New business owners often struggle with these issues when they’re just beginning to build processes. But, they can crop up at any stage of the business, so it’s important to honestly assess if, and how much, you’re stagnating because of an ineffective management system.

Take some time to really think about the challenges you’ve faced this year. Are they because of an ineffective management system? And if so, what are you going to do to solve your conundrum? To help you with that, let’s jump into a step-by-step process on how to create an effective management system in this next part.

Part 2: 5 Steps to Building a High-Performing Management Team

A high-performing business starts with a high-performing management team.

But how do you go about creating an effective management team? Following these steps would get you there:  

 

Step #1: Create or Update Your Standards and Protocols

Your standards and protocols lay down the rules for your team and key business activities. These should be aligned with the vision and strategy of your business. The list of what this could include is endless and specific to every business, but here are some questions to get you going: 

  • Customer service: How do we handle complaints, returns, etc.?
  • Sales policies: Do we offer guarantees or refunds?
  • Marketing and promotional activities: Which activities and channels do we use?
  • Team policies: How do we conduct employee training, performance reviews and advancements?
  • Staff behaviour: What type of clothes are required/acceptable and what is our work from home protocols?

Creating a Team Handbook laying out these rules would also be helpful.

 

Step #2: Create or Update Your Organisational Chart

An organisational chart provides a visual structure of departments, sub-departments, upper and middle-management roles, and support staff roles. The chart should also illustrate how the different roles and departments work together.

 

Step #3: Create or Update Job Descriptions, with Position Agreements

You cannot hold someone accountable for something they did not agree to. 

Beyond the basics of the usual job description, position agreements establish a clear understanding of each position’s accountabilities, standards, and what resources and support they need to succeed in the role. 

We’ve found that while it’s important to have a job description, you have to carefully go through each of the items and make sure both you and the manager understands what each statement means and what is expected from the manager. There can be no grey areas and you need to get buy-in from your manager for each point.

 

Step #4: Create or Update Your Operation Manuals

Your operation manuals should be specific to each position so that every employee knows the functions of their role and what steps should be taken to complete each task. This will eliminate any guesswork or confusion. 

Don’t go overboard with this, though. Leave some room for people to think and use their creativity if they’re dealing with a scenario that is out of the ordinary. We’ve found that if you’re too detailed, people start to get lazy – they don’t think about what they’re doing and why, and if dealing with an outlier case, they don’t know how to handle it.  

 

Step #5: Hold Regular Individual and Team Meetings

One-on-one meetings provide opportunities for managers and employees to build effective relationships. It also supports employees’ growth. Company-wide meetings, whether bi-monthly or quarterly, provide you with the valuable opportunity to share updates, reaffirm the vision and strategic objective of the firm, and reinforce team spirit.

 

How Will This Look in Your Business?

When you have a management system that works like a well-oiled machine, you’ll be able to design your business around the lifestyle you dream of. At BWMD we believe that your business is a tool to help you create your ideal lifestyle – your business should not overshadow every bit of your life.

But, creating the type of business where systems work smoothly can be a challenge. We love helping SMEs like you to design and update your systems in a customised way that works for your unique business, so get in touch if you need a hand.

 

Why You Need to Work On Your Business – Not In It

13 Aug 2021 | Biz Strategy

Are you micro-managing every piece of your business? If so, you probably can’t see the forest for the trees – the bigger picture, instead of all the small details.

As the business owner or CEO, your job is to look ahead, imagine what your business can become, work out the business strategy, and make sure your team has the tools to bring your vision to fruition. In other words, working on your business.

Not only will the business be more successful when you work on your business, instead of in it. But you will enjoy it more as well.

The purpose of life is not to serve your business – your business’ purpose is to serve your life.

Is it time that you reimagine your business from being a burden that consumes your life, to the tool that will enable you to achieve the lifestyle you crave?

 

 

Signs that You’re Stuck on ‘In’

It may already be obvious to you where change is needed, but sometimes it’s a subtle and habitual approach that causes stagnation. If you’re caught in an employee-mindset, you often lose the entrepreneurial perspective that inspired you to be a business owner in the first place.

So, to help you identify whether you’re IN instead of ON, let’s look at some of the red flags:

  • There is no solid system of processes in place.
  • You don’t delegate enough, or ever, and are micro-managing every aspect of the business.
  • You’re constantly putting out fires.
  • You lack solid team members or department managers you can hand over responsibility to. 
  • You’re working long hours, are drained, and have little time for family, hobbies, or relaxation.
  • You’ve lost sight of your vision, creative inspiration, and goals.
  • You feel like an employee serving your business, not the business serving your life.

