Christmas in Australia is a joyous time of year hallmarked by great weather, school holidays and family time. Many small businesses see their sales skyrocket at the end of the calendar year, but for some the festive season is marred by huge disruptions to your businesses cash flow.
What do you need to do prepare your business for the festive season?
Hear from business gurus - Andrew Van De Beek from Illumin8 Accounting, Sam Musgrave from Nine Advisory, David Boyar from Sequel CFO and Troy Townley from HTA Advisory - who have shared their 12 merry tips that will get your small business ready for christmas.
1. Communicate Early
Ensure you have an efficient and effective credit policy in place before Christmas. As the end of the year approaches people go into holiday mode and it’s likely many invoices won’t be paid until the new year, creating a drag on your cash flow. Make sure you are invoicing customers promptly as you complete work, setting expectations by clearly stating the payment terms.
Before the point of office closure ensure to communicate with both your customers, the people that owe you money, and your suppliers, the people that you owe money to. Know when the office is closing, what that looks like, what their trading terms are over Christmas and, if needed, re-negotiate these terms. Don’t get left in the dark.
2. Organise and empower your staff
Forecasting your staffing needs is critical over the Christmas period as your cash flow may become inconsistent or stagnant. You want your staff to enjoy their holidays too, so make sure you have sufficient cash to pay them, accounting for any holiday wage increases or entitlements. If your product or service requires staffing over the break, communicate with your staff early so they know they’re needed and you know there are sufficient people on hand.
Remember, Christmas is a holiday of reflection and thankfulness. This means it’s the perfect time to make sure your employees feel appreciated. Take time to thank each member of staff for their hard work and commitment so they go into the break feeling happy with where they are at in the business. You don’t want to let any issues linger over the new year.
3. Have a real break - no work!
As Illumin8 director, Andrew Van de Beek, says, “there are very few times when you are able to unplug from your business and people are generally okay with it - Christmas is one of them.” So take some time off! Try to close your laptop and do something non-business related for however long you can feasibly manage. Use this time of year to pursue your hobbies, spend time with the family or go on a holiday - give your mind a break from the business and just enjoy yourself.
Failing to take time away can leave you feeling worn down before the new year has even started and the quality of your work may suffer as a result. Come out of the Christmas break refreshed and ready to go, not exhausted.
4. Re-inspire yourself with a good book
Most small business owners are extremely busy and the stack of unread books on the coffee table rises higher throughout the year. The Christmas period gives you time to catch up on some of this reading and give your mind a break from the daily grind. Line up a couple of books and allow them to inspire you with new ideas and re-invigorate the passion you have as a business owner.
“Use this period to fall in love with your business again” - David Boyar, Sequel CFO
Don’t know what to read? Well David Boyar has ‘Thinking Fast and Slow’ by Daniel Kahneman at the top of his list and you can’t go wrong with ‘HBR's 10 Must Reads 2017: The Definitive Management Ideas of the Year from Harvard Business Review’.
5. Document Holiday Reponsibilities & Processes
This time of year brings with it a variety of unique hurdles that businesses must navigate. If you have been in business long enough you will probably know the major challenges in front of you, so plan for them! Whether it be a shortage of staff as people go on holidays or suppliers closing down for extended periods, you need to be prepared. Get your small business ready for Christmas - write a checklist of what needs to be done, work out who is going to be responsible for each action and empower them to execute effectively.
“Pro-actively preparing basic business processes and planning ahead will mean fewer phone calls and emails interrupting your family holiday.” - David Boyar, Sequel CFO
6. Collect your Debts ASAP
Chasing payments can be uncomfortable but it’s imperative to deal with late payers as soon as possible. Track your outstanding receivables and apply a consistent policy to chasing up unpaid invoices, utilising both friendly reminders and strict payment requests. If you don’t get your overdue invoices paid before the Christmas break it is likely you won’t see that money until February (if at all!).
“There’s no need to fund someone else’s Christmas holiday at the expense of your own.” - David Boyar, Sequel CFO
It is important customers have all the information they need to make payments on time. Look for negative balances or misallocated credit notes on your receivables ledger, sometimes people don’t pay because what you are telling them is due is the wrong amount. Clean up your debtor ledger and ensure your customer doesn’t have an excuse not to pay.
