December is here. The busiest time of year for both our business and social lives. As a small company, you are probably wrapping things up and completing a host of services and orders before the lull arrives in January.
And at home, it’s time to think about how you want to celebrate the festive season with those you love, and what presents to put on the gift list.
It’s not unusual to feel overwhelmed and stressed at this chaotic time of year. But to help you sail smoothly into 2020, I’ve come up with some tips so you can ride high into January with positive cash flow.
Avoid debts and enjoy guilt-free spending
With some simple planning in place, you can ensure you aren’t left in the red when the New Year rolls around.
This doesn’t mean being a scrooge and avoiding spending at all costs. Instead, it’s about being thoughtful about managing your payments and outgoings so you only spend the money you have at Christmastime.
Follow these two simple steps and avoid sliding into debt when the new year arrives:
Step one: Work out your liabilities
Before you hit the shops, pull up your balance sheet and work out all the outgoings you will have for January and February.
This list should include:
- What you will owe suppliers
- Superannuation payments
- BAS (for the end of February)
- Complete operating costs for December, January and February.
Once you have a list of all of these payments, add up the total bill and put the money aside in an account that’s not to be touched until these specific invoices come through. By saving away all your upcoming outgoings, you won’t have to stress when 2020 arrives as you’ll have the money you need put aside to pay the bills.
This way, you can enjoy Christmas guilt-free, without worrying about overspending.
Step two: Work on your cash flow
Cash flow is the number one challenge facing small businesses around Australia. Avoid getting into strife by making sorting out your cash flow one of your new year’s resolutions.
It isn’t unusual to have your invoices paid late at any time of the year, and this practise is even more commonplace at the beginning of the New Year when many businesses are cash-strapped. Although December is frequently a profitable time of year, often cash flow can be slow throughout this period as invoices won’t be paid until the end of January or early February.
However, there are a few ways you can reign back control of being paid on time.
Invoice right away
Firstly, invoice immediately – as soon as you have completed the task – so that you are paid as fast as possible.
If you run a service that lends itself to taking an upfront payment before the work begins, consider altering your payment terms so you can be paid 50% before the commencement of the task, and the remainder on completion of the job.
Make payments due sooner
Another option is to shorten your payment term periods.
For example, if you currently allow up to a month for payment, think about reducing this to seven days or even a fortnight in the lead up to Christmas. This way, you can get paid before the festive period, ensuring you’re not left in the lurch in the new year when many businesses are short on cash flow.
Chase outstanding invoices
If you currently have any outstanding invoices, aim to get them sorted before Christmas. Send out email reminders to the businesses with outstanding payments, and if you don’t get a response within a few days, consider giving them a call. Be friendly when you chat, yet polite and firm, asking them to kindly meet the payment.
Make processing payments simple
If you want to be paid faster, make sure it’s easy for your customers to pay. Install a payment gateway to allow them to pay online via credit card so they don’t have to fiddle around with a bank transfer. This can easily be done with software such as Xero. The easier you make the payment process, the more likely you will be paid on time.
A little planning will make Christmas a joy
Getting paid quickly for your services will make the post-Christmas period a lot less stressful and careful planning will allow the lead up to Christmas to be full of guilt-free spending.
So start 2020 off with a bang with positive cash flow for your business. By putting these simple measures into place and taking the time to implement a few simple strategies you can enter the new year with confidence.