If you’re spending the majority of your time working in the trenches of your business, this leaves precious little time to actually focus on your business, with long-term planning, goal setting, performance tracking, or scaling. Although doable for the short-term, this approach will leave you with no energy or time for much else but managing day-to-day operations.

 

Why a Business Process System is Essential

As the business owner or CEO, your work is to design the machine-like structure of a business process system – the model of replicable actions and process automation that your team can follow.

The people on your team are vital to its success – they are on the frontline of your business. But, without the structure of solid business processes, the full potential of your employees will go to waste.

People bring systems to life. When systems work well, people have the space to, and often do, perform exceptionally.

“Businesses are not built by extraordinary people, but by ordinary people doing extraordinary things.” – Michael E. Gerber

 

Why Should You Design and Build a Well-Oiled Machine for Your Business?

These are some of the results you can expect:

  • Consistently providing superb services and value for your clients.
  • Cost efficiency, increased productivity, and higher employee satisfaction.
  • A structure for your team to know what to do when.
  • Easier transfer of business knowledge when someone leaves and you need to train a new staff member.
  • Structure and order which will empower you and the team, instead of chaos and confusion.

The only person in your company who will be genuinely motivated to grow your company is you. Every minute that you spend working on tasks that can be delegated is a minute that you are not planning, strategizing and building the best business possible. – Inc.com

 

How Do You Build a Well-Oiled Business Machine?

  • Take stock of everything and ask: “what can we do better?”, “where are our bottlenecks?”, “where do we not get consistent results?”, “what do we waste our time and resources on?”, and “what’s outdated?”.
  • Establish the big picture layout, and inspire an excited team effort of who’s going to do what, with clearly identified roles of responsibility.
  • Map out new procedures, fill in the blanks with the little details, and document the new processes. 
  • Test and tweak, gather feedback and adjust as required.
  • Train the team on new processes. Make sure more than one person knows how to do each task so there’s a backup for every role.
  • Establish an ongoing review and improvement plan.

 

Ready to Transition from Doing to Leading?

When the right people, structures, and processes are in place, not only will you improve the business’s agility and efficiency, you’ll finally have the freedom to step out of being a micro-manager. Instead, you’ll oversee the larger picture, lead your team, better react to change, and steer the ship in the direction that supports your vision for the business.

Need help building a process system so you can get out of IN and back to ON? Get in touch with us so we can help you to design your business to become the tool to achieve your dream.

The Art of Asking the Right Questions

29 Jul 2021 | Team

Your team is only as strong as the questions you ask 

If you’ve ever been in charge of training people, you may have had moments where you get frustrated with the pace people are learning at, or that you often have to repeat yourself. 

Maybe these thoughts sound familiar… 

“They don’t listen”

“I’ve told them that already”

“Why can’t they just do what they’re supposed to and stop interrupting me?” 

Have you ever thought that the problem doesn’t lie with those you’re trying to teach, but rather with your teaching method? Maybe you’re not telling them the right way. And by telling, we mean asking the right way.

 

Asking Your Team the Right Questions 

A big mistake we often make when we train new staff, is to just tell them what to do. Sure, if you don’t tell them what to do, how would they know how to do their job, right? And for the first few days, that’s exactly what you need to do. But there comes a time where you have to switch your approach from telling to asking. 

Let’s look at a few examples.

 

How do you understand your role/this process? 

You’d be surprised how often you may think someone is on the same page as you, while they’re actually in a completely different book. When you ask them to repeat the process back to you, you can easily spot the holes and correct them – and avoid unnecessary misunderstandings.

 

How do you think you should do this? 

This question is a great way to cement what you’ve taught them, especially if they’ve asked you the same question before. If you just repeat what you said previously, instead of asking them to explain it to you, you’re going to have to answer the same question a few more times. Talk about frustration overload! 

This is especially good for more technical questions. To give you a few examples of where we use this tactic at BWMD, is when we get questions like this: “I have a client query and I don’t know how to solve it”; “I’m not sure how to record this transaction”; or “How should I treat this for tax purposes?”

 

Why do you think we do it this way? 

This is a very powerful question to ask if you want the person to think a bit deeper and really understand what they’re doing. It’s also good for those instances where there isn’t a black and white answer. Not only will they grow in their knowledge and confidence, but they may also come up with ideas and solutions that you haven’t thought of before.

 

Getting into the Habit of Asking Questions 

Asking instead of telling doesn’t come naturally to everybody. It’s like a muscle you need to train, and the more you ask questions, the better you’ll get at it. 

You’ll also be pleasantly surprised when you see people learn quicker and retain what they’ve learned. They’ll also become better teachers themselves. Seeing how people grow is one of the most satisfying experiences any manager can have. 

So, next time someone asks you to explain something to you, answer their question with a question.