7. Clearly document your business processes
The lead up to Christmas is the perfect time for you to ensure your business processes are refined, well documented and clearly communicated to all involved. Business owners often become frustrated at staff or suppliers who aren’t performing tasks in their preferred manner and such frustrations are only exacerbated over the unpredictable Christmas period. Well planned business processes can make it feel like there are multiple ‘yous’ on hand to help the business run at peak efficiency, requiring less resources to achieve the same outcome. This is a key to maintaining consistency and getting your small business ready for Christmas.
8. Clearly forecast your sales pipeline
For many owners the Christmas period provides their business a natural level of buoyancy as they reap the rewards from months of planning and marketing for the Christmas rush. However, owners often don’t employ enough resources to the post-Christmas period and find themselves exposed in January, February and March. Having visibility over the sales pipelines and some clarity around the first quarter of the next calendar year is essential to make sure your business thrives all year round. Whilst it is important to take advantage of any benefits you can derive from the Christmas period, it cannot be at the expense of the next quarter.
“Make hay while the sun is shining, but don’t forget the business needs to roll on.” - Sam Musgrave, Nine Advisory
9. Forecast and prepare for new year tax obligations
As you are dealing with the post New Year’s hangover your thoughts are most likely drifting toward your upcoming family holiday and not your business’ cash flow. But it’s important to keep in mind that the new year brings with it two small business cash flow landmines that you need to be fully aware of and prepared for. Firstly, the superannuation obligations for your staff are due at the end of January. And secondly, your BAS for the October-December period (that is your GST and PAYG withholding) falls due on the 28th of February and is often larger than usual. After successfully getting through the Christmas period it is essential you continue to watch your cash flow so you aren’t surprised by these statutory obligations.
“We don’t want to get into a situation where our cash flow planning hasn’t been sufficient enough to allow for those large sums that are going to arise at the end of Jan and Feb.” - Sam Musgrave, Nine Advisory
As Christmas approaches make time to reflect upon the year that was. Many owners are so focused on the day-to-day running of their business and ticking off the next item on their to-do list that they forget to stop and look at what they’ve achieved. No doubt you and your team have been working towards a variety of goals, so gather them together and celebrate the success you’ve had over the last 12 months.
Troy Townley of HTA Advisory suggests using this period to “reflect on what’s worked well and what could be a focus to further improve for the new year ahead.”
You’ve put in the hard work so make sure you finish on a positive note and don’t forget to celebrate those wins!
11. Cash flow management
The lead up to Christmas is very busy so it’s important you forecast your working capital requirements ahead of time and don’t lose sight of your cash flow. As we’ve talked about, there is inevitably going to be a slow down for most businesses at the start of the calendar year as trade dries up. This slow down combined with the superannuation and BAS obligations due in January and February will put great pressure on your cash flow. Therefore cash flow forecasting is key during this time of year - small business cash flow management tools, such as Skippr, become an owner’s best friend as they provide valuable insight into whether you are on the right track.
Many owners ask how to improve business cash flow. Look to collect your debts, delay the purchase of big ticket items and review your outgoing payments to preserve as much cash as possible during these months. If needed, don’t be afraid to rely on external funding to create a ‘cash flow buffer’ and ensure you can get through this post-Christmas slow down. However, finding last minute funding the week after Christmas usually isn’t easy, so be proactive and do this ahead of time based on your forecasts.
12. Healthy mind, body and business
Christmas in Australia not only means holidays, presents and family time - but it brings with it the start of our beautiful summer. This makes it the perfect time to get outside and balance out all the Christmas eating and drinking with some personal fitness. Clear your mind and keep that waistline under control by getting active outdoors, whatever that means for you. Keeping fit and catching some sun will give you more energy and peace of mind so you are ready to tackle anything your business throws at you in the new year.
“Use the new year to implement your regimes, focus on your personal health and create goals you want to achieve for the year ahead.” - Troy Townley, HTA Advisory