For small business owners, the ‘season to be jolly’ often involves a lot of expenses and paperwork.
Staff still need to be paid; the rent won’t pay itself; suppliers will need to be paid; and there are electricity and water bills to contend with.
That’s on top of the costs of an office Christmas party and potentially end of year bonuses. And to make matters worse, a Christmas shutdown might mean there’s no revenue coming in at all.
As the silly season rolls closer, here are five tips from H&R Block’s director of tax communications, Mark Chapman, on how to keep tabs on all your festive expenses.
1. Invoice before the Christmas shutdown.
You don’t want the cash flow to drag into the new year – so invoice work before you close for the year, Chapman advises.
“Don’t delay sending invoices until the new year – that way you’re locking in several weeks of extra delay in getting paid.”
2. Avoid big purchases.
If you can, wait until your cash flow stabilises next year before buying non-pressing or non-essential things like office furnishings or equipment.
“You don’t want to be faced with a hefty bill for a new item of plant which you can’t pay until post-festive season revenues pick up.”
3. Collect your debts.
“Try to get as much cash in before Christmas as possible,” Chapman said. You probably won’t have any cash coming in over the Christmas break.
“So chase your debts now and chase them hard with a view to leaving your debtors ledger as light as possible come mid-December.”
4. Avoid overspending on gifts.
How much do you want to spend? And on whom? Gift-giving should be about rewarding effort and building goodwill in key relationships for the year ahead, Chapman indicated.
“Remember also that most gifts are tax deductible which helps with keeping costs under control. So, don’t overspend and only give gifts if you think your business will benefit in the long run!”
5. Don’t dip into the tax and super piggy bank.
The flurry of the Christmas season can make it easy to overlook tax and superannuation payments.
“Don’t forget there is a business activity statement due in February (complete with GST payment) and a Super Guarantee payment due 28 January,” Chapman warned.
“So no matter how tight your cash flow, set aside adequate funds in a holding account, and don’t dip into it. The ATO does not make a friendly creditor!”
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