The end of the calendar year brings warm weather, Christmas celebrations, school holidays and seasonal cashflow. A little Christmas time cashflow planning now, even just an awareness, could help get you through without any surprises.
Service based businesses such as lawyers and real estate agents experience a slowing of revenue in the Christmas period as Australian’s generally don’t buy and sell houses over the new year and are spending time with family and friends on holidays rather than sitting in their lawyers office.
This means that if you have a slower trade over the Christmas period you want to go into cash conservation mode as you’ll need to still pay suppliers, your team, rent and any loan repayments however you won’t have the safety net of healthy in-flows of cash like you do at others times of the year.
On the flip side, businesses such as tourism, retail and hospitality will be excited for their boom period. Many Australians are on holidays spending big, there’s the mad rush before Christmas to fill stockings and we are all partial to eating and drinking a lot more.
If you are in tourism, retail or hospitality you’ll need to plan for additional team members and increased stock levels to help service this increased demand. The last thing you want is to run out of stock or not have enough hands to full-fill on the demand. If you don’t have cash reserves to buy additional stock or take on more team members you should strongly consider additional funding just for the Christmas period be that from your bank, drawn down on loans or more innovative options in the fin-tech space that we can help you with.
Also keep in mind that your Oct-Dec BAS will generally be a lot larger than normal. As this is not payable until the end of February in the following year, you can easily slip up and start spending and investing your cashflow early in the year then get stung with a decent BAS to pay.
The nature of the next three months for your business and industry will dictate whats the best strategy to take. If things slow down for you, it might be best to wait to take on that new team member until the new year or buy that new piece of equipment. If your business will speed up, now is the time to start planning and putting things in place with the help of your accountant or Virtual CFO.
Another alternative is businesses that operate on a recurring revenue model. I am seeing this more and more, even in industries that traditionally price otherwise. A recurring revenue model is basically a subscription based model. Let’s take Netflix for example, you pay a monthly subscription fee and can watch as many movies and tv shows as you like on demand. What this does is it flattens out your cashflow and makes it more predictable which is a tremendous help to managing and growing a business.
Cashflow is king, not only for the cash outflows from your business but also cash inflows. If your businesses pricing is a recurring/subscription based model and most of your expenses are also subscription based (which nowadays so quite easily achievable for many industries) then forecasting your cashflow inflows and outflows are a lot more straight forward making the running of your business a lot easier.
A budget and cashflow forecast will go a long way to guiding your cashflow decisions as to when to conserve and when you can spend. Ensure your forecast is updated prior to Christmas and if you don’t have one, strongly consider having this prepared as its a core tool for any successful business. We are pretty good at numbers so touch base if you need a hand.