Budgeting Over Christmas
The quickly approaching Christmas period is essentially a one- to two-month time period where businesses have to do ‘Twister’ game-like moves to make ends meet! More often than not, the expense list, including Christmas budget is longer than the income one during this period!
Why is that?
Typically in Australia, between mid-December to the end of January, a majority of small and medium businesses (plus some big nationals, too!) will have to undertake and/or experience many – if not all – the following:
*Holiday closure of their office/store(s). It’s harder to make money when you’re not open for business!
*Slower and lower sales. Consumers begin to horde cash after their big gift spend, plus tend to go away for a holiday break.
*Zero partnership opportunity. As your industry shuts down, partnering up with others for joint ventures becomes near nonexistent!
*Higher payroll costs. Staff will cash in their holiday leave – meaning they get time off AND get paid! Not to mention extra superannuation costs and leave loading (if you offer that as well).
*Christmas Party and end of year bonuses. For good will and cheer, you might throw an all-expenses paid Christmas party, or offer End-Of-Year bonuses – that’s more out of your pocket with not much more coming in!
So, how do you cope?
Planning, planning, planning! Similar to the old fable of ants working hard in the summer to have resources during the winter – all businesses need to budget and store appropriate cash reserves throughout the year in order to make ends meet in the leaner times, such as the Christmas break. That’s all well and good, but how does one do that exactly?
Review then plan!
Have a look at your previous years’ records to see what the average revenue is for your business during the holiday season, and use that as your model to budget the cashflow.
Remember to take into consideration: wages, normal expenses like rent and electricity, extra expenses like bonuses and parties, superannuation, leave loading, additional advertising, GST on revenue, and so on. And don’t forget to account for the days your business will be closed, therefore taking zero revenue!
Once you’ve done this, it’s important to move onto rosters and scheduling to shave back unnecessary ordering and staffing during this time period. Then hone in on the days or weeks where turnover is typically very low, then brainstorm some fantastic specials for those times –which will appeal to your target market – and entice them to come in and part with their cash!
What’s more, if your business is staying open during the holiday period, be sure to budget in extra advertising costs so your target market actually knows you’re open for trade! There’s no point having the doors open if nobody knows they are!
What if your budget can’t handle it?
This is definitely not the situation you want to be in, but if your budget can’t handle the tight Christmas squeeze, it means you haven’t done what those hard working ants did during summer: planned and stored.
Aside from picking up the phone to talk to me about how best to budget over Christmas, I recommend you go back again to your previous financial records and locate the times where your business is more abundant with revenue – then budget in to put aside some of those extra takings to cover the leaner times like this.
But what if you’re a new business and don’t have previous records to refer to? Or perhaps you’re in quite a pickle right now and need some help and answers fast? Then let me and my team help you! Not only can we compare industry averages to your business to see how your tracking, but we can assist you in countless ways with budgeting, tax planning, maximising cashflow and minimising taxation. Pick up the phone and ring 1300 135 918, drop into our office in Liverpool, or simply contact us here.