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Managing cashflow key to successful holiday season

Managing cashflow key to successful holiday season

Wednesday, December 15, 2010

While planning ahead to cope with the cashflow headache of the holiday season is not something new, it is surprising how few particularly small and medium sized businesses do not do it, and find themselves in financial strife in the New Year.

Staples Rodway Hamilton Senior Tax Manager Greg Brewerton says there are a few simple things people can do to make sure their businesses are in good shape when the holiday season is over.

“Businesses might close down for a few weeks but the expenses still have to be paid. Cashflow management is about making sure there’s enough money to pay the bills even if you haven’t been paid yet,” he says.

Mr Brewerton’s top tip is to make sure the books do not get neglected, and make sure you are getting regular, up-to-date financial reports. By doing this businesses will be in a better position to manage cashflow, with the added bonus of a better understanding of what makes it profitable.

“Many small business owners don’t like book keeping because they see it as non productive time. But if you don’t like doing the books, get someone else to in a format that you understand so you can take an interest in what they show.”

“Planning ahead will also allow you to be aware in advance whether there is going to be enough money in the bank to pay your bills. By considering factors such as sales seasonality, tax bills and capital expenditure ahead of time, funds can be put aside so you can budget more easily to meet your commitments,” says Mr Brewerton.

If businesses do find themselves in cashflow trouble, there are several things they can do:

• Tighten your debt collection efforts to bring cash in more quickly
• Avoid drawing funds for private use during difficult periods
• Consider a sale of slow-moving stock to generate funds quickly
• If you’re going to seek help from the bank, do it early before it becomes a crisis and to give yourself more options
• Offer creditors a payment plan to show your good faith.

Finally, if a lack of cash or poor profitability are ongoing issues, Mr Brewerton suggests getting professional advice.

“Particularly in the tough times we’ve seen this year, when revenue is down it’s tempting for businesses to focus on production or just do what they need to do to keep it going, but having a business plan and forecasting ahead will ensure long term viability,” he says.


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