As the summer holidays approach, many businesses in New Zealand face unique challenges in managing their cashflow. With business close down periods, provisional tax payments, and GST due, it becomes crucial for business owners to plan ahead and implement strategies to protect their cashflow during this period. In this blog post, we will discuss some practical tips and considerations to help you navigate these financial obligations and ensure a smooth transition into the summer holidays.
1. Plan for Business Close Down Periods
Many businesses experience a temporary closure or reduced operations during the summer holidays. It is essential to plan for this period to avoid any cashflow disruptions. Have you considered the following:
a) Communicate with your clients/customers: Inform your clients/customers well in advance about your business close down period. This will help manage their expectations and avoid any last-minute surprises.
b) Keep on top of invoicing: Ensure you’re invoicing as frequently as possible for your business over the next two months to increase your cashflow and manage your working capital cycle. Don’t head into the 24th of December with the “I’ll invoice in January” attitude as this will delay payment for up to another two months!
c) Manage your expenses: Review your expenses and identify any non-essential costs that can be minimised or deferred during the close down period. This will help conserve cashflow and reduce financial strain.
d) Cash reserves: Build up a cash reserve to cover any fixed costs or unexpected expenses that may arise during the close down period. This will provide a safety net and ensure your business remains financially stable.
2. Provisional Tax Planning
Provisional tax payments can significantly impact your cashflow, especially during the summer holidays. Here are some tips to manage your provisional tax obligations effectively:
a) Accurate forecasting: If you’re an Ascend client already, we will complete an assessment of your actual trading performance to ensure accurate tax planning in December. If you’ve not yet made the switch to Ascend it is crucial to review your financials and forecast your income for the upcoming year. This will help you estimate your provisional tax liability accurately and avoid any surprises.
b) Utilize tax pooling: Consider utilizing tax pooling services to manage your provisional tax payments. Tax pooling allows you to defer or pay your provisional tax in a more flexible manner, reducing the strain on your cashflow during the holiday season.
c) Seek professional advice: Consult with your accountant or tax advisor to explore any available tax planning strategies that can help optimize your provisional tax payments and minimize their impact on your cashflow.
3. GST Considerations
GST payments can also pose challenges to your cashflow during the summer holidays. Here’s how you can manage them effectively:
a) Cashflow forecasting: Plan your cashflow in advance and ensure you have sufficient funds to cover your GST liability. This will help you avoid any penalties or interest charges for late payments.
b) GST instalment payments: If you are on the GST instalment payment scheme, ensure you make your payments on time. Late payments can result in penalties and additional financial strain.
c) Utilize accounting software: Ensure you have you Xero reconciled and up to date as early in December as possible to enable your GST to be prepared promptly. This will help you forward plan as you’ll be certain on what your impending GST liability is.
Protecting cashflow during the summer holidays requires careful planning and proactive measures. By considering business close down periods, managing provisional tax payments, and staying on top of your GST obligations, you can ensure a smooth financial transition into the holiday season. Remember to get in touch with your Ascend Account Manager to tailor these strategies to your specific business needs. With proper planning, you can enjoy a well-deserved break while safeguarding the financial health of your business.