Christmas is a joyous time, but for small business owners, it can also be a high-stakes, anxiety-inducing period. For many, financial viability depends on this seasonal influx in revenue. Unexpected challenges during this critical time can significantly increase the risk of insolvency. Preparation is key.
This article will share four essential tips to help businesses avoid a visit from the liquidator this silly season.
- Anticipate suppressed discretionary spending
Strong, discretionary retail spending this Christmas is not guaranteed, primarily due to high interest rates and the cost of living. Consumers are gravitating toward value-driven purchases, with a growing reliance on digital platforms and competitive prices offered by global retailers. Unfortunately, small businesses often bear the brunt of these shifts.
- Minimise your expenses
This one is self-explanatory: with any luck, Christmas will bring a much-needed boost of cash flow. However, if you do find yourself flush with cash, resist the urge to splurge until you’ve prepared a detailed cash flow forecast for the months ahead. The post-holiday slump, often referred to as “spending fatigue”, can leave small businesses particularly vulnerable. Since cash flow is the lifeblood of any business, consider setting aside a portion of your holiday earnings to help weather these slower months.
- Organise reserve working capital financing
Engage your bank to discuss reserve working capital financing. These arrangements should be finalised early on, and only used if absolutely necessary. Securing a loan is far easier when the business is performing well, whilst emergency short-term funding often comes with eye watering costs. If you do use these funds, ensure you fully understand the implications of any personal guarantees included in the agreement.
- Don’t forget the ATO
The ATO is intensifying its efforts to recover billions in outstanding tax debt, making it more important than ever to stay on top of superannuation and BAS obligations. If you fall behind on payments, ensure your lodgments are submitted on time. The ATO has significantly increased its issuance of director penalty notices (DPNs), which can hold directors personally liable for a company’s unpaid debts.
The takeaway
Prepare for the worst, and hope for the best. If you need advice regarding company liabilities or a DPN this Christmas period, please contact someone from Our Team. We are available for an informal chat, anytime.
