With the holiday season just around the corner, business owners need to invest some time now to get their finances in shape for summer.
Whether it’s typically a business boom time or a slow period there are a number of factors to consider, be it chasing debtors and managing stock levels or paying out staff bonuses and funding Christmas parties.
To kick-start the process, the Commonwealth Bank’s Local Business Banking team—many of whom have first-hand experience working in, or running, small businesses—has identified some top tips to get businesses on track for the festive period:
1. ‘Tis the season to be prepared
For many businesses, Christmas and the summer months are the busiest of the year so it’s crucial to be prepared. A rise in sales can see a boost in profits, but to ensure there is enough cash flowing through the business, it’s also important to stay on top of the expenses and cash receipts.
2. Hire enough helpers
Many businesses will need to hire extra staff over the holiday period to meet the rise in demand. As well as adequately budgeting for the extra salaries, business owners will need to invest the time to properly train their new hires.
3. Identify the hidden extras
Businesses may need to invest extra funds into seasonal marketing promotions or advertising in the lead-up to Christmas or new year sales. Some may also need to consider additional security measures to cover store closures or reduce shoplifting during very high-traffic periods.
4. Make sure your stocking is full
Take a look at last year’s sales records to determine how much stock to order for summer and ensure there is enough money in the budget to cover the additional cost. If business slows down over the Christmas period and there is too much stock, consider having a pre-Christmas sale. Don’t forget to ensure that even at a discount, each sale is still profitable.
5. Receive many happy returns
Avoid a new-year cash flow shortfall by collecting outstanding debts before the holiday season begins, especially if the business tends to slow down during this period. If there is a long time lag between work completed and payments collected then business’s will quickly feel the pressure on their cash, especially in the New Year when business picks up again and there isn’t enough cash available to purchase necessary stock.
Many clients may also be on holidays in January, and not around to make payments. Make sure to negotiate payment dates with them prior to the holiday season.
Help simplify the billing process by building up good relationships with key suppliers, setting clear payment terms and producing accurate invoices.
6. Prepare for cash coming down the chimney
Working capital requirements fluctuate throughout the year, which is why it’s so important to continually manage cash flow. If the business is busy over summer and a surplus of cash is generated, invest it in a business savings account to accrue interest until it’s needed.
7. Don’t go over budget
Everyone enjoys a bonus or a good party over the festive season and business owners need to budget for these additional costs. Remain cautious with employee entertainment —businesses could be subject to fringe benefits tax in March/April for staff Christmas parties. Just ensure there is enough money in the budget for all costs incurred.
8. Don’t overlook the little things
Keep customers up to date about the business information over the holiday period. Post details about trading hours, closing dates and special offers on the company’s website and don’t forget to update voicemail and email messages with similar information.
9. Time for a New Year’s resolution
Whether the business experiences a boom or a downturn over the summer months, it’s a good opportunity for owners to reflect on the successes and challenges of the first half of the financial year and make plans for the latter part. Start the New Year off on a positive note by getting the financials in shape and update business plans where required.
Business owners should take time in January to meet with their business banker and update them with the business plans for the next 12 months. This will help ensure they understand the goals and can help meet necessary banking and financial needs.
10. Enjoy the festive season and celebrate business success
It’s important for business owners to also take a break. If they’ve got their plans and budget in shape for the holiday season then they can now look forward to an enjoyable Christmas, relaxing holiday and stress-free New Year.
Source: Commonwealth Bank of Australia, Local Business Banking team
* The opinions expressed in this article are those of the author, and don’t necessarily reflect the opinions of DYNAMICBUSINESS.com or the publishers.