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Tips for small businesses to manage their finances over summer

Posted 7 years ago in Advisors by
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Money Week is here in New Cashflow-BlogZealand! 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.

  • Invoice immediately
  • 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
  • Send statements
  • Use your Accounts Receivable reports to manage cashflow

For further information, check out the Money Week website.

3 comments

Jess
October 15, 2014 at 3.14 am

I sure wish summer was approaching here in dreary Scotland..

Great article, cashflow is absolutely king, and all businesses must prepare for the dip in January, not to mention the constant ebb and flow of their finances.

A final tip I might add to the list: don’t assume all customers will pay on time, make sure to plan for those you suspect might pay late. Your cashflow forecast will look more realistic and you’ll avoid the scary surprise of missing a critical invoice.

Float is a great tool for cashflow forecasting. It’s available in the Xero add-on store, or at floatapp.com

Stella Nicholson
October 15, 2014 at 3.05 pm

Absolutely cash is king at any time of the year but particularly in January when sales may be down, holiday pay has been paid and debtors have gone on holiday without paying you. Getting someone else to call your debtors in November and December takes the pressure off you and is effective in having sufficient working capital to get you through. Let us help.

Wayne Smith
October 18, 2014 at 5.29 pm

Christmas is certainly the trickiest time to be managing cashflow. Encouraging direct deposit and easy ways to pay invoices certainly helps with people away from their offices.

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