It's hard to believe that Summer is here and we're sliding quickly into the Christmas period! For a huge number of the businesses I work with it will be a well earned break and a time to congratulate yourselves for a job well done over the year.
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 doing it at the end of each job 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
Chase up overdue accounts – let every customer know as soon as the due date passes – set their expectations up front and follow up with a simple message. Then keep onto it – it’s often the thing we Kiwi’s don’t like doing, but it's 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's 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 want to keep staff busy over the holiday period 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! So if you're one of the ones at the beach, you can trust the plan!
4. Keep your bank in the loop
The last resort is to catch up with your banker and make sure you have the flexibility in your banking arrangements to meet your needs – call them now and show them your last set of YTD management reports if necessary. Banks don't like surprises, and will be more willing to accommodate your needs if they know you're planning ahead.
That’s it – some simple ideas that might avoid the valley of death this holiday season.