Deck the Halls – but only if you can afford to
Employees at Christmas time lock the doors, turn out the lights and waltz away carefree for two, three or four weeks, sleeping easily with the security of holiday pay. But as a business owner, it can be a stressful and expensive time of year. It’s important to plan paying staff and taxes before you start Christmas shopping.
Even when your staff aren’t in the office, you may still be making your regular payroll payments. An employer can implement a close-down once a year and require employees to take annual leave. Christmas is also the holiday turkey stuffed with public holidays. Employees are entitled to a paid day off on a public holiday if it they would otherwise be scheduled to work. When your workforce has time off, it generally means that less cash is coming in, but the regular overheads and salaries continue to go out. Make sure you have a clear understanding of your upcoming cash commitments before payments are due.
If you’re going to have a shortfall, forward planning will minimise the potential impact. Try talking to your suppliers to work out an arrangement, or move flexible expenditure to future months. It’s unlikely your staff will take an IOU, but even tax payments can be massaged if organised ahead of time.
Tips to minimise the stress of cash-flow over the holiday period
Invoice early – it goes without saying that if you want to be paid, you need to send out your invoices. Keep ahead of the end-of-month bottleneck and invoice as you go throughout December. Depending on your business and your customers, you may be able to invoice in advance. Chase payments – keep on top of the money coming in. People get busy at this time of year and even the best intentions can get way-laid. Talk to suppliers – many businesses are in the same situation at Christmas time, and appreciate you letting them know in advance that you may not make payment. Ongoing business relationships require flexibility. Talk to the bank or Inland Revenue – your bank may have cheaper ways of financing the shortfall than emergency funding, and IRD can minimise penalties if an arrangement is reached ahead of time. The use of tax pooling allows you to pay your tax when you have the funds to do so.
A healthy business means work-life balance. Business owners need breaks too. If you’d like to enjoy your Christmas holidays without the stress of business cashflow, book an appointment with us today.