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Is the government putting Kiwi SMEs on struggle street?
Wed, 21st Aug 2019
FYI, this story is more than a year old

Too many New Zealand small to medium enterprises are taking too long to anticipate change, particularly those 'imposed by a Government strong on social engineering', according to OneHQ.

Managing director of accounting at OneHQ, Vinay Iswar, says too many small and medium businesses continue to struggle, or fail, because they cant see 'the writing on the wall'.

"It is obvious that living wage will soon enough replace minimum wage. Health and safety regulations will tighten and environmental compliance like the plastic bag ban will gather momentum," says Iswar.

"Changes will happen almost overnight."

Iswar says SME owners need to be planning now in order to survive and thrive in an environment of not just regulations and compliance, but also social compliance.

"So long as Jacinda Ardern remains prime minister, SMEs can only expect business conditions to get tougher," he says.

Iswar says that what Government does is usually beyond the power and control of small and medium businesses, therefore, to remain competitive and gain long-term success, the key is to look ahead, predict change and prepare now.

"The implementation of the New Zealand single-use plastic bag ban saw one popular Sandringham takeaway, Paradise Indian Takeaway, cut off their plastic bag handles to get around the law. The consequence was a media and public backlash that could have been avoided if they had prepared early and moved swiftly," he says.

"The reality is that they had about year to think about this. When the plastic bag ban was first muted, they should have started preparing for paper bags six months ago," he says.

Iswar says with motor vehicles being the next likely government target with the introduction of road user charges on the cards, business owners should consider how they will be affected by the potential changes to avoid passing those costs onto their customers.

"The government is talking about a three-thousand-dollar penalty fee on people who own cars that are regarded as not environmentally friendly, and discounts for those in small efficient vehicles," Iswar claims.

"Changes such as this will impact SMEs, so the solution is to give consideration to the cars you buy. Don't go out and buy or plan to buy a heavy-duty diesel vehicle because it will cost you money perhaps even before the car is three years old," he says.

Businesses should also be preparing for wages to change, says Iswar.

"The signals are there that businesses will soon be required to pay the living wage instead of minimum wage," he says.

"How are business owners preparing for this? Failing to adapt, adhere and integrate aspects required by law will be detrimental to the success of a business, and if a SME owner doesn't think their business can flourish under the new conditions, they should consider closing their doors or pivoting to a new model or direction," says Iswar.

"There are Aucklanders living below the living wage. If you are a business owner not paying a living wage, and your business is just scraping by, it might be time to ask yourself some hard questions," he says.

"Understand that prices, penalties, compliance and taxes will only ever increase, and it is not a solution to pass on costs to the consumer."

With petrol hikes, the end of plastic bags and the tightening up of health and safety on the rise, here are three tips Iswar says are important to consider going forward as a business owner.

1. Valuate all your business decisions now.
Scrutinising current practices should help SME owners understand areas where they could improve to cater for current and future requirements.
2. Continue, close or change?
After evaluating your business practices, decide whether it is worth continuing to run the business or consider shutting up shop or changing the model. Especially in terms of the living wage which is set to increase by more than 27 per cent over the next few years.
Deciding whether it is feasible down the track will be an important aspect to consider.
3. Anticipate
Forward thinking and anticipation will save you a great deal of problems in the future.

"While some things may not be law yet, it is important to start thinking like it is the law and start doing better business," Iswar says. "Ask yourself: Is it socially and environmentally friendly? Will it be levied? Will it be regulated? Will it turn into a cost down the road? Change now, and you will reap the benefits."