With changes com­ing across the ac­count­ing and pay­roll sec­tor, in­clud­ing new pay­roll re­port­ing rules, busi­ness own­ers have much to pre­pare for go­ing into 2019. For­tu­nately there are so­lu­tion providers ready to make life eas­ier.

No­body ever said run­ning a busi­ness was easy, but it cer­tainly doesn’t help mat­ters when changes to busi­ness leg­is­la­tion come along which de­mand ad­di­tional com­pli­ance and ex­tra plan­ning – and sig­nif­i­cant changes are al­ways on their way.

Cue this coun­try’s lead­ing ac­count­ing and pay­roll soft­ware providers, who have no choice but to keep up with the pack or risk leav­ing their clients be­hind. Large sums of money are con­stantly in­vested to en­sure changes hap­pen smoothly and on time – with the goal of mak­ing busi­ness man­age­ment less oner­ous over the long term.

One of the most test­ing changes for busi­ness ad­min­is­tra­tors is the new Pay­day Re­port­ing regime, which will be com­pul­sory from 1 April next year, and re­quire most em­ploy­ers to re­port their em­ploy­ees’ earn­ings, tax, Ki­wiSaver and so­cial pol­icy de­duc­tions to In­land Rev­enue within two work­ing days of them be­ing paid. This process will re­place the in­for­ma­tion cur­rently ag­gre­gated and re­ported on the Em­ployer Monthly Sched­ule each month.

In ad­di­tion to this em­ploy­ment in­for­ma­tion, em­ployee start and leav­ing in­for­ma­tion, in­clud­ing opt-in and opt-out in­for­ma­tion to Ki­wiSaver, will also be sub­mit­ted elec­tron­i­cally to In­land Rev­enue.

Only em­ploy­ers pay­ing less than $50,000 in PAYE and Em­ployer Su­per­an­nu­a­tion With­hold­ing Tax are ex­empt from th­ese pay­day re­port­ing re­quire­ments.

While all this may sound rel­a­tively sim­ple, Mike Rich, co-founder of At­taché and not-for-profit M-In­sti­tute, says it will re­quire ev­ery pay­roll to be up­graded.

At­taché has pro­duced a help­ful ‘Pay­day Fil­ing Check­list’ (see pages 25 and 26) to help em­ploy­ers through the whole process – no mat­ter what pay­roll soft­ware they are cur­rently run­ning with.

“The first step is to ap­point your ‘pay­day fil­ing cham­pion’, and start tick­ing those items off,” ad­vises Rich.

It may seem far away still, but he be­lieves the 1 April dead­line will be tight. “Both the UK and Aus­tralia have done a sim­i­lar thing and the big­gest les­son learnt was that most em­ploy­ers and pay­roll providers left it all too late.”

Rich also thinks the switch to pay­day re­port­ing is a rare chance for busi­nesses to im­prove their sales, stock and debtor sys­tems – “es­pe­cially if you have old desk­top or small cloud sys­tems you have out­grown”.

For medium-sized busi­nesses of around $2 mil­lion to $100 mil­lion in rev­enue, At­taché has also pro­duced a free ‘Busi­ness Im­prove­ment Guide-Pay­roll’ that can help de­ci­sion-mak­ers de­ter­mine what level of soft­ware best fits their busi­ness.

So what ex­actly is the IRD’s goal with the new pay­day re­port­ing regime? It’s sim­ply about a more timely re­ceipt of in­for­ma­tion. Dat­a­com Pay­roll’s GM prod­ucts and com­pli­ance, Chris Mar, says it’s in­tended to stream­line the re­port­ing process, al­low­ing In­land Rev­enue to iden­tify mis­takes and sug­gest cor­rec­tions as soon as they’re made. It also al­lows govern­ment so­cial pol­icy to be based on more real time in­for­ma­tion.

“In­land Rev­enue’s in­ten­tion is that even though re­port­ing hap­pens more fre­quently, the fact that the process will be em­bed­ded in pay­roll soft­ware will make over­all com­pli­ance eas­ier, as the fil­ing of in­for­ma­tion be­comes a part of the nor­mal process of em­ploy­ing and pay­ing staff.”

Mar says it’s im­por­tant to note that pay­day re­port­ing re­lates only to the need to re­port the earn­ings and PAYE in­for­ma­tion each pay to In­land Rev­enue. There is no change to the dates on which tax

pay­ments are due. Th­ese re­main the same, ei­ther once or twice a month de­pend­ing on whether your busi­ness is with­hold­ing less or greater than $500,000 per year.

