Trustees must be aware of fishhooks

A solicitor in a provincial town was the independent trustee for a family trust. Mr and Mrs B bought and sold 11 properties over a 12-year period. Ms X, the solicitor, did the conveyancing.

The trust treated these properties as separate residences of the beneficiaries. The tax department alleged the transactions were taxable and charged both GST and income tax, plus penalties.

The trust deed required all trust decisions to be made unanimously. In this case, it would have required Mr and Mrs B and Ms X to have agreed to each purchase and each sale.

However, Mr and Mrs B acted on their own account, buying and selling property and arranging finance, and then getting their solicitor, Ms X, to do the legal work.

It seems regular minutes were not prepared. However, they were prepared retrospectively and signed by all trustees. It seems that even if the minutes had not been completed, Ms X had agreed to the transactions because she would have signed the various documents in her capacity as a trustee and she would have known that all the transactions were occurring.

Ms X was held to be jointly and severally liable for all tax and penalties, along with the other two trustees. This means if they could not or would not pay some or all of the money owing to the IRD, Ms X would have to make up the shortfall.

If you are an independent trustee of a trust, we hope you have read this little story. If it gives you nightmares, resign your trusteeship first thing in the morning.

If you must accept the position of trustee for someone else’s trust, you must know what is going on. If your co-trustee(s) thinks they can act independently, resign. Sometimes this can be a painful process. For solicitors and accountants it can mean the loss of clients. For others it can be the loss of friends. Face up to it, don’t get caught like Ms X.

Xero Tip # 4 – Using Inventory Items to speed up processing Sales

inventroy items

You can enter your inventory items under the Settings Tab / Inventory Items.  Here you can add a description, unit price for purchases and sales (or just sales if appropriate) and select what account codes should be used.

This can really speed up creating invoices if you have regular items that you use.

Even if you don’t have set prices this can be great for populating the description field.

Xero Tip # 3 – Getting Paid Faster

Xero has some great features to help you to manage your Accounts Receivable(Debtors) and below we explain some of those features.

invoice features # 4

 

  1. From the Accounts/Sales screen you can send Statements from here including sorting by amount paid and selecting which statements to print or send via email.
  2. Search for invoices based on client name, invoice date, invoice number or reference
  3. View Paid, Repeating, or All invoices.
  4. See the amount of invoices that are awaiting payment and click on this amount to see the details.
  5. See the overdue invoices and click on this amount to view the individual invoices that are overdue.
  6. See a list of the customers owing you the most money, including viewing it as a pie chart.

invoice features # 5

Once you view the invoices you want to chase you can click on the + button under the expected date column and this will bring up the contact details of the customer and you can phone them and then add notes into Xero based on what you discussed including an expected payment date.

Great to be able to refer back to this when you next call if you still haven;t received payment.

Video from a client using Xero to get paid faster

Xero Tip # 2 – Customer Invoices (Sales)

 

Invoicing Features

Below are some screen shots and some explanation and tips for how to use the various fields and features when creating invoices for your customers.

 

invoice features # 1

  1. You can enter a new customer in Xero without having to add all the details (address etc) to create an invoice.  You can add the other details later.
  2. Enter “t” for todays date, you can also do quick enter like 15/5 for 15th May.
  3. You can enter “+7” in the due date field to add 7 days to the invoice date (you can use any number of days) .
  4. Invoice number – automatically generated in Xero, but can be overridden, we normally recommend not to do this though.
  5. The reference field can be used for a purchase order number or the name of the person who requested the goods or services.  This is also a handy search field so could be used in a variety of ways.  For example some of our construction industry clients put the site address in here.
  6. You can have multiple invoices templates in Xero.  This can be very useful if you have different brands, or different payment options.

invoice features # 2

 

  1. If you setup Inventory Items in Xero you can use these to quickly populate your invoices.
  2. These can be setup with a standard description which can be overridden if you need to.
  3. If you need more than 2 decimal places in your unit price you can swap the quantity and unit price fields over as the quantity field allows more than 2 decimal places.  For example if you have a unit price of 4.5667 with 100 units you can enter it as 4.5667 in the Qty field and 100.00 in the unit price field.  You could then amend your invoice template to just show the total.
  4. If you want to enter your line items including GST you can just select Tax Inclusive and Xero will deduct the GST of the Unit price you enter.

 

invoice features # 3

 

  1. As discussed before you can add the address details after approving the invoice.  Quick tip, for an invoice to be valid for GST purposes it needs to include an address for the customer.  Remember to add an email address if you want to email invoices and statements.
  2. Email invoices to clients.  The Xero stats show that those that email invoices have less debtor days than those that are not emailed.  You can customise your standard email wording under the Settings / Invoice Settings.
  3. Print the invoice via PDF based on your branding theme.
  4. Add files to the invoice (for your view only, not customers).  This is useful if you wanted to add a purchase order document, project authorisation or anything else that may be useful when chasing payment or validating your invoice amount.
  5. Invoice options, setup repeating invoice for regular charges, copy, invoice, edit it or add a credit note.  Tip:  you can only edit an invoice if a payment has not been allocated to it.

Link to Video on Invoicing

 

Xero Tip # 1 – Uploading files into Xero

files in xero

You can now add files directly into your Xero account.

This is great for invoices, hire purchases agreements, loan agreements and any other files that will be useful in preparing your accounts and keeping stored alongside your financial data.

Think of it as an electronic version of the folders we provide

Here is a video about it.