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5 tips to avoid the summer cash slump

Written by Greg Millar on December 19th, 2017.      0 comments

For many businesses summer can be a tricky time for cash flow.

planningBut it doesn’t have to be that way.  

In fact, the quiet summer period can be incredibly productive. We hear from Xero’s small business advisory panel who suggest some small changes that can have a big impact on the traditional summer slump in cash.

#Tip 1: Don’t get spooked over summer

If you’ve just started a business, particularly one in professional services, the quiet summer period can take you by surprise. But don’t be spooked – this seasonal pattern is very familiar to many businesses.

James Begley, the founder of Pickstar, learned this the hard way. “I wish I’d known about the inevitable summer downtime,” he says. “When I started, business was quiet in December. I worried about it, wondering if I’d got my model all wrong. Then it happened again the next year, and it wasn’t until year three that I realised I’d need an annual buffer to cover this period. So you learn to batten down the hatches.”

Instead of getting spooked by the quiet period, use this time to be as productive as possible behind the scenes. This means that December is for planning and talking about new ideas as much as possible.

Tip #2: Get those invoices in

Quiet periods go hand in hand with poor cash flow. But there are ways to speed up cash flow at this time of year.

Typically, if you don’t get your invoices in by mid-December each year, there’s a good chance you won’t be paid till February.

Get on the phone to chase late payers at this time of year, to drive payments and actually call people who owe money.

Send automatic payment reminders too, but just getting on the phone and saying, "I know you said that money was coming last week, but nothing’s come in yet," can be the human nudge someone needs.

Tip #3: Stagger your outgoings

Aside from getting invoices in early, think about your business expenses and staggering costs over summer.

Pippa Oostergetel, the founder of Squeak, staggers her wholesale orders whenever cash flow is tight. “It’s such a good idea to track your data, as long as you take that one step further and develop conditions that help you,” she says.

“Like my wholesale orders, I haven’t ordered the stock yet – I’ll wait until I’ve got a little bit of cash that’s coming down the line. It’s about creating rules and procedures for yourself to aid your cash flow initiatives during typically quiet periods.”

#Tip 4: Negotiate with staff for a win-win

If you pay employees over the quiet summer period, this can impact cash flow. To address this, talk with staff to see if you can create a win-win outcome.

For example, some staff may like the idea of having the entire summer off for an extended holiday, or not working in school holiday periods and being with family instead. If you don’t ask, you don’t know. It may even be as simple as an unpaid ‘picnic day’.

#Tip 5: Stop and reflect

Since summer can be slow,  it can pay to reflect on what is and isn’t working in your business.

Sitting down to objectively look at sales: look back on what products sold well last year and plan around that. Make sure you've got everything ready in advance, so you don't sell out. But at the same time, don’t order in too much and be left with additional stock.

December should be for planning ahead in order to achieve longer-term profit.

Use the time in December to really plan. If you can plan for the first third of next year, then that’s probably a good result because, from mid-January onwards, the work can come in a rush.  Be prepared, so you are ready for anything from January onwards.

Get on top of your bookkeeping today!

Contact Alliotts' Xero Specialists on 09 520 9200 who provide streamlined and efficient remote / offsite bookkeeping services to businesses who wish to outsource their day-to-day processes such as Accounts Payable, Accounts Receivable, NZ GST, PAYE and Payroll all using Xero.

Source: Xero’s small business advisory panel

 

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