(IRD has a full list of em­ployer re­spon­si­bil­i­ties around pay­day fil­ing ex­plained here:­roll-em­ploy­ers/ re­turns-pay­ments/pay­day-fil­ing/pay­day-fil­ing.html)

Plan ahead, start now

Un­less busi­nesses want to man­u­ally file pay­day data each pay­day, it makes sense to have their pay­roll ser­vice provider do it for them au­to­mat­i­cally – in other words, seam­lessly and with­out re­quir­ing any in­ter­ven­tion. iPay­roll is one provider who’ll be do­ing pay­day fil­ing this year, and has over­seas ex­pe­ri­ence to draw upon. “iPay­roll, through its sub­sidiary CloudPay­roll, had an ex­cel­lent go ‘live’ with Sin­gle Touch Pay­roll (STP) in Aus­tralia,” says iPay­roll’s manag­ing di­rec­tor Martin Glee­son. “It was com­pul­sory for all or­gan­i­sa­tions with 20-plus em­ploy­ees from 1st July 2018, and we went early from the start of June. “We are work­ing di­rectly with IRD to en­sure we have a sim­i­lar ex­pe­ri­ence in New Zealand and our ex­pe­ri­ence with hav­ing al­ready done some­thing sim­i­lar in Aus­tralia re­cently is help­ing us con­sid­er­ably.” Dat­a­com Pay­roll’s Chris Mar warns that once-amonth fil­ing might seem like a man­age­able task now, but hav­ing to re­port this in­for­ma­tion each pay will quickly be­come tire­some. “While In­land Rev­enue will sup­port a man­ual up­load of em­ploy­ment in­for­ma­tion each pay, a man­ual ap­proach will in­evitably in­crease your com­pli­ance costs.” Mar says ide­ally a pay­roll provider should pro­vide a fully in­te­grated so­lu­tion with IRD sys­tems, so that when your pay­roll is run, you have an op­tion to au­to­mat­i­cally sub­mit your pay­day data di­rectly from the soft­ware once you are sat­is­fied that all is OK. “At a min­i­mum, pay­roll soft­ware should be able to pro­vide ex­port files of the re­quired data in the cor­rect for­mat for up­load to In­land Rev­enue.” Mar be­lieves it’s eas­ier if pay­roll soft­ware can in­te­grate with In­land Rev­enue sys­tems di­rectly, as op­posed to us­ing some­thing like the IRD por­tal myIR to have to file pay­day re­ports. “Hav­ing acted as a PAYE In­ter­me­di­ary since the scheme’s in­cep­tion, we’re con­fi­dent we have the nec­es­sary ex­pe­ri­ence to work with In­land Rev­enue to com­plete the re­quire­ments for pay­day fil­ing as well. Cus­tomers that have al­ready out­sourced their pay­roll fil­ing re­spon­si­bil­i­ties to Dat­a­com will no­tice very lit­tle change when pay­day re­port­ing starts.”

Look­ing at the Aus­tralian STP ex­am­ple, so far, Mar be­lieves the level of knowl­edge from em­ploy­ers, in terms of un­der­stand­ing their obli­ga­tions, was fairly min­i­mal.

“This was de­spite a sig­nif­i­cant com­mu­ni­ca­tions push by the Aus­tralian Tax Of­fice and soft­ware providers to let em­ploy­ers know about the up­com­ing change.”

Some Aus­tralian em­ploy­ers were sim­ply not pre­pared for the change, Mar says, and he ex­pects this to hap­pen in New Zealand too.

The ATO im­ple­mented a de­fer­ral scheme which al­lowed em­ploy­ers to ap­ply for an ex­ten­sion of time to get ready for the change – and this de­fer­ral scheme was ex­tended to pay­roll providers. How­ever, the IRD has given no in­di­ca­tion of in­tro­duc­ing an equiv­a­lent de­fer­ral sys­tem here, says Mar.

Why au­to­ma­tion mat­ters

For busi­ness own­ers tempted to man­u­ally DIY their way through the new pay­day fil­ing regime, Lisa Martin, ex­ec­u­tive di­rec­tor of ac­count­ing so­lu­tions spe­cial­ist GoFi8ure, sounds a warn­ing. If you’re pay­ing staff weekly, it would re­quire you to log onto the IRD site four times a month.

Things get tricky when a busi­ness owner de­cides to wing it, Martin says. They might go on­line at 10pm on a Mon­day night, get the PAYE cal­cu­la­tor, work out the net pay and pay their staff. Then have just two days to get it checked.

Bet­ter to go on an au­to­mated pay­roll sys­tem and avoid all the stress, she says – pro­vided you’re talk­ing to a book­keeper, ac­coun­tant or tax agent, and de­spite the fact that the IRD is en­cour­ag­ing peo­ple to deal di­rect.

Martin im­plores busi­ness own­ers to never use Ex­cel spread­sheets to man­age pay­roll, when there are so many af­ford­able cloud-based (SaaS) pay­roll soft­ware pack­ages out there. And get the provider to set it up, she says, so bal­ances such as ac­crued leave are car­ried for­ward cor­rectly.

