Time to see how business finances will hold up over the holidays.
Time to see how business finances will hold up over the holidays.
With only a few more sleeps until Christmas, you might be wondering how your business cashflow is going to hold up over the festive season.
Businesses that shut over the break still have to pay overheads, such as salaries and rent, without being able to generate any income. Then there'sGST and provisional tax payments due on January 15.
Here are a few quick things to help manage your cash:
Do a quick budget to make sure you know how much you need to cover the break and also what this might mean for the first few weeks before you produce an income again.
If you're a project-based business, completing jobs usually means you can bill customers. Prioritise jobs that you can finish and invoice before the break -- if possible negotiate interim payments for work done to date.
Look at your debtors' ledger and offer a discount to some debtors for prompt payment before Christmas. If you do this, be careful it doesn't completely erode your margin.
This can also work for suppliers. I have worked with a few clients to look at negotiating discounts on their payments to suppliers, particularly those who had considerable payments due. Everyone likes to get cash in before Christmas.
Provisional tax payments in January can be financed using tax management services -- you pay an upfront interest cost and the tax management service makes the credit available. You agree to pay the principal amount later when cashflow is better.
You can also review your year-to-date profit in case you're paying more provisional tax than you need to.
But chances are given the economy is reporting steady growth, businesses are too so that tax payment is probably due.
One of the best things you can do is look to the break as a time to reflect on your business and make sure that next year you're well prepared. Make and act on those New Year's resolutions to make sure cashflow is good all year round. Review regularly your payment terms, and who you do business with.
Jeremy Tauri is an associate at Plus Chartered Accountants.
