Christmas is that crazy time of year! It’s exciting but scary, as this is when business owners tend to run into financial difficulties. The seasonal shut down can stop the normal cycle and disrupt cash collection. Debts are not collected, staff go on leave and business tends to slow down. These factors tend to affect cashflow of businesses into February/March. Unfortunately, this can lead to a rise of insolvencies in the New Year. Considering the tough year we have experienced so far, we have prepared some cashflow tips to help you get through this Christmas period:

1. Review Your Expenses

Now is a great time to review all your subscriptions and overheads. Figure out what you use and what you don’t. Many businesses find they have many subscriptions which are not necessary for the running of their business. Make a list and cut down on expenses that are not necessary or benefiting your business.

2. Forecast cash flow

Plan for the decrease in income by forecasting cash flow and creating a monthly budget to predict upcoming expenses. Make sure you consider upcoming bills and staff costs if you are closed over the Christmas period. If you need help with forecasting this is something we specialise in and LOVE.

3. Know what is going on with your business

Use financial reports to show the basics clearly and accurately.

You want to know:

• What cash you have?
• What Bills are owed?
• What invoices are still owed?
• What you are expected to pay in tax and super and when is it due?

Having an online accounting software like Xero will help you keep track of all these aspects and more. If you want to know more about how Xero can help your business, don’t hesitate to call.

4. Defer large purchases/expenses

Only place essential orders before the holiday season. With income likely to lower over Christmas, big expenses can push a small business into a loss, deferring purchases and/or capital expenses until after Christmas can benefit your cash flow. If purchases can’t be delayed, try to organise deferred payment arrangements. This would allow you to spread the cost over time maintaining an even cashflow, although ensure to confirm the details in writing.

5. Keep a cash reserve

Put away as little as 5% of income into an Emergency bank account throughout the year. This will make all the difference when things get tight over slow periods or something unexpected arises. Additionally, create a separate Tax bank account where you transfer PAYG/Super to each pay run as well as GST as invoices are paid. Not only will this show your surplus cash better, putting away these taxes/employee expenses means when BAS time comes you will have the funds ready to go.

6. Focus on invoicing & Collect Debts

Focus on jobs that you can deliver faster and get your invoices out quickly. Review your debtors. Be proactive in addressing overdue accounts and getting payments finalised to get the cash you’re owed faster. Don’t be afraid to call customers and get payments ASAP. Offering options such as discounts for upfront payments or payments plans may help your customers pay invoices faster.

7. Tax & Super don’t holiday!

Never Forget your ATO and super obligations. It can be easy to overlook the payment of GST or superannuation amid the holiday season.

Take notes of Due dates:

• Quarterly Super is Due 28th January
• Quarterly BAS is Due 28th February
• Monthly BAS/IAS is Due 21st January

Make sure you set aside adequate funds in your tax account so debts can be paid promptly and don’t attract penalties. If you are struggling with cash flow, give us a call and we can arrange a payment plan with the ATO for new and pre-existing debts.