Money Week is here in NewZealand! With summer fast approaching it’s a timely reminder for small businesses to ensure their finances are in shape for the holiday season.
Trend analysis of Xero’s small business customers in New Zealand from 2011 to 2014 shows accounts receivable is on average more than 30 percent lower in January than the 12 month average. So businesses need to be prepared for that lower than normal cashflow.
If there’s one thing we know about small business finances, it’s that cashflow is king so preparing well in advance for that dip in January is crucial. Taking sensible, practical steps will help you control spending and manage your business finances during that holiday period.
Developing a clear financial plan to keep track of finances coming in and going out is key to keeping business in shape.
And, with only ten weeks until Christmas, now is a great time to take a few hours and plan all the really important things that need to happen before then.
Different plans work for different businesses, and owners should discuss this with their accountant to see what works best, but it’s important to be realistic and estimate how much you’ll sell and spend. Plug these numbers into your financial plan and see if the results work for your business.
Planning for an increase in spending over the holiday period, such as Christmas functions and gift buying, is vital. Then there are public holidays – knowing your obligations when it comes to paying staff and planning ahead can save a lot of trouble.
Prompt invoicing and cash collection ahead of the Christmas break will also help, ensuring your business has enough cash flowing to pay the bills come January.
Tips from Xero: Improving your cashflow
All small business owners experience the stress of managing cashflow, but life would be a lot less stressful if your customers paid you faster. Here are some tips to speed up the process and dramatically improve your small business finances for the holiday season.
Email your invoices
Write detailed descriptions on your invoices to avoid confusion
Set your own payment terms (such as days to pay)
Encourage direct payments to your bank account
Use your mobile phone to access your accounts and check-in during the day to keep on top of your cashflow
Have someone else call your debtors
Use your Accounts Receivable reports to manage cashflow