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How to avoid a Tax Hangover this Festive Season

chrissy


It’s beginning to look a lot like Christmas...

While Santa’s checking his pressie list, make sure you check out our 8 tips to get yourself and your Business ready for the Festive Season. 

Tip 1. Get into the festive spirit

The end of a year is a great time to celebrate and acknowledge the hard work and achievements of your team. Making your team feel rewarded and appreciated for their work throughout the year is an important step in creating comradeship and longevity of your employees.


Tip 2. Create a short term cashflow forecast

December is not a normal time of year for any business, and it’s likely that you will be affected by the season, regardless of your industry or sector.

It’s important to have a cashflow forecast to manage your cash position by tracking your cash inflows and out-flows. We recommend doing a 3 month cashflow forecast starting now that takes you to February 2019 and updating the figures on a weekly basis. This will help you to identify any potential shortfalls early and give you enough time to take action. 

Once you have that information, you should be able to predict whether a cashflow problem is likely and consider how you can tackle it.


Tip 3: Keep an eye on your Tax obligations

Ensure tax obligations are included in your cash flow forecast. There is plenty to consider when it comes to managing your tax obligations over the festive season, even more so since in the last six months the ATO has become more stringent concerning tax debt. The biggest tax obligation in the New Year will be a BAS return, which is normally due in late February (for most businesses). Take this into account because February is only the first month when business and cash flow starts to return to normal levels.


Tip 4: Keep on top of debtors

The festive period is particularly tricky when it comes to collecting payment from clients. Nearly everyone’s feeling the same pressure from reduced cash flow so it’s important to not let this area slide. Revisit your payment terms for debtors and ensure they are working well for the business. If you find your debtors are not adhering to these terms, perhaps they need reminding.


 TIP 5: Revise your payment terms

The New Year is also a good time to revise your payment terms. If your terms are currently at 30 days and you are suffering from a delay in cash flow, consider shortening them to 14 days, also review your debtors to see if you should be servicing clients if they are not paying their bills.


TIP 6: Maintain good relations with creditors

Being up front and talking to your suppliers about the possibility of extending your payment terms, even if this is only over this two month period will help with cashflow. If suppliers offer discount for early payment, consider taking advantage as any money saved can boost cashflow.


TIP 7: Think about ongoing measures in helping overall cashflow

  1. Issue invoices as soon as the job is complete – don’t sit on the invoice and wait for the new year
  2. Make payment as easy as possible – offer different options for payments or offer a 5% discount for early payment before the Christmas break – often 95% before the break is better for your cash flow then waiting 3 months for 100% payment
  3. Hold off purchasing big ticket items until the new year if possible – review or delay these items
  4. Keep a close eye on inventory levels – particularly the slow moving or non-profitable items, try and convert to cash as soon as possible, hold a sale in the new year to clear and convert stock to cash
  5. Consider debtor financing where you receive 85% of your current debtors in cash immediately and the finance company will chase the debt for you. Once they have collected the debt – you receive the balance less their fees

Tip 8: Tip 2-7 apply all year round if you want to continue seeing positive cashflow.

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Azure Group
Azure Group

Azure Group is the leading Accounting, Chartered Accountant, Business Advisory and Strategic Advisory firm supporting the growth & success of fast growing entrepreneurial businesses.

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