Winning the paper war: The creeping menace

ELLEN READ looks at the costs of compliance and suggests ways in which the burden can be lessened.



Red tape constantly tops the list of complaints from small business - there's too much, it's too time-consuming, too expensive, too restrictive. The list goes on.

It's not surprising, given that New Zealand has more than 7000 acts and regulations.

Because small businesses account for 97 per cent of New Zealand companies, employing 43 per cent of all workers and producing 39 per cent of goods and services, it's vital something is done to help them.

Ministry of Economic Development research shows that of all new businesses started in 1995, with five or fewer full-time employees, only 27.4 per cent remained active last year. Just 55 per cent were still in business after only two years of operation.

Part of the reason for this could be that the business owners got too bogged down in complying with this, that and the other thing and did not have time to develop their firms.

Two reports released last year highlight the impact of compliance on small and medium enterprises (SMEs). The first, a joint survey by the Auckland and New South Wales Chambers of Commerce, showed that a small company (five or fewer staff) in Auckland could spend 172 hours annually on Government-related paperwork. The only consolation was that a similar company in New South Wales might spend 200 hours.

"The fact that a small business operator here has to spend the equivalent of a month's work a year dealing with red tape is still a huge barrier to business growth," Auckland Chamber of Commerce chief executive Michael Barnett said then.

He added that compliance costs were rising - with 18 new levies and taxes introduced in the past four years.

In December, for the seventh consecutive time, respondents to the National Bank's small business survey said regulation was their biggest problem. Compliance takes time - something in short supply - so it is not surprising SMEs rail against paperwork that benefits the Government, but perhaps not their own business.

Note was made, however, of Government that strangles business efforts to cut red tape by allocating Budget money for a small business advisory group and moving to simplify tax for small businesses.

While big firms have compliance specialists, SMEs have to be experts in all areas. This can not only lead to a frantic life for the small business owner but also risks serious accidents, injury and penalties if, even through no fault of their own, standards are not met. And when there is a constant stream of new and complicated legislation the late nights and after-hour study just to keep up can be intolerable.

There is a huge number of areas where the SME owner has to comply and regulate. The Resource Management Act, employment law, health and safety, and tax issues are some of the more prominent.

Help is at hand. Luckily there are lots of places for SME owners to go for guidance and help.

First up is the Government website. It has a section of "plain English" explanations, lots of articles and links about tax, employment, the environment, fair trading, consumer guarantees and so on.

People can also sign up for an electronic newsletter that will update them on the latest news. It's a wide-ranging site so can get a bit complicated, but chances are the information you need will be there. (And if it's not helpful, you can tell them via the feedback button.)

Home Business New Zealand's site has articles and suggestions, as well as forums and live chats, covering a wealth of topics for home business people.

While the free mentoring service offered by Business in the Community is not aimed at providing people to do the work for SME owners, the mentors are available to discuss and help with planning and problems.

The Government is in the midst of hosting a series of regional Small Business Days around the country, where representatives from government departments are on hand to answer queries and help with problems. Launched in Wellington last month, the days also involve free mentoring sessions, business seminars and a business expo.

For those based in Auckland, a small business expo is being held from April 29 to May 1 organised by Spring Group. Spring is working towards building and opening a one-stop shop for SMEs in Auckland.

"A small-business person can go in and cover all their needs in one go - buy flowers for the secretary on secretaries' day, buy the new laptop or mobile phone they're after and also engage a business consultant or learn about the Government's free business training," said Spring founder Sarah Trotman.

Spring expects the complex to be made up of service and product retail outlets, eating and entertainment facilities for meeting other like-minded entrepreneurs, meeting rooms and conference facilities, and a training and mentor outlet.

It's all part of Spring's goal to form a comprehensive, multi-faceted SME help facility.

"Our tagline says we're a state of mind for business. We are talking about the business people who have got the importance of working on their business, not in it, people with that x-factor, that passion for business," said Trotman.

The Government is also doing its bit with Small Business Minister John Tamihere expected to release a report soon on reducing compliance.

He told those people attending a Small Business Day in Wellington last month that holiday provisions, tax, employment relations and compliance costs were top of the list of SME complaints, according to feedback received during nationwide visits by politicians to small businesses in the past month.

Tamihere said some tax simplification measures had been introduced and that compliance costs were being addressed.

Government funding was also recently announced for Business in the Community, and the small business advisory group is well aware of the pressures and problems of compliance.

Despite all the problems, there is some good news for SMEs. Largely sheltered from the troubled export sector, small business outpaced its larger counterparts last year.

The National Bank survey (December) showed economic activity for small businesses slowed markedly in the September quarter although they continued to outperform in the year-on-year growth stakes.

Small business GDP growth expanded 0.1 per cent in the September quarter with year-on-year growth easing to 4.9 per cent, the bank said, although still well above the national average of 3.6 per cent.