Christmas is just weeks away, and depending on your business, you may be buying extra stock, bringing in additional workers, prepping for leave periods or finalising the dates you’re closing the office, if you haven’t organised them already.
But there is one constant every business needs to take into account at this time – having the cash on hand to pay wages, cover expenses, and supply stock or services as needed, often all culminating in January. And this requirement is even more important this year, with inflation putting strain on businesses and individuals alike.
Top tips to ensure you have the cash you need available
As the Head of Business Development, I’ve been working closely with businesses for 24 years, helping them weather the Christmas, New Year, and summer holiday period – which can stretch into March for some. More often than not we deal with reactive requests for assistance that can add to the stress levels of all involved.
If minimising stress at this time of year sounds appealing, here are my top tips to make sure you’ve proactively got the finances sorted for the end of this calendar year.
1. Put a plan together as early as possible
Ideally, you’ll be planning for your seasonal period at the start of your financial year, ensuring you have enough working capital put aside to cover your expenses. But ‘ideal’ and ‘practical’ don’t often line up. You should have enough time to make the necessary arrangements if you plan several months ahead, depending on your business. If you’ve missed this date, make sure to see tip four.
2. Forecasting can be a game-changer
While it can be more of an art than a science, forecasting your cash flow while allowing for ‘surprises’ can at least give you something to strive for. You’ll need to update your forecasting as your business changes, letting you identify cash flow requirements ahead of time. It’s also a good idea to include some wiggle room, adding 10-20% on your projected costs, and reducing your projected income by something similar. That should help cover most unexpected expenses.
3. Use the technology at your disposal
There are a lot of digital tools that come with your bank account, or accounting platform, or that are available online. You can use these to provide insights into your real-time cash flow.
4. Check out seasonal funding options
BNZ has a range of options available that can help support businesses over peak trading periods. This could mean you won’t need to pay 12 months of fees for something you only use a few months of the year. If you do use a financing facility year-round, an option worth considering may be an interest-only period. This could give you additional cash when you need it without having to potentially increase your facility limits and is also often a quicker and easier request for your bank to consider. Key when approaching your funder is to come prepared with a plan (tip 1), the numbers to demonstrate maximum requirement (tip 2), and show how the seasonal facility will be repaid (tip 2 and 3). Showing up prepared always results in a better outcome.
If in doubt, talk to a professional
If managing the books or forecasting isn’t a personal strength, make sure you engage a suitably qualified professional for help. It can be your banker, your accountant, or a financial advisor. The expense of engaging a quality advisor is almost always returned to the business many times over.
Staying proactive and prepared for the holiday period means less stress and more time to savour a well-earned break. Merry Christmas!
This article is solely for information purposes. It’s not financial or other professional advice. For help, please contact BNZ or your professional adviser. No party, including BNZ, is liable for direct or indirect loss or damage resulting from the content of this article. Any opinions in this article are not necessarily shared by BNZ or anyone else.