The re­cent Bun­nings case re­lat­ing to mis­cal­cu­lated leave pay­ments is a great rea­son why you should get it right.

“Start now with new soft­ware, don’t leave it to April 2019,” urges Martin. “It’s all about the plan­ning and pro­cesses, es­pe­cially con­sid­er­ing it is some­one else’s money!

“There are loads of book­keep­ers stand­ing at the ready to help you get off spread­sheets and into the 21st cen­tury.”

Catie Cotcher, gen­eral man­ager, Busi­ness Group at Reckon says on­line ac­count­ing soft­ware should make your busi­ness run more ef­fi­ciently, not add stress. “From stream­lin­ing your ac­count­ing needs, to giv­ing you the flex­i­bil­ity to man­age your fi­nances on the go, cloud ac­count­ing can of­fer a tai­lored so­lu­tion that suits your busi­ness whether you’re a sole trader or larger busi­ness owner.”

Cotcher’s ad­vice is to speak with an on­line ac­count­ing provider, such as Reckon, about your

busi­ness needs and get the so­lu­tion that is go­ing to fit your busi­ness model the best.

“Ask your­self ques­tions around what you need from your busi­ness ac­counts, and look into the fu­ture slightly – are you go­ing to grow? Will you need fur­ther func­tion­al­ity as the busi­ness ex­pands? One size doesn’t ne­c­es­sar­ily fit all,” she says.

The chal­lenge for all busi­ness own­ers is that their busi­ness is their num­ber one pri­or­ity, as it should be, Cotcher points out. “Ac­counts, in­voic­ing and pay­roll obli­ga­tions can be­come a time-con­sum­ing chore, and in busi­ness time is money,” she says. “Un­der­stand­ing that there are new ini­tia­tives com­ing through is also im­por­tant. Busi­ness own­ers need to be pre­pared, in order to make nec­es­sary ad­just­ments to their book­keep­ing pro­cesses and en­sure their fo­cus re­mains on their busi­ness.

“We’ve come a long way in a few years. Busi­ness own­ers are re­al­is­ing that there are eas­ier ways to get things done – with all the added ca­pa­bil­i­ties of cloud ac­count­ing now sav­ing time and the headache.”

A glimpse of the fu­ture

So what other pay­roll is­sues do the ex­perts an­tic­i­pate go­ing for­ward into 2019? Dat­a­com Pay­roll’s Chris Mar says Hol­i­days Act com­pli­ance will re­main a chal­lenge, given the in­creas­ing va­ri­ety of ways in which em­ploy­ees work.

“While we can be hope­ful that a govern­ment work­ing group tasked with re­view­ing the Hol­i­days Act has been formed, I can’t see any im­me­di­ate relief in the short term, so we must con­tinue to grap­ple with the ex­ist­ing Act for some time yet.”

Mar says the pro­lif­er­a­tion of smart de­vices and peo­ple spend­ing time on­line will con­tinue driv­ing de­mand for work so­lu­tions that mir­ror the ease of ac­cess that users en­joy through per­sonal and so­cial ap­pli­ca­tions. “Pay­roll tech­nol­ogy that gives em­ploy­ees and man­agers ac­cess to the data that helps them do their day-to-day job – from be­ing able to log timesheets, re­quest leave or view payslips – are ex­pected by to­day’s work­force.”

iPay­roll’s Martin Glee­son an­tic­i­pates bet­ter in­te­gra­tion be­tween pay­roll and bank­ing ser­vices, and apps will be high on the agenda in the pay­roll space over the next 12 months.

The fi­nal word goes to Reckon’s Catie Cotcher, who pre­dicts even more choice in ac­count­ing and pay­roll op­tions and be­spoke prod­ucts and ser­vices go­ing for­ward – al­low­ing busi­ness own­ers to source the best so­lu­tion for their needs.

“Busi­ness own­ers are time-poor and de­mand­ing big­ger ef­fi­cien­cies from their cloud ac­count­ing ser­vices and with ad­vance­ments in tech­nol­ogy, the cloud ac­count­ing space is mov­ing with them. “De­vel­op­ment is mov­ing at a much quicker rate and there are more cut­ting-edge op­tions avail­able.”

Cotcher’s ad­vice is to be aware of changes in the in­dus­try and ac­cept the ways in which they can im­prove your busi­ness – not hin­der it. “This will lead you in the right di­rec­tion.”

Manag­ing the ac­counts may seem like climb­ing a moun­tain for busi­ness own­ers.

Here’s some prac­ti­cal ad­vice for rel­a­tive new­bies to help bring ev­ery­thing down to a man­age­able level.

Are the busi­ness ac­counts ‘do­ing your head in?’ Are you con­fused by all the talk around book­keep­ing and manag­ing fi­nances?

You’re not alone.

