RA Business Advisors

Christmas

Managing Your Cash Flow Over The Holiday Period

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December is usually the busiest time of the year for retail and hospitality businesses. But businesses in other sectors often find that their sales slowdown and their customers stop paying them for a few months. So cash flow dries up.

Whether your business is large or small, well-established or in start-up mode, you need to take a planned approach to managing cash flow during the holiday season. Here are few tips for keeping on top of cash flow management during the Christmas/New Year holiday period.

1. Keep Invoicing In The Lead Up To Christmas

Don’t let your business admin slip in the rushed lead-up to Christmas. This is the most important time of the year to stay on top of your invoicing. You may find that many customers will be slow to pay because their businesses are closed over the Christmas period.

2. Set Clear Expectations With Your Customers

Be clear with your customers that you expect them to pay within the pre-arranged credit terms over the Christmas period. Phone regular slow payers a few days before payment is due to confirm that they’ll be paying on time. The phone is always a more effective method than email. If you’re not comfortable having this conversation with your customers, your accountant or bookkeeper may be able to assist.

3. Service Business – Offer A Discount For The “Quiet Time

If your business is usually quiet in January, why not offer your clients a 10% discount if they book you in for January? Why not offer them a 15% discount if they also refer a neighbour or a friend? Set whatever discount amounts work for you. This is the thing: A strategy like this will keep your business busy and some cash coming through during the usually quiet period.

4. Use The Quiet Time To Work On Your Business

If sales are a little slow in the lead-up to Christmas, use the time wisely to hit the ground running int he new year.

The pre-Christmas slow down is a great time to work through the to-do list you’ve been compiling all year.This might include taking a thorough inventory, searching for more suitable lending alternatives, completing a comprehensive competitor analysis or researching the market for new products and suppliers.W

Would You Like Fringe Benefits Tax With Your Eggnog?

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The end of the year is fast approaching and its finally time we put our phones down, hung up our stockings and sat back with a glass of eggnog. Here at RA this will be accompanied by a wholesome team dinner for our Christmas party, but if you are considering having a Christmas shindig for your team you may be forgetting one thing – fringe benefits tax.  

Fringe benefits tax? 

Fringe benefits tax is a tax employers pay on certain benefits they provide to their employees – including employees’ family or other associates. FBT is separate to income tax and is calculated on the taxable value of the fringe benefits provided.  

When would fringe benefits tax apply? 

  • A Christmas party provided to current employees held on the premises on a working day may be an exempt benefit. 
  • The costs associated with a Christmas party (food and drink) are exempt from FBT if they are provided on a working day on your business premises and consumed by current employees. 
  • Gifts provided to employees at a Christmas party are exempt from FBT if they meet the minor benefits exemption rule and are worth less than $300. 

What do I keep in mind when I’m planning to make sure I don’t accrue any FBT? 

  • How much is the event/gift going to cost? 
  • When and where is the event going to be held? 
  • Who is going to be invited? Are exclusively current employees going to attend or a wider base of people? 
  • What type of gifts are going to be given if I’m giving gifts?  
  • Who is going to be receiving the gifts? 

What about Christmas parties off-site? 

Costs associated with Christmas parties held off your business premises will give rise to a taxable fringe benefit for employees and their associates unless the benefits are exempt minor benefits. For example, if exclusively current employees and their associates attend for $180 per head, there are no FBT implications as the minor benefits exemption applies. However, if current employees, their associates and clients attend at a cost of $365 each – a taxable fringe benefit will arise for employees and associates. For clients, there is no FBT payable and the cost of providing the entertainment is not income tax deductible.  

If you need further advice on your tax needs, give us a call or book a consultation on 07 3367 0852