Capify’s 5 tips to avoiding a financial hangover
1. Look at the past to plan the future
According to Capify most Aussie businesses will encounter seasonal peaks and troughs throughout the year, so the good news for established businesses is that they can plan ahead using past experience.
“Look back through your sales and payment history over the last few years and look at when you can expect cashflow to become tighter.”
“By knowing when your revenues are at their highest and lowest you can set aside funds to ensure you have enough cash in reserve for the quieter times. That allows you to budget for the quieter and busier times appropriately.”
2. Tighten your belt
With many employees out of the office on holiday over the Christmas and New Year period, Capify suggests that it just makes sense for businesses to reduce or pause a number of common expenses.
“You can reduce your costs over the quieter times by looking at what expenses you can cut over the holidays. For example, you can suspend services like Netflix in the office, newspaper deliveries and other recurring expenses so you're not paying for things you won't use.”
“You may even find your recurring costs for cloud-based IT services can be scaled back if systems aren't being used at the same level.”
3. Look at billing frequencies
Unfortunately, the new year can often coincide with annual bills or subscription renewals coming in, which is why Capify advises businesses to think about spreading these bill costs over the year, where possible, instead of getting whacked by one-off payments at an unideal time.
“Although the default for many bills is quarterly or annual, there are options for shifting to monthly or weekly billing cycles. So, instead of dreading a $5,000 quarterly power bill, you can move to a $1,700 monthly bill. That way, when cashflow is at its lowest, you won't be hit with massive bills.”
“Similarly, you can also reconsider your own billing processes and think about shortening your payment terms to get funds paid into your accounts before the holiday break.”
4. Explore financing options
While reducing costs is one strategy, small businesses could also look to additional funding to help improve cash flow over the holiday period.
“If you have a good relationship with your suppliers, you may be able to establish an account with them so that you can make bulk payments for products and services. So, while you continue to purchase goods, you can pay for them later. This will help when your cash balance might be low but you need to get back to work after the summer break.”
“Another option is to take out a loan with a trusted finance company, like Capify, to help bolster your balance while income levels are lower than normal.”
5. Ramp up your marketing
If possible, Capify also recommends that businesses take a proactive approach to customer shortfalls by ramping up marketing.
“In the lead up to the quieter weeks, you can invest some time and effort into marketing. For example, you can contact customers that might have fallen away recently to make them a special offer for products or services over the summer.”
“You can also create special offers for existing clients and use the quieter times to establish marketing and business development plans for the new year so you're not caught out next year.”
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