As Christmas quickly approaches, many business owners are looking forward to taking a well-deserved break. While the holiday season is a time to relax and recharge, it’s also an important period for making sure your business finances are in order. With revenue fluctuations, increased expenses, and the need for strategic planning, managing your finances effectively before and during the Christmas break can ensure that you start the New Year on the right foot.
1. Get Your Business Affairs in Order Before the Holidays
Before you shut down for the holidays, it’s important to tie up any loose ends in your business. The last thing you want is to return from your break to a pile of overdue invoices or unfinished tasks. Use the lead-up to Christmas to review your financial records, pay any outstanding bills, and ensure your books are in order.
Key actions to take:
Complete invoicing and payments: Process all outstanding invoices and collect any overdue payments before the Christmas break.
Clear communication: If certain tasks can’t be completed before your break, communicate with clients and suppliers in advance.
Update your records: Double-check your financial records to ensure everything is accurate and up to date.
2. Create a Solid Cash Flow Plan For Your Business
Cash flow can be unpredictable over the Christmas break. While some businesses experience a sales surge, others may face a downturn in revenue. With fixed operational costs, maintaining positive cash flow can be challenging during this period.
Tips for managing cash flow:
Review past years business finances: Look at your sales data from previous years to anticipate trends in revenue and expenses over the holiday period.
Plan for fixed expenses: Make sure you have enough cash flow to cover essential fixed expenses, such as rent, utilities, and payroll, even if your sales slow down.
Arrange extra funding: If you anticipate cash flow shortages, consider discussing a temporary overdraft or line of credit with your bank to provide a financial buffer.
3. Plan for Holiday Staffing Costs
Holiday pay, annual leave accruals, and additional staffing for peak periods can add up quickly. Make sure you’ve budgeted for these extra expenses ahead of time.
Budgeting tips:
Review leave balances: Check employee leave balances and make sure you’ve accounted for any paid time off or holiday pay.
Create a holiday fund: Set aside funds throughout the year in a dedicated "holiday expenses" account to cover these costs when they arise.
Plan for part-time staff: If you need extra hands over the holidays, think about hiring temporary or casual staff well in advance.
4. Prepare for Tax Deadlines and Reporting
The end of the year is also a crucial time for tax planning. Be mindful of upcoming tax deadlines, such as GST and Provisional Tax (Payment 2), which are due in mid-January. If your tax records aren’t up to date, you may face last-minute stress when you return from your break.
What to do:
Review tax obligations: Ensure all invoices and payments are entered into your accounting system so that your tax filings are accurate and up to date.
Schedule a meeting with your accountant: Let your accountant know your holiday dates and confirm what documents they need to file your taxes promptly.
Set reminders: Note any critical tax deadlines on your calendar, so you don’t forget about them during the holiday rush.
5. Maximise Tax Deductions on Gifts and Entertainment
The festive season often comes with gifts for employees and clients, as well as staff parties or other entertainment expenses. While these can be great for morale and relationship-building, it’s important to understand the tax implications of these expenses.
Tax considerations for gifts and entertainment:
Staff gifts: Gifts to staff are 100% tax-deductible (up to $300 per employee). However, make sure the gifts are not classified as entertainment (e.g., vouchers, hampers, and wine qualify).
Client gifts: Client gifts such as food, drink, or other entertainment items are only 50% tax-deductible, while non-food items (like gift vouchers or flowers) are fully deductible.
Staff parties: Staff Christmas parties are generally 50% tax-deductible. If you host a more formal event, be mindful that some entertainment costs may not be fully deductible.
6. Communicate Your Holiday Hours to Customers
To ensure a smooth flow of business during the holidays, make sure your customers are aware of your holiday hours and any potential delays in services or product deliveries.
Best practices for customer communication:
Update your website and social media: Post your holiday hours on your website and social media channels well in advance.
Send customer notifications: If applicable, send emails to clients letting them know about any delays or changes to your services during the holiday period.
7. Reflect and Set New Goals for the New Year
Once you’ve managed your business affairs and enjoyed a break, the New Year is a great time to reflect on your achievements and set new goals. With fewer emails and meetings during the holidays, it’s the perfect opportunity to evaluate your business’s performance and plan for the future.
How to reflect and plan:
Review the year: Take stock of what went well, and identify areas that need improvement.
Set realistic goals: Create specific, measurable goals for the year ahead. This could include improving cash flow management, expanding your customer base, or investing in new technology.
Make a plan: With your goals in mind, develop a clear action plan to guide your business throughout the year.
A Message From Sharon at Prime Strategies:
“Have you ever thought about working with a business adviser to help with the goal setting and planning process. Sharon is a Business Adviser with Prime Strategies group and works with SME business on planning and solutions to that drive growth and efficiency. Book for a Free Business Health Check and find out how Prime Strategies could help your business”.
Sharon from Prime Strategies and I are partnering to help businesses grow and become more efficient while helping them manage their cashflow and keep their accounts up to date so business owners can make business decisions with real time and up to date financial data.
Sharon van Soest - LinkedIn
By following these essential accounting tips, you’ll set your business up for a smooth, stress-free holiday season and be well-prepared to hit the ground running when the New Year arrives. Whether you’re tackling tax deadlines, managing staff expenses, or planning for inventory needs, proactive planning ensures you can truly relax during the festive season.
Get in touch today to book in getting your accounts up to date and your budgeting and forecasting sorted now.
Contact Samantha
samantha@everycentaccounts.nz
021 061 1070