Waikato Business News February/March 2021

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22 WAIKATO BUSINESS NEWS February/March 2021 LIFESTYLE INVESTMENT A home built around you A home built around you Last viewing weekend on the 10th & 11th of April. No existing plans, templates, or catalogues. We work with you to create a unique home designed and built just for you, inspired by you. Our award winning showhome at 22 Riverpoint Glade, Hamilton, is open Saturdays and Sundays,1 pm - 4 pm. Come and see our amazing award winning show home. Don’t miss out on this opportunity! For a free, no-obligation chat about a home built around you call Jeff Marra at Design Builders Waikato today on 027 488 0044 or email jeff.marra@designbuilders.co.nz No existing plans, templates, or catalogues. We work with you to create a unique home designed and built just for you, inspired by you. Our award winning showhome designbuilders.co.nz at 22 Riverpoint Glade, Hamilton, is open Saturdays and Sundays,1 pm - 4 pm. For a free, no-obligation chat about a home built around you call Jeff Marra at Design Builders Waikato today on 027 488 0044 or email jeff.marra@designbuilders.co.nz designbuilders.co.nz
Sponsoring your clients without knowing it THE BUSINESS EDGE WAIKATO BUSINESS NEWS February/March 2021 Time to be really kind - or just really realistic? Most migrant workers and international students who come to New Zealand do so with the desire and expectation that they will be able to stay. 23 Sponsorship deals are reasonably common in business. A business pays an agreed amount to an individual, a team or a group, and in return receives media coverage, brand awareness, maybe some tickets and merchandise and of course the satisfaction of making a difference. Sometimes it is not just cash that a business gives a sponsor, it is discounted products. Sponsorship deals are negotiated, are real and serve a purpose. However, there is a different type of sponsorship – when a business owner inadvertently “sponsors a client” without intending to. In normal circumstances a business owner is motivated to make their business as successful (and profitable) as possible. If a business is to make a profit, it needs to sell goods and/or services by applying a mark-up. If you don’t get the mark-up right, then it is highly likely you are sponsoring your clients. What do I mean? By not knowing what your true costs are, or by incorrectly applying mark-up, your clients may be underpaying you and you are taking the hit. If you are in a retail business, it is relatively easy to apply mark-up, calculate gross profit and take into account your overheads, but let’s consider a business that manufactures a variety of products requiring different combinations of inputs (for instance, materials and labour). > BY BRENDA WILLIAMSON Brenda Williamson runs business advisory service Brenda Williamson and Associates www.bwa.net.nz If you don’t understand your true cost of the inputs, you may be offering some products at a loss due to: • Additional labour costs depending on complexity. • The cost of your raw materials increasing or creeping over time. • Overheads increasing over time but the allocation of overheads not being updated. • An error within the inventory management software. • Not applying freight, customs and duty costs correctly. If you are in a business that provides a service or produces a product, you really need a job costing system, so you know what the gross profit is on each job. When you quote for work you won’t always get it right (small swings and roundabouts are okay) but if you are making a loss on more than a few jobs, then you’ve got a problem. If so: • Do you increase your prices to reflect your true cost? • Do you try and reduce the cost of your supplies? • Can you improve efficiency by reducing the time on jobs, reducing direct wages cost? • Do you drop some unprofitable lines or services? A job costing system doesn’t need to be complicated; it just needs to be fit for purpose. If you are a small business, you can run a fairly simple system. Once up and running, you will wonder how you ever managed before! Technology, also, can let you down - a simple error in your costing system or software can have a catastrophic effect on your profit. The more electronic businesses become, the less visibility there is around back end information. It is easy for a staff member to incorrectly enter stock into the system or for a stock system to incorrectly allocate cost prices based on units – individual items v packets v boxes v pallets. Let’s look at a simple example: You purchase 1 box of 10 widgets at a cost of $10 each [cost = $100]. The box of stock is entered into the system as a 1 box @ $10 [with 10 units within]. A cost price of $1.00 is allocated to each widget in the system instead of $10. Consider this scenario across 2000 stock items! Implement checks and balances as part of your ongoing controls so you have confidence in the back end of your systems. Remember rubbish in equals rubbish out. It is a common mistake to overlook this area of business management and focus on meeting customer demand, but it is an easy way to improve your profitability. New Zealand has always been, an attractive and welcoming country especially in which to raise a family (and now more than ever). But we must ask why would a medical doctor or a skilled software developer choose to come to New Zealand when they can be paid significantly more for their skills in other countries? Let’s not fool ourselves - it is simply because of the opportunity they can have to settle down and live permanently in New Zealand. The main pathway to residence is the Skilled Migrant Category (SMC) in which applicants are assessed on a points basis for age, qualifications, work experience, and their New Zealand employment role. The process previously involved submitting an initial Expression of Interest (EOI). Those with 160 points or more were selected in fortnightly selection draws and invited to apply for residence. At present, applicants can still continue to submit their EOI (at a cost of $530), however selections were suspended last April and have not yet resumed. This extended hiatus can be put down to two factors: the Government reviewing the SMC policy in light of the impact of COVID on the labour market, and the very long backlog of some 11,000 lodged SMC applications yet to be processed by Immigration New Zealand. Applications originally lodged in July 2019 are only now being processed. So, with the borders closed and overall visa applications down by 80 percent, INZ is taking the opportunity to play catch-up, albeit not as quickly as everyone would like! Previous expectations were that the Government would look to raise the SMC thresholds and make it harder for migrants to qualify for residence. However, with the likelihood of a continued closed border, lower than expected unemployment, and growing skills shortages, the Government needs to think very carefully and quickly about how to keep these migrant workers in New Zealand. As always, Australia remains the greatest threat to New Zealand retaining both its local and migrant workforce. The many talented New Zealanders who returned home in the last year have skills which Australia will pay more handsomely for, and we can expect many to cross the ditch. The same will happen with the migrant workers in New Zealand; if Richard Howard they do not have a clear pathway to secure their residence here, they also will follow the money. The Government needs to rapidly weigh up if it is going to be kind to these workers (and their New Zealand employers!) by implementing policies which will keep them permanently in New Zealand. Otherwise, the triple whammy of losing both skilled New Zealanders and migrant workers to Australia and our continued border closure, will quickly dampen the current economic momentum. It’s time for the Government to take the lead and be proactive in providing long term security for these migrant workers and protect New Zealand’s best interests… it’s time to be realistic! Immune system boost From page 14 exporters. These are resulting in increased costs and potential reputation impacts. While the expectation of no disruptive events is unreasonable, when the inevitable disruption occurs, the resilient business can immediately put its plan into operation, so that the impact is managed and minimised. Common roadblocks in becoming more resilient that we see in organisations include: • Fragmented and incomplete views of information as it is spread over multiple systems. • Vulnerabilities in third party systems and operations. • Lack of budget to support proper resilience investment. • Thinking of resilience as a point in time project. • Lack of balance sheet strength. To succeed, business leaders must drive resilience in an integrated manner, so that resilience becomes part of the organisation's DNA and culture - this way everyone will own their resilience actions. While it's possible to survive in the short term, business resilience is a fundamental pre-requisite for success over the longer term. The comments in this article of a general nature and should not be relied on for specific cases. Taxpayers should seek specific advice. Level 2 586 Victoria Street Hamilton 3204 Level 3 50 Manners Street Wellington 6011 07 834 9222 enquiries@pathwaysnz.com pathwaysnz.com
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Waikato Business News February/March 2021

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