For many industries, tis’ the season that work slows down as the out of office goes up and spending habits change. For small businesses this can be a tricky time to manage but we’ve listed some of our key tips to manage your precious pennies come silly season.
Cash flow is king!
Know what’s coming in and going out. This isn’t the time to bury your head in the sand. If you need help you might consider using a cash flow program or talking to your accountant about ways to keep your finger on the cash flow pulse. Float/ Castaway/ Spotlight and Vistr are all great pieces of software you might find helpful.
Make the most of sales drivers
Reap the rewards of the silly season. Put an emphasis in your business plan for a marketing campaign during the Christmas lead up to squeeze the last drop of sales out before the new year. Then fill up your workflow and sales lead funnel for late January and February for the new year.
If you don’t have that business plan, use the potentially quieter period between Christmas and the new year to make one and write it down! We can help.
Keep money coming in with a few simple tips on invoicing.
- Issue invoices as soon as jobs are completed rather then at the end of the month to get the payment process rolling ASAP. When issuing your invoice, reduce your payment terms for example from 30 days to 14 or 7 days if you can, particularly for new clients.
- Implement upfront pricing, fixed pricing, taking deposits, credit card payments on the spot – just make sure you get paid!!!
- Stay on top of your debtors, contact your clients a few days before invoices are due to make sure they’re in the system and ready to be paid. Using automated invoice reminders and having a policy in place for unpaid invoices makes this a lot more seamless. If you’re on top of your proposals and invoicing software and are using a program like Practice Ignition, the invoicing and payments will be taken automatically each month which makes cash forecasting much easier. You know exactly when the money hits your bank account each month!
- Incorporate the charging of late fees into your invoicing. Why not? The banks and utilities do it, why shouldn’t you?
Start pulling back on expenses as early as possible towards the end of the year. Ask yourself what can wait until the New Year? If you manage your stock, be careful not to buy bulk if it’ll be difficult to move. Go easy on the Christmas party spending, perhaps even do something low-key and save the big celebrations for a Christmas in July celebration instead. Become a lean machine!
Maintain ongoing tracking and planning for superannuation and GST BAS payments as there are two straight after Christmas (January for Super and February for GST). Be prepared. Ensure you’re putting away enough money each week for GST, PAYG, Super and tax savings.
If you’re owed a large sum of money that you don’t expect to be paid for until after Christmas and you are really cutting it fine with your cash flow, you could consider debtor financing. A debtor financing company can provide up to 80% of the value you are owed and then your customers pay the debtor financing company. Once all the invoices are paid, you are paid out the remainder less their commission which is usually 1-2%.
Give a little in return
Make sure you are giving back as well. Your creditors are trying to manage similar issues. Keep communication channels open with your creditors if you are facing lean times and agree on a payment plan if necessary. Times can be tough but there are solutions out there.
Finally, consider reviewing your cash flow plan before heading into the challenging Christmas period and potentially also refresh it in the New Year looking for new ways to address cash flow deficits across the year. If you plan accordingly, the holiday season really can be the most wonderful time of the year.