October can feel too early to think about Christmas when you’re still quoting jobs, managing staff and getting through the week’s work. But if your business slows down over December and January, the decisions you make now can affect how comfortably you get through that period.
The challenge is often the gap between finishing work and receiving payment. You might have a full November calendar and plenty of invoices going out in December, while wages, suppliers and loan repayments fall due before that money arrives.
For small business owners on the Sunshine Coast, particularly in construction, trades and professional services, October is a useful time to review cash flow with your accountant. There is still time to follow up overdue accounts, adjust spending and work out what the business needs before the holiday period begins.
Start with the weeks when money could get tight
A healthy bank balance today doesn’t tell you whether you can comfortably cover January’s expenses. Some of that money may already be needed for supplier bills, tax, payroll or work you’ve committed to deliver.
Map out your expected cash position from October through to the end of January. A weekly forecast can be particularly useful around a shutdown because it shows when payments are likely to arrive and when expenses need to be paid.
Start with your available cash, add the receipts you realistically expect each week, then deduct the payments due. Include wages, applicable leave payments, superannuation, rent, insurance, finance repayments, supplier accounts and tax obligations. Include what you need to draw from the business, too.
The figure to watch is the lowest projected balance. If the forecast dips below what you need to operate comfortably, you’ve found something to address while there is still time.
Forecast payment dates, not invoice dates
An invoice sent on 15 December isn’t necessarily money available on 15 December. Your client’s payment terms, usual payment behaviour and holiday arrangements all matter.
For example, a trade business might expect a substantial progress payment before Christmas. If the person who approves it goes on leave before the claim is submitted, that receipt could move into January. Meanwhile, the materials and labour used to complete the work still need to be paid for.
Review your larger expected receipts individually. Confirm any approval requirements, supporting documents and processing cut-offs with the customer. Where payment timing is uncertain, build that uncertainty into your forecast rather than assuming every invoice will be paid on time.
It can also help to prepare a second version showing what happens if a major payment arrives two or three weeks late. That gives you a clearer view of how much breathing room you have.
Follow up overdue invoices before December
If an invoice is already overdue in October, leaving it until December gives you less time to resolve it before the break.
Review your accounts receivable report and identify which balances need attention. A reminder may be enough for some customers. Others may need a conversation to resolve a missing purchase order, a disputed amount or an invoice sent to the wrong person.
For current work, make invoicing part of your regular routine. Send invoices promptly when the agreed milestone is reached, include the information the customer needs to approve payment and make the due date clear.
Before accepting new work, check whether the agreed payment schedule leaves you funding a large amount of labour or materials upfront. Where appropriate and permitted, discuss deposits or progress payments before the work starts.
Check whether extra work will improve your cash position
It is tempting to say yes to every job before Christmas, especially when customers are pushing to have work finished. But extra revenue can create pressure if the costs arrive well before the payment.
A job requiring materials upfront, additional labour and a long payment period may use cash you need for the shutdown. It may also deliver less profit than expected if overtime, subcontractor costs or rushed purchasing reduce the margin.
Before taking it on, look at both the expected profit and the payment timing. Can the business fund the work without relying on another customer paying early? Does the price cover the actual delivery costs? Is there enough capacity to finish it properly?
These questions can help you decide which work is worth taking on and which commitments need different terms.
Keep committed money out of your spending decisions
A strong month of receipts can make a new vehicle, equipment purchase or larger owner withdrawal feel affordable. Before committing, check what that money needs to cover over the next few months.
Your accountant can help you estimate upcoming tax obligations and separate those commitments from the cash available for other spending. A separate account for tax and other planned payments may make this easier to manage, although the amount to reserve will depend on your business.
The same thinking applies to customer deposits. Receiving money before completing the work improves today’s balance, but you still need to fund delivery of what you’ve promised.
Use October to make practical changes
A forecast becomes useful when you act on what it shows. Depending on your circumstances, that might mean collecting overdue accounts, delaying a discretionary purchase, confirming customer payment dates or reviewing the timing of upcoming work.
If the forecast shows a shortfall, speak with your accountant early. There is more room to assess options when the payment deadline is weeks away. If finance is being considered, its repayments and costs also need to fit into the plan.
Revisit the forecast as actual payments arrive and plans change. Even a short weekly review can help you spot a developing gap before it becomes urgent.
Small business accountants on the Sunshine Coast
At Victor Bimrose Accountancy, we help Sunshine Coast business owners make sense of their financial reports and use them to support business decisions.
If you’re unsure whether your cash flow will cover the Christmas break, October is a good time to have the conversation. Bring your current accounts, outstanding invoices and upcoming commitments so we can look at what the next few months may mean for your business.
Contact VBA to arrange a review and head into the holiday period with a clearer financial plan.
This article provides general information only and does not constitute financial, tax, or legal advice. Please consult a registered tax agent or financial adviser for guidance tailored to your circumstances.
