How small business owners can stay on top this silly season

It can be tough running a small business over the holiday period – while everyone around you is planning trips to their favourite coastal town, many small business owners are facing a time of either feast or famine.

Each brings their own challenges, from either organising extra staff and negotiating cash flow over shut down periods to making sure you get paid before everyone disappears for the holidays.

Here’s how you can minimise these common financial stresses for your business ahead of the end-of-year (EOY) period.

Negotiating cash flow strains

Planning ahead to ensure your cash flow over the EOY period can cover holiday pay and other expenses is vital, says Tibor Mackor, Director at Auckland-based Better Business Strategies.

“A lack of cash flow can cause payment challenges where you, as the owner, are not able to pay your staff, suppliers or yourself,” he says.

Phil Holland, Owner and Founder of Tauranga-based Love Your Business, says it’s critical you start planning early.

“If your business does close down over Christmas or it’s a quiet time, make sure you’ve reflected this in your forecast and working capital,” he says.

If you think you’re going to come up short over the EOY period, Holland suggests you:

  • Organise temporary business finance for the holiday season.
  • Chat to your main suppliers about stretching your terms during that period.
  • Get deposits from customers if you’re able to do so.
  • Minimise any unneeded expenses while you’re shut down.
  • Chase up debtors now – don’t wait or try to do it over the holiday period when they’re away.

Meanwhile, to make sure you’re on the front-foot next year, Mackor recommends you build up a buffer throughout the more prosperous times of the year to act as a safety net if needed during the EOY period.

“I usually recommend business owners save 5% of turnover and teach them to run their businesses on the remaining 95% turnover,” he says.

Chasing up debtors before EOY

When it comes to making sure your invoices are paid before everyone takes off on holidays, Holland says the key is communication and setting expectations.

He suggests small business owners:

  • Bring forward invoice dates (and communicate why).
  • Get your invoices out fast to increase the chance of being paid on time.
  • Offer a payment discount or gift if clients pay their December invoice by the due date.
  • If you have a slow payer, get in touch early and have a discussion about paying on time – set your expectations and boundaries.

To help with tardy debtors, Mackor recommends you obtain a 50% deposit on any work to be done for a client, which helps bring immediate cash flow into the business.

He also suggests making sure your invoice terms and conditions are watertight, so that payment happens when it should.

Using accounting software where your clients are regularly reminded about the outstanding amount, can also help speed up payment. “For example, Xero has a facility where you can program the sending out of a statement weekly,” he says.

Coping with extra staffing demands

If you’re a retail business, Carli Saw, Founder of HR consulting firm Strawberry Seed Consulting, who works with clients in New Zealand, says you need to start prioritising your holiday staffing arrangements pronto.

When looking to put on additional staff, she says the first thing you need to do is define exactly what role you need.

“Where most smaller companies fall down on recruitment is, they just say ‘Hey, we need staff, PM us if you’re interested’,” Saw says.

“But they haven’t really got a clear idea of what they can pay or the role they’re offering, before they go to market, and that causes confusion and delays.”

She says recruiting new staff doesn’t need to cost you hundreds of dollars on recruitment platforms such as SEEK, either.

In fact, she suggests posting jobs on Facebook, in relevant local community groups.

“There are a lot of job boards on Facebook that won’t cost you anything. You can even do promoted posts for a very low fee and target specific demographics,” she says.

To stay open or closed on public holidays

Another big financial decision you’ll have to make in the lead up to the EOY period is choosing what public holidays to stay open for, and what public holidays you’ll be pulling down the shutters for.

To assist you in your decision, we’ve created this handy infographic, which runs you through all the costs and benefits to keep in mind.

If the best-laid plans aren’t looking like enough to get you through the holiday period in one piece, talk to one of Prospa’s business finance specialists about how a small business loan might help ease any cash flow strain. 

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