For many businesses summer can be a tricky time for cashflow. But it doesn’t have to be that way. In fact, the quiet summer period can be incredibly productive. We spoke to Xero’s small business advisory panel who suggested some small changes that can have a big impact on the traditional summer slump.
#Tip 1: Don’t get spooked over summer
If you’ve just started a business, particularly one in professional services, the quiet summer period can take you by surprise. But don’t be spooked – this seasonal pattern is very familiar to many businesses.
James Begley, founder of Pickstar, learned this the hard way. “I wish I’d known about the inevitable summer downtime,” he says. “When I started, business was quiet in December. I worried about it, wondering if I’d got my model all wrong. Then it happened again the next year, and it wasn’t until year three that I realised I’d need an annual buffer to cover this period. So you learn to batten down the hatches.”
Instead of getting spooked by the quiet period, James suggests using this time to be as productive as possible behind the scenes. “This means that December is when we plan and talk about new ideas as much as possible,” he says.
Tip #2: Get those invoices in
Quiet periods go hand in hand with poor cash flow. But there are ways to speed up cash flow at this time of year.
“I always tell my accounting clients, if you don’t get your invoices in by 11 December each year, there’s a good chance you won’t be paid till February,” says Mark Lawry, a partner at Suntax. “I wish more small businesses understood this,”
Mandi Gunsberger co-founder of Babyology suggests getting on the phone to chase late payers at this time of year. “We get on the phone to drive payments, and actually call people who owe us,” she says.
“We send automatic payment reminders too, but just getting on the phone and saying, ‘Hey, I know you said that money was coming last week, but nothing’s come in yet,’ can be the human push someone needs.”
Tip #3: Stagger your outgoings
Aside from getting invoices in early, think about your business expenses and staggering costs over summer.
Pippa Oostergetel, founder of Squeak, staggers her wholesale orders whenever cashflow is tight. “It’s such a good idea to track your data, as long as you take that one step further and develop conditions that help you,” she explains.
“Like my wholesale orders. I haven’t ordered the stock yet – I’ll wait until I’ve got a little bit of cash that’s coming down the line. It’s about creating rules and procedures for yourself to aid your cash flow initiatives during typically quiet periods.”
#Tip 4: Negotiate with staff for a win-win
If you pay employees over the quiet summer period, this can impact cash flow. To address this, Mandi suggests talking to staff to see if you can create a win-win outcome.
For example, some staff may like the idea of having the entire summer off for an extended holiday, or to not work in school holiday periods and be with family instead. If you don’t ask, you don’t know. It may even be as simple as an unpaid ‘picnic day’, explains Mandi.
“Our twenty staff all take leave between Christmas and New Year because it is so quiet for us,” she says. “They probably take a few extra days in January as well, and we give them one free ‘picnic’ day to spend with their families – which all helps our cash flow.”
#Tip 5: Stop and reflect
Since summer can be slow, it can pay to reflect on what is and isn’t working in your business.
For Pippa, it’s a case of sitting down to objectively look at her sales. “I look back on what products sold well last year, and I’ll partly plan around that,” she says. “I just have to make sure I’ve got everything ready in advance, as I don’t want to sell out. But at the same time, I don’t want to order in too much and be left with additional stock.”
For James, December is for planning ahead in order to achieve longer-term profit.
“I use this time in December to really plan,” he explains. ”I say, ‘Well, if I can plan for the first third of next year, then that’s probably a good result’. Because from mid January onwards, the work can come in a rush for us. We have to be prepared, so we are ready for anything from January onwards.”
Meet the four founding members of Xero’s small business advisory panel.
Mandi Gunsberger, a high-profile digital media advisor, who successfully sold the nationwide digital publishing company Babyology.
James Begley, founder of Pickstar, the Uber of sports-celebrity speaker engagements.
Mark Lawry, a partner at Suntax accounting firm in Melbourne who has mentored hundreds of startup businesses.