Nearly one in two small to medium enterprise (SME) owners have gone without any pay when cash got tight and 17% of SME owners have maxed out their credit cards to cope with cashflow problems.
New research released by Xero found 28% of businesses don’t have any provision in place for when times get tough, with another six percent unsure of whether they do or not, or what they’d do in tough times.
But this isn’t denting confidence, with 71% of SMEs not expecting their revenue to drop over summer.
As the country slows down for the silly season, experts say the trick is for businesses to give their finances a little love and attention now so they don’t go into the new year with a financial hangover.
Craig Hudson, Xero New Zealand country manager, says though SMEs’ cashflow-confidence is high towards the end of the year, they need to be wary of getting carried away with the holiday spirit.
“Eighty percent of SMEs are not concerned about managing their cashflow over summer but, with the number of business owners who’ve gone without pay or maxed out their credit card, it tells us that more preparation can be done.
“In the busy rush of the holidays we can overlook business as usual, such as holiday pay and credit card payments, and all this can make for a lean festive season for the owner unless they’re prepared for the new year,” says Hudson.
Almost a third of businesses do not know whether they can survive a rough patch in their business, or withstand any surprises life may throw, so businesses should think about seeking professional advice as an option.
“Six out of ten SMEs reported not receiving cashflow advice, but having an accountant or bookkeeper to work with your bank and manage financial pressure and stress is always helpful.
“Accountants and financial advisors can actively manage your credit control and debtors and provide advice, which could be the difference between being able to pay your team and staff, or going into the new year with a tight wallet,” says Hudson.
SMEs should use the downtime during the Christmas break to prepare a three-month budget, review the work coming up, work currently in progress and do as much invoicing as soon as possible, and ensure reminders are set for unpaid invoices.
“A little forward thinking and planning can help lessen the pressure and stress in the new year, and it can be anything from implementing new tools, such as payment services to help get paid faster, to seeking professional advice or help to manage cash-flow.
“As an SME you never have time off even during the holidays, but the silly season when business slows down for most is a great time to take a moment and reflect on what’s been good and prepare for what’s ahead in the new year,” says Hudson.