By Vaughan Granier
Welcome to part two of our series on how to become an Accredited .
Proving that your business is financially sound is a critical requirement employers must meet when becoming an Accredited Employer with Immigration New Zealand (INZ). And this important factor will be investigated thoroughly by the agency to ensure your business is not only fiscally responsible but also has a plan in place for its future.
In this article, I dive into how to prove that you’re a viable and genuinely operating business and point out some key elements to help you get your application started.
So, let’s get into it…
Goes without saying
INZ will need to see proof that you’re a registered New Zealand company with a valid New Zealand Business Number (NZBN), as well as proof that you’re registered with Inland Revenue Department (IRD).
But beyond that, your business will need to show that it’s able to meet all of its current, ongoing, and future financial obligations including wages and other operating costs.
Back-up: practical and trustworthy tools
Your company should have access to at least two well-informed financial experts: your bank manager for your accounts, and your accountant or auditor. Many financial reporting requirements are technical, focus on business sustainability rather than day-to-day finances, and are best reported by your expert advisors.
In addition, your company should have trustworthy financial tools including software that manages your accounting, payroll, and timekeeping – all are valuable elements that will strengthen your application.
For businesses that rely on programs like Microsoft Excel to manage their payroll and accounting, it’s a good idea to transition away from these practices. Why? As powerful as Excel is, it’s not a trustworthy business tool as it’s prone to human error. From data entry and incorrect formulas to incomplete programming and deleting entire files (by accident of course)! Trustworthy software is a better option as it provides safeguards and backs up data.
The proof is in the reporting
The best way to demonstrate your financial sustainability is through reporting. We recommend that you request particular elements mentioned below from your financial advisor. For new businesses, this is something you may struggle with and you should then also focus on a credible business plan to support your application.
If you’re a new business, the key will be in the systems you have, the trust of your financial advisors, and the realistic nature of your self-assessments. Imagine you’re preparing reports for a potential investor – it might be tempting to show an optimistic view in the paperwork you present, but remember, the people assessing your application are very experienced and have wide industry knowledge. They’ll be able to identify any risks or issues, so it’s best to be realistic.
INZ highlights that businesses who are less than 12-months old can provide evidence such as start-up capital or funding, cash flow, or revenue forecasts and contracts for work.
For small companies that manage their own accounting using a software package, it’s wise to contact your provider and ask for help setting up the reports if you don’t have those at hand. All systems can give you the information you need, and every provider has a team on standby to help you with that.
According to INZ, all businesses that are older than 12-months must meet one of the following four elements to prove that they’re a viable and genuinely operating business:
- be profitable (before depreciation and tax over the last 24-months);
- have positive cash flow for each of the last six months;
- have sufficient capital and external investment or funding (for example from a founder or parent company); or
- have a plan to ensure the business remains viable.
Planning for the future
The reports mentioned previously are significant – they’ll help you to demonstrate plans for the ongoing sustainability of your business to INZ. You’ll want to be able to show how cash flow ebbs and flows and what plans are in place in case of a momentary shortfall such as a big client not paying an invoice on time.
Short-term cash flow: This should be managed through reserve capital – savings or loan facilities. Having these strategies and resources available will go a long way in demonstrating the sustainability of your business. They also show, all things being equal, that the company won’t resort to worker exploitation to keep its head above water in a crisis.
Long-term income generation: Some businesses rely on the market (some would say luck) to send opportunities their way. When a company is in the right place, offering the right products and/or services at the right time, this can often be enough. But, showing how you get new work – for example, a sales pipeline, marketing strategy, and budget – will demonstrate a commitment to sustainable future income generation, which is fundamental to any assessment of the company.
What’s your strategy?
The ability to sustain current or proposed employment levels is critical. If a business is struggling with cash flow at its existing employment levels, and the business is unable to show a strategy to shift momentum towards being cash-positive, it’s unlikely that INZ will approve an application to hire foreign workers into the business.
Points to consider
Your anticipated company growth, or the capability to win contracts of a certain size, must be clearly illustrated. The well-being of all employees, including foreign workers, is a big responsibility and INZ will want to be sure you aren’t running the risk of failing in your commitments. Minimum wage requirements and ongoing costs such as insurance cover for personal injury (ACC) are just some of the obligations that companies have to employees – these are immovable costs.
In a relevant case, a small vehicle maintenance and servicing business hired a foreign technician on a visa that allowed him to bring his family to New Zealand. After the employee and his family sold their home and possessions, left schools and family behind and relocated to New Zealand, the employer had to let the foreign worker go after six weeks (the company used the trial period clause) because the employer had not done their business planning correctly and ran out of money to pay the employee’s wage. This is a classic example of the failure of the current immigration system when assessing the worker only, not the employer.
So, what else can affect a business’s future growth? Unfortunately, failure to focus on the long-term financial constraints rather than the immediate needs of a business can have a hugely negative impact. For example, small businesses often start as subsistence companies where the focus is on meeting the living expenses of the owner. But if the company wishes to transition to more significant operations, it’ll be required to show that they practice the right levels of fiscal responsibility from the start.
So, if you’re business is serious about becoming an Accredited Employer, it’s time to focus on your company’s financial soundness. Compiling all of the required reports can be time-consuming and tedious, but starting early will mean that you’ll be able to lodge your application before the rush begins.
If your business is serious about becoming an Accredited Employer, it’s time to begin compiling the information you need to prove your financial soundness. The team at HR Assured are experts in human resources and workplace compliance practices. If you’re interested in how we can help you become an Accredited Employer, contact us.
Other articles in the series:
Vaughan Granier is the National Workplace Relations Manager for HR Assured NZ. He has over 24 years’ experience in international human resources, health and safety, and workplace relations management. With over 13 years working in New Zealand and Australian companies, he provides in-depth support to leadership teams across all areas of HR, Health and Safety, and employee management.