Five Tips to Avoid a Cash Flow Hangover
Obviously the Christmas-New Year break is a wonderful time of the year, but when it comes to cash flow in the New Year, seasonal cheer can turn into a nasty hangover if businesses are not prepared.
Accounting software provider MYOB has five simple tips for avoiding the cash flow crash that will help mitigate the impacts of business seasonality.
1. Make hay while the sun shines
“During peak times, we see countless businesses crammed full of customers and people lined out the door waiting to be served. A lot of small businesses get very busy during the high season and miss sales opportunities because they haven’t catered well enough for the bump, meaning people end up going elsewhere,” says MYOB head of small business, Ingrid Cronin-Knight.
“Make every sales opportunity count. This is a time of year when customers are willing to spend money, so be ready to cater for that increase in traffic. Gear up in advance with staff and stock so you can keep the cash registers ringing.”
2. Stash the cash
To help your business during low cash-flow periods, make sure you build up a reserve of cash when cash flow is good. It is easier to build a decent cash reserve for the down times if you have taken advantage of every customer dollar while the register is running hot.
“Setting money aside will tide you over the quiet periods when foot traffic dries up and the phones stop ringing,” Ingrid says.
“Put some money aside for paying business taxes when they fall due. Don’t fall into the trap of spending all your cash during the peak times, only to leave the cupboard bare during those lean months when the taxman comes knocking.”
3. Look ahead
Like a ship’s captain on the deck peering through a telescope, business owners should be able to spot storms on the horizon when sales start to drop and cash flow is tight.
Good owners, especially if they have been in business for more than a year, should plan drops in sales and delays in getting paid.
“Talk to your customers and try to pick where business confidence is going. The summer period is a great time to do some study and get a read on trends in your industry.
“There is some great business writing out there and it’s worth having a look at what the Reserve Bank is saying about where the economy, inflation and interest rates are heading. “Understanding your own business patterns alongside the wider economy will help you spot the peaks and troughs to come – and provide for them in advance.”
4. Keep a few promotional aces up your sleeve
Smart promotional discounts during the slower months can help boost flat sales. Create some targeted marketing campaigns in advance that you can quickly promote to your customer base if needed.
Smart and quick sales campaigns can give your business a vital boost in cash flow when all your competitors are struggling. Being proactive can start cash flowing again in your business – and digital marketing campaigns can reach your customers no matter if they’re on the beach or around the BBQ.
5. Hire a flexible work force
For most businesses, labour cost is their largest expense. If you are in an industry with big swings in customer demand, it makes sense to get your rostering right.
Make sure you have a labour model that allows you to be flexible with your staff during peak periods as well as during the lull.
“It also means being upfront and transparent with staff about what will be required of them through the summer months. Your employment contracts should accurately reflect the demands of your workplace,” Ingrid says.