It’s not too late for a last-minute push to get your outstanding receivable paid before Christmas, and get your cash flow sorted before everyone shuts up shop.
According to Alexander Laureti, partner at LMS Advisory, having enough money over in the bank to cover the Christmas/New Year period is a challenge for many businesses. For this reason, he suggests being proactive in pushing for payments before December 25 arrives.
“You've got leave for your employees, you've got your savings that you want to make, your holiday spending money, things like that,” he says.
Alexander has these tips for business owners looking to secure their cash flow for this year and future years ahead:
1. Invoice early
“It's a great idea to invoice as you go, throughout the month of December,” he says.
“Get invoices out there to customers, give them every opportunity to receive an invoice, check an invoice, agree that it's payable, and they might want to clear that off their ledger too before Christmas so they have less things hanging over their head.
“I think that, especially towards the month of December, if you can invoice out to your customers earlier, then that's something that can bring a little bit of cash flow in sooner too – especially if you're on seven-day terms, or 14-day terms.”
2. Save, save, save
For seasonal businesses such tourism and hospitality in particular, the summer holidays can be their busiest time of year, meaning cash flow is not so much of an issue. The challenge, however, is ensuring that cash isn’t frittered away before it is needed during the quieter periods.
“Once you've collected that money, then what are you going to do with it? How is it going to either benefit your business, pay your bills, or how is it going to help you grow in the next year?,” Alexander asks.
“I really think it's important to have whatever money that you're collecting, form part of a budget for the business. I think it's also important to have some kind of disciplined saving plan for the business as well, so that if you make your money in six months of the year, you've got to put aside for those lean times as well. It's always the temptation that, there's money in the bank, let's go ahead and spend it.
3. Plan statutory requirements ahead
Nothing is more certain in life than death and taxes. To this end, don’t overlook ensuring your bases are covered from a compliance perspective, particularly if you plan on taking leave yourself.
“From my own experience in my business, we'll put aside a couple of weeks’ wages so we know that as we go into the January period, a lot of people are on holidays, but so are business owners,” Alexander says.
“Generally not much happens in terms of activity in the month of January. It's a great opportunity for us to have a little bit of down time. It's also an opportunity to focus on the business. We'll be saving up in the month of December, putting aside some extra cash for payment of things like employee wages over that Christmas break, and any other statutories that might come up.”
What businesses can learn from Sir Roger Bannister
By Adam Zuchetti
‘We had lost our way culturally’
By Adam Zuchetti
Ask the Experts: How can employers protect their own mental health?
By Adam Zuchetti