Lisa Martin from GoFi8ure says ul­ti­mately ac­count­ing prob­lems can be caused by a lack of fi­nan­cial lit­er­acy and busi­ness fi­nance skills – hav­ing a neg­a­tive at­ti­tude to­wards money and not ac­knowl­edg­ing how im­por­tant it is.

Of­ten it can be as sim­ple as not know­ing the ba­sic rules around send­ing out a tax in­voice, she says. “They won’t ask, they won’t go to the IRD web­site and type ‘what must I have on an in­voice?’”

New­bies of­ten don’t un­der­stand that tax is cal­cu­lated on net

profit, not gross rev­enue – or what ex­penses can be claimed.

Never wing it. Ad­mit you don’t know ev­ery­thing, and get some­one to ad­vise you, she says.

“What’s scary is they’ll sign up for an on­line pro­gram such as Xero and won’t think to re­quest help.”

One out­come is peo­ple fir­ing off in­voices and col­lect­ing GST, when they’re not even GST reg­is­tered. “They don’t re­alise the power be­hind the soft­ware or that they’re do­ing any­thing wrong. Or even that there’s a ‘no-GST’ set­ting on Xero.”

Martin says New Zealand has fo­cused on mak­ing tax eas­ier and sim­pler, with the IRD even en­cour­ag­ing end users to com­mu­ni­cate di­rectly. It’s so easy to reg­is­ter and start a busi­ness and get go­ing, but peo­ple are not do­ing the nec­es­sary ‘checks and bal­ances’, or fac­ing up to their re­spon­si­bil­i­ties of run­ning a busi­ness.

“It’s like peo­ple di­min­ish the im­por­tance of fi­nance – but as we all know, if there’s no money there’s no oxy­gen and the busi­ness dies.

“Never de­value what a paid ac­count­ing pro­fes­sional can do for your busi­ness,” says Martin, adding that it’s im­por­tant to know the right ques­tions to ask and prefer­able not to have to make mis­takes in order to learn.

Down to ba­sics

While many busi­ness own­ers run a highly ef­fi­cient ship when it comes to book­keep­ing – there will al­ways be those who strug­gle and won’t have the nec­es­sary level of un­der­stand­ing.

“Be­ing a busi­ness owner is an evo­lu­tion,” ex­plains Martin. “Over time you ap­pre­ci­ate the value of what a good staff mem­ber can do for the busi­ness; what a pos­i­tive bank bal­ance can do for your peace of mind; what con­tin­u­ous pro­fes­sional de­vel­op­ment does for you. It’s about stay­ing ahead of the game.

“I find it frus­trat­ing when busi­ness own­ers re­alise that they should do things dif­fer­ently to get things right, but don’t. It’s like some­one with heart dis­ease be­ing told to give up smok­ing, but they don’t!”

Martin says the big­gest mis­take busi­ness own­ers make in re­gard to their ac­counts is not un­der­stand­ing the bal­ance sheet – for ex­am­ple, the dif­fer­ence be­tween GST (a third-party tax be­ing col­lected on be­half of the govern­ment) and in­come tax (a tax on net-profit). “GST is not your money. When you charge $1000 plus GST – that $150 is not yours!”

If a busi­ness earns $10,000 from a client, Martin’s ad­vice for new­bies is to be dis­ci­plined in keep­ing a third in the cur­rent ac­count to cover busi­ness ex­penses, a third in a sav­ings ac­count and a third in the tax ac­count.

“It’s the fun­da­men­tal un­der­stand­ing of what be­longs to you on that client in­voice and what be­longs to some­body else. Don’t get emo­tion­ally at­tached to that money and/or spend it.”

When it comes to choos­ing an ac­count­ing soft­ware plat­form, Martin says the mar­ket is awash with ex­cel­lent prod­ucts – each with its own pros and cons. While some of­fer add-ons, of­ten busi­ness own­ers have no need for all the ‘bells and whis­tles’, she says.

“Dis­cuss the op­tions with a good ac­coun­tant or book­keeper – some­one you’re com­fort­able with and who’s pre­pared to give you 30 min­utes from the out­set to an­swer your ques­tions.

“Ev­ery busi­ness is dif­fer­ent,” says Martin. “It’s a case of work­ing out whether the new busi­ness client learns by see­ing, shar­ing or think­ing and feel­ing – this is what be­comes ob­vi­ous when you’re face-to-face.”

Her ad­vice for busi­ness own­ers hav­ing to ad­just to fu­ture changes is to have a strong sup­port net­work – friends in busi­ness you can talk to in order to stay mo­ti­vated through the good and bad times, or a men­tor who is a good match with what you do.

“Busi­ness is a marathon, not a sprint. Feed your­self well so you last the dis­tance.

“Have a strong busi­ness plan, and a vi­sion that is non­nego­tiable.”

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