This Christmas make a list and check it twice

This Christmas make a list and check it twice.

The big guy in the red suit is not the only person who needs to be organised at this time of year. Businesses can’t afford to get too carried away over the silly season. There are a few things that, if not taken care of, could hurt you early on in the New Year.

I'm sure you get tired of us using the C-word (cash flow) but we're entering a funny time of year where everything (with the exception of retail) slows down, which plays havoc on our normal cash cycles. Like last year, we are entering the holiday season with tightening credit and bank overdrafts; you're likely to have very limited options if you suddenly find yourself short. It is important to remain positive; the low interest rates have provided some relief to home owners so we should expect a rise in consumer spend this Christmas and a much needed lift in the economy. But we still need to be pragmatic - the last thing anyone wants is to go into the break up against their overdraft limit.

It's only just gone December so take the opportunity to have another look at your forecasts (and management accounts) for the next few months. If anything has been missed, there is still time to give your bank a heads up and put a plan in place that will get you through the holiday period.

Have you identified and budgeted for the extra costs that can fall over this holiday season, such as: Team perks, such as Christmas gifts and the end-of the year team function* (read more about deductibility)

Holiday Pay. The biggest pay period falls in December so you need to factor this into your forecast. Some businesses may very well need to pay their staff earlier as a result of the public holidays that fall over the next few months, disrupting your cash cycle.

Bonuses. Some employment contracts have these built into them and typically these are paid out at the end of the calendar year.

Don't forget the taxman will also be collecting. For the majority who have a 31st March balance date the following taxes must be paid by 15th January 2013:

o Provisional Tax.

o GST for the 30 November period.

It's also important you use these next couple of weeks to do everything you can to get money through the door:

Invoice like a demon. Get the last of November's invoices out within the next 48hrs and any subsequent ones out the door as quickly as possible; before all the disruptions kick-in. Every day that goes by will drastically reduce your chances of getting paid before Christmas. Leave it too late and you could be waiting until as late as February and that's a long time to be without cash. Remember the disruption continues after Christmas with people on extended leave, school holidays and Provincial Anniversary Days.

Reel in those overdue accounts. Make this a priority and get a campaign underway today or you risk being hurt by additional delays in payment. Start with the most recent accounts, and work backwards. Instruct your accounts team to be firmer this month; for example, many invoices state an interest penalty for late payment, so this is the perfect time to act on it.

Keep an eye on stock levels. This is crucial, particularly for busy retail businesses. Reconcile your inventory daily to ensure your accounts are accurate. Reordering stock that isn't moving ties up your cash and running out of stock results in lost sales opportunities. Either situation will hurt your cash flow, so it is important to know exactly where you stand.

Knowing what to expect, and having a plan to deal with the unique challenges that come with the holiday period will ensure everything keeps ticking along as it should, freeing you up to still enjoy the holiday season. Remember it is also time to refresh, rekindle. You need this time to recharge your batteries because it's usually when you're outside the detail that your strategies become so much clearer. Collect your thoughts. Think about what's in store for 2013 - for you, your industry and how your competitors are likely react. In the meantime finish ticking things off that list - it's only 19 days until Christmas!

About the Author

Aaron Wallace is Business Advisory Director at Hayes Knight. Aaron is a member of the Institute of Directors and brings a sound knowledge of good governance practices to his clients and the boards he sits on. Aaron is regularly invited to share his knowledge through various business publications and public speaking roles

W www.hayesknight.co.nz

*Some staff perks are fully tax deductible under the Entertainment Expenditure regime, others are subject to Fringe Benefit Tax. Here are how some of the common office Christmas traditions are generally treated: Team Christmas Party - 50% deductible Team gifts (food and wine) - Fully deductible, provided FBT is payable on the gifts. If not then the cost of the gifts is 50% deductible. Team gifts (other) - Fully deductible, but majority still subject to FBT. Client Christmas Meal - 50% deductible. Client gifts (food and wine) - Fully deductible, provided it is for the sole benefit of the client. Client gifts (other) - Fully deductible. If you have any questions on deductibility regarding Entertainment Tax and FBT please contact your accountant.

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