Your responsibilities

 

So you have a business and do your best to keep some sort of order, including keeping the accounting under control. But what about your wider responsibilities as a business owner?

 

Keeping records (including source documents) for seven years after the end of the financial year to which they relate is a well-known requirement. But there are many other factors to consider.

 

For example trusts can last up to 80 years, and failure to produce records from any time within that could produce less than great results.  Normal business records are often produced, transmitted and received electronically. Major suppliers have approval from IRD to hold data offshore. But what happens when technology changes, when you change software, when you change banks, and so on? Do you still have access to the data? Even if you do, does it go back seven years prior to the current year?

 

But more fundamentally, what are business records? Do you claim a home office expense? What if your home is owned by a trust? What if the cost and payments aren't directly related (for example Powershop lets you buy power in advance). Suddenly business expenses include some private items and it all gets even more complex.

 

Most readers will know of Peter Jackson. Fewer will be aware that he resigned as director of his companies because of the additional responsibilities placed on directors by health and safety legislation. Sadly there are other responsibilities on directors which are too often ignored but just as serious. Do you produce minutes recording events as required? Do all directors really know what is going on? There's no such thing as a sleeping director - all are liable. And just what does require a directors' decision as opposed to a managers decision? Are personal assets such as a home at risk? What is the best form of protection in your circumstances?

 

In case you're thinking you made the right decision not to incorporate, often the same responsibilities apply to other businesses. For example, trading while insolvent is a known risk to company directors - but can also threaten other businesses. In that case who is at risk?

 

Should your business become an employer then there's a whole new world to face. Of course there are more grounds for success as the business grows beyond a one-person band but there are also more risks.

 

This is not a complete breakdown of the responsibilities that you need to consider. And we are not ideally placed to deal with them. Your advisory team should include your lawyer and your risk / insurance broker as a starting point. But just as we are not the best people for advice on legal or insurance matters, neither are they usually adequately placed to advise safely on accounting matters. Sub-optimal (and sometimes  expensive) outcomes can result when one area is focussed on without others being adequately considered.

 

So if you still think you can handle it all, good luck. If not, make sure you consult people who can work with others to achieve great results.

Contact us

Email results@businessacademy.nz

 

Skype PhilANZ

 

Phone 04 920 0911

 

P.O. Box 30-545, Lower Hutt 5040

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