Bells are jingling and cash tills should soon be ringing for Australian retailers this Christmas. With an estimated $50 billion to be spent by shoppers, there should be plenty of holiday cheer for everyone in business.
Unfortunately, for agencies and other small businesses and tradies operating outside the retail or hospitality sector, Christmas and the holiday period can present a challenge for cash flow rather than a surge of happy customers.
Sales can slow, invoice payments may be delayed and suppliers may close for extended periods. Follow these tips to manage your cash flow and ensure you don’t have a “bad Santa” experience this Christmas.
1. Invoice promptly
Small businesses can often neglect the administrative side of things towards the holidays, thinking they can get to it over the Christmas break. However, delaying invoices means they likely will not be paid until late January at the earliest.
Stay on top of your paperwork and make sure invoices are sent well before businesses shut down for the holidays. This is the first step towards effective cash flow management. Ideally, small business owners should automate the invoicing process using cloud-based accounting software. These programs pair the invoice with a payment policy and can advise advising when incoming payments have landed, as well as sending overdue reminders.
2. Plan in advance
The best thing about the Christmas and holiday season is it comes at the same time every year, giving you 12 months to prepare for the next one. Putting a little cash aside for expenses or slow sales during this period is crucial.
From staff parties to holiday penalty rates, there are extra costs you will need to prepare for. Manage your cash flow around and make sure you have some extra funds to cope with all that cheer.
3. Allow mobile payments
Using a mobile payment system is a great way to ensure customers pay small bills immediately, rather than in 90 days’ time.
Most banks offer mobile payments systems now, and they are particularly handy for businesses like tradies who are always on the go. The range of services continues to grow, including Apple Pay, Samsung Pay and all the big banks, but compare all the various costs including BPAY fees and make sure your phone is secured for security tips).
4. Chase debtors
It may not be much fun, but contacting debtors a few days before the payment deadline is the best way to ensure they pay on time. Generally three or four days before the deadline is the ideal time to give a friendly reminder about the invoice, and to ask if they need anything else.
If you have a personal relationship with the client, it might be better to have another staff member do this to avoid any awkwardness.
5. Hold off on big purchases and slow moving inventory
If you are intending to buy a new vehicle, move to new premises or buy expensive equipment or tools, it is best to wait until after the New Year when you have a better idea of your finances.
The same goes for inventory purchases. If you know January will be a quiet time, scale down your usual order, particularly for less liquid stock that often takes longer to sell.
No one wants a bad Santa experience!
Avoid a bad Santa experience and don’t let Grinch steal your Christmas. Keep on top of cash flow this holiday season to make sure your business is on solid ground and ready for the new year.
And for a hassle-free online loan, check out Prospa’s small business-friendly loan which can help you get through the holiday period.