It's hard to believe that Summer is here and we're sliding quickly into the Christmas period! For a large number of the businesses, we work with it will be a chance for a well-earned break!
A few years ago, one of our customers referred to the holiday season as the “Cash Flow Valley of Death” – and we’ve been quoting him ever since. From late December to mid-Feb every year a lot of businesses don’t pay their bills, and that hurts everyone down the chain.
With ¾ of the country at the beach or offline for a decent part of December and January, not having a plan means you might find a gaping hole in work to do or cash to pay the monthly fixed costs (think wages & rent!).
Even taking the sales team offline for that period can cause a block in the work pipeline. It doesn’t help that GST and Income tax can fall due on 15 January!
The time to act is now (if you haven’t already). So here's four simple tips you can start thinking about now, to avoid hitting the bottom of the valley yourself!
1. Make hay while the sun shines
Get your invoicing out early!
If you normally wait till the end of the month, try processing invoicing weekly or at the end of each job up until Christmas. If your customers have asked you to get something done before the break then their appreciation for doing it is high – let this translate into payment on time!
2. Set the expectations
Start chasing up overdue accounts now!
Set your expectations upfront before any work begins and follow up with a simple message to let customers know as soon as their due date passes. Then keep onto it, it’s often the thing we Kiwi’s don’t like doing, but it is a necessary evil, and it works!
If you really don't like being the debt collector yourself, then consider using automated tools or engaging others to do the chasing for you. There are plenty of debt collection service providers out there who are experts at this stuff - check out Debtor Daddy as one example.
3. Create a kick-ass plan
If you plan to relax don't be relaxed in your planning
If you want to keep staff busy over the holiday period or want to hit the new year running then start planning now. Line jobs up well in advance and communicate the status of this work with all parties – especially your customers. That way everyone knows when, where, and what needs to happen - and what needs to be paid for!
If you are planning to take leave, have your plan in place well before you go. This way you will be able to test it out and can work through any niggles well beforehand. If you are planning on taking a break the last thing you want to be doing is fretting about work!
4. Keep your bank in the loop
Get all your 'just in case' ducks in a row
If you are concerned that you may need financial assistance it's a good idea to catch up with your banker in November or early December. Make sure you have the flexibility in your banking arrangements to meet your needs. Ensure you have your last set of YTD management reports ready to go. Banks don't like surprises and will be more willing to accommodate your needs if they know you're planning ahead. Also as you can imagine bankers are in hot demand as they will be shutting down over the Christmas break.
That’s it – some simple ideas that may help you to avoid the valley of death this holiday season and allow you to take your well-earned break properly.