Are you already fed up with Christmas?
We all moan about the annual deluge of Christmas ads, especially when they start in August. But for many businesses the last quarter of the year is also the most profitable. Especially for retailers (on- or off-line) and for restaurants, pubs, and caterers.
So whether or not Santa exists, Christmas – for business – is definitely a time for giving.
It’s also, of course, a time for spending. Typically the money goes on stock and on marketing.
Higher income – and higher profits – are always welcome, but it’s vital to keep an eye on those costs, as well. Because, especially in the last quarter of the year, success comes to those who manage their cash flow.
Excellent advice. But when your time is fully taken up with other things, it can be difficult to follow. So here are a few things to watch out for…
Caring for your cash flow
What’s your break-even point? The point where your income covers your expenses? Keep it in mind so you don’t slide below it when you’re distracted by a surge in your business. It’s particularly important when you’re spending money on new promotions, and the income hasn’t been generated yet!
Still doing accounts on a spreadsheet? Then you may not be getting the full picture. There are plenty of good accounting packages out there, they don’t cost a fortune, and most will give you a clear snapshot of your cash flow position.
Once you’ve got that in place, keep a weather eye on your figures. Is one of your suppliers upping their price? Have you taken out a new online subscription – or forgotten to cancel one? And have you got enough in reserve to meet all your outgoings – and still make a profit?
(Ideally, you want a four-month cash reserve. So how’s that going…?)
Getting the money in…
A good accounting tool will also remind you when invoices are due – and can even automate any necessary reminder emails to your clients. What it won’t do is chase them up once the last reminder has gone out – that’s still your job.
Nor (usually) will it create the invoices in the first place. And yes, when you’re busy it can be surprisingly easy to forget about that. (It’s a particular problem for solopreneurs who are trying to do everything else in the business at the same time. But it doesn’t exactly encourage prompt payment…)
…and paying it out
On the other side of the equation, don’t forget about your bills – and be sure to pay them promptly. You really need to keep suppliers onside. And you don’t want to find yourself short of cash at the end of the month simply because you forgot about a bill – until the reminder came in…
You could, of course, try to negotiate more time to pay. It could help your cash flow, of course, but it may not improve your relationship with the supplier – because you certainly won’t want to wait for payment yourself!
From experience, we’d say that if a client wants 90 days to pay a bill, you should simply walk away – unless they’re willing to cut that to a maximum of 30 days. For smaller businesses, where cash flow is critical, it’s perfectly reasonable to ask for your money in 14 days, or even seven. And for larger jobs, it’s equally reasonable to ask for stage payments. Preferably after you’ve run a credit check, of course. And got a signed agreement, too!
And as long as you build some leeway into your prices, you can encourage that prompt payment with a discount, or some other form of reward. Your cash flow will thank you…!
All this, of course, takes time. Effort. Skill. Focus. And a lot of things that other parts of your business will also need. You could take on an employee to do it all for you, but then you will need to train them, pay them a regular salary, do their tax, pay their pension contributions, and consult an HR specialist to make sure your terms of employment are all in order…
Alternatively, you could just call us.
Our bookkeeping and invoicing service will do all those things and more. With years of experience in helping businesses of every size and variety, we won’t just stop there, either. We’ll make suggestions. We’ll provide ideas. And we’ll work with you to secure your cash flow and grow your business.
Think of it as a Christmas present to your business.
Like to know more? Then give us a call on 01638 741079. Or drop us an email!