Now more than ever, is the time to move to the cloud!
Last week I attended the annual PKF New Zealand Conference with guest speakers from Xero, the leading online accounting software provider.
The great news is that PKF Poutsma Lemon Limited, along with the network of PKF offices throughout New Zealand, are platinum partners with Xero.
Xero has transformed how small to medium businesses transact their business internally, at a business to business level and at a business to customer level with the help of add on partner applications.
Inland Revenue is also getting in on the act in a Government initiative to make tax simpler for small businesses.
The current provisional tax system was designed at a time when considerable effort was required to work out a business's financial position. To minimise the burden of calculating income, provisional tax was designed to be paid in advance two or three times a year.
One drawback of this, is that tax is paid before a business knows what its actual taxable income is going to be with the potential for interest and penalties if incorrect.
Those tax payments also have a major impact on cash flow, as there is no flexibility about timing of payments. And if things don't go according to plan, changing the payments can be time consuming.
If tax payers continue to use the standard uplift method, they will no longer be charged interest if they underpay P1 and P2 provided they pay the balance of the tax they owe at P3.
Inland Revenue will scrap some of the penalties on overdue tax and revamp provisional tax to make it more business friendly.
Small businesses with a turn-over of less than $5 million, will get the option of paying tax on a PAYE basis through Inland Revenue approved online accounting software.
Xero is an approved Inland Revenue online accounting software!
The Accounting Income Method (AIM), uses that power to enable the calculation of provisional tax liabilities from a business's latest available financial information. The cornerstone of what Xero does. The calculation process will be built into the business's GST return preparation process, as much as possible, to minimise the time burden on small businesses.
Provisional tax payments will be made six times a year at the same time as GST payments. This saves time and effort. The payment is based on the results actually achieved in that tax year, matching payments to cash flows as closely as possible.
AIM will be responsive to changing business conditions too. If economic conditions tighten and a business's tax liability drops, Inland Revenue will refund overpayments, in much the same way that GST refunds are handled.
Now there is just another good reason to move your business into the cloud, if you aren't one of the many that have already upgraded to Xero!