Get your small business finance in shape for summer
Get your small business finance in shape for summer
Money Week is here and summer is fast approaching,
serving as a timely reminder for small businesses to ensure
their finances are in shape for the holiday season.
Trend analysis of Xero’s small business customers in New Zealand from 2011 to 2014 shows accounts receivable is on average more than 30 per cent lower in January than the 12 month average, and Xero New Zealand Managing Director Victoria Crone says businesses needed to be prepared for that lower than normal cashflow.
“If there’s one thing we know about small businesses, it’s that cashflow is king so preparing well in advance for that dip in January is crucial,” says Crone. “Taking sensible, practical steps now will help you control spending and manage your business finances during that holiday period.”
Crone suggests developing a clear financial plan to keep track of finances coming in and going out is key to keeping business in shape.
“With only ten weeks until Christmas, now is a great time to take a few hours and plan all the really important things that need to happen before then.”
“Different plans work for different businesses, and owners should discuss this with their accountant to see what works best, but it’s important to be realistic and estimate how much you’ll sell and spend. Plug these numbers into your financial plan and see if the results work for your business.”
“Planning for an increase in spending over the holiday period, such as Christmas functions and gift buying, is vital. Then there are public holidays – knowing your obligations when it comes to paying staff and planning ahead can save a lot of trouble.”
Prompt invoicing and cash collection ahead of the Christmas break will also help, ensuring your business has enough cash flowing to pay the bills come January, adds Crone.
Tips from Xero: Improving your cash flow
All small business owners experience the stress of managing cash flow, but life would be a lot less stressful if your customers paid you faster. Here are some tips to speed up the process and dramatically improve your cash flow for the holiday season.
Invoice immediately
Email your invoices
Write detailed descriptions on your invoices
Set your own payment terms
Encourage direct payments to your bank account
Use your mobile phone to access your accounts and check-in during the day
Have someone else call your debtors
Send statements
Use your Accounts Receivable reports.
In the 12 months to 30 June 2014, the total
value of transactions processed through the Xero system in
New Zealand was $58.9 billion. With New Zealand’s GDP at
around $200 billion, this reflects more than a quarter of
the economy being transacted through Xero.
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