The festive season comes with plenty of opportunities to enjoy and let your hair down, but for business owners it can also be an extremely challenging time. Cash flow management can be problematic for many small business around this time of year. But fear not, there are things you can do to ensure you and your business survive to thrive in 2019.
So what can you do to ensure cash flow during the festive season?
Have a clear strategy in place
December comes with a unique set of challenges that you may not have to worry about over the rest of the year. The retail industry may be particularly affected by many extra costs such as training new employees and seasonal staff, double payroll, extended training hours, increased shipments & inventory as well as an increase in theft. Many businesses must also consider the cost of office parties and end of year bonuses. Others might shut down completely over the holiday period. And whilst this might reduce some operational costs, they still need to pay their staff and manage other overheads with zero revenue coming in.
Having a clear strategy and budget in place beforehand for all of these additional costs is key to surviving this busy period. Creating a cash flow forecast well ahead of time will help you anticipate the peaks and troughs of your revenue, calculate how much additional spend you will have in December and allow you to budget accordingly.
Save up for the New Year
Many businesses, particularly in retail or ecommerce, have a surge in revenue during the festive period. And although spending it all quickly might be tempting, putting money aside for the New Year’s expenses is a much smarter choice. Keep in mind that bills must be paid and rental increases may occur at this time of year as well as other overheads like staff bonuses.
This is also a great opportunity to create your cash flow forecast and budget for the year ahead. By analysing your recent sales figures and expenses, you can adequately prepare for the next festive season. Putting some money aside from your recent sales boost will give you a safety net and help ensure a smooth cash flow for next year.
When it comes to your staff contracts, give yourself room to breathe. For your full time staff, make sure you have an annual leave policy that protects you from personnel shortages at critical times of the year. Depending on your situation, you may wish to explore the option of asking staff to take compulsory leave over the Christmas period. Or, if you need additional seasonal staff to keep up with production or retail demand, be sure to only keep them on for the necessary time periods to avoid unnecessary costs.
Being organised and strategic about which hours you ask your staff to work is also key. Be mindful of any overtime, public holiday and other penalty rates under the relevant modern awards. Before offering extended opening hours, carefully calculate whether the cost of penalty rates are covered by your expected revenue. Is it more cost effective for you to open for less hours at busier times of the day? Or is using temporary staff for those extra evening hours cheaper than asking your full time staff to do overtime?
Though it is tempting to simply maximise opening hours to accommodate your customers, make sure you take a step back and carefully evaluate whether this is ultimately cost effective. Carefully planning your staffing roster will help ensure that your outgoing costs are justified and that your revenue is maximised.
Get professional help
What works best for your business will depend entirely on your specific circumstances. The best way to ensure that your strategy fits your particular business is to enlist qualified professionals to help you navigate things. At Atkinson Vinden Lawyers, we have a range of small business advisory service in NSW and a team of expert and experienced lawyers who can help ensure that you have all the necessary strategies and contracts in place to survive the festive period and to go from strength to strength in the New Year.