Kickstart your cash flow after the holidays: A practical guide for NZ SMEs

The holiday season is a time for rest, relaxation, and – let's be honest – spending. But as we shift gears back into business mode, many small and medium-sized enterprises (SMEs) across New Zealand find themselves grappling with sluggish cash flow. Whether it’s the lull in January trading, unpaid invoices from December, or the looming tax deadlines in the new year, cash flow challenges can hit hard if left unaddressed.

Don’t panic. With some proactive planning and strategic action, you can get your cash flow back on track and set your business up for success in 2025. Here’s how:

Assess the situation

Before you can take action, you need a clear picture of where your business stands. Take some time to review your financial position:

• Review your cash flow statements: Look at the inflows and outflows from the past few months to identify patterns or problem areas.
• Check your accounts receivable: How many invoices are overdue, and what’s the total value?
• Assess your payables: Know what you owe and when those payments are due.
• Understand your upcoming obligations: Take note of upcoming tax payments, rent, payroll, and other fixed expenses.

This initial review is essential to understand the current state of your cash flow and identify what needs immediate attention.

Chase outstanding invoices

If you’re like many businesses, there may be a backlog of unpaid invoices from December. The holiday period often causes delays, so now’s the time to follow up:

• Send reminders: Be polite but firm when reminding customers about overdue payments. Highlight the due date and provide easy payment options to speed things up.
• Negotiate payment terms: If a customer is struggling to pay in full, consider offering a payment plan to recover at least part of the funds sooner.
• Offer incentives for early payment: Discounts for prompt payment can encourage customers to clear their balances quickly.

Proactive communication is key here. A friendly but direct conversation can often be all it takes to unlock stuck payments.

Tighten your expenses

The start of the year is a great time to reassess your spending habits and cut back on unnecessary expenses:

• Review supplier agreements: Are you getting the best deal? Negotiate better terms or shop around for alternatives.
• Hold off on non-essential purchases: Until cash flow improves, delay any big-ticket spending that isn’t urgent.
• Monitor discretionary expenses: Small costs can add up, so keep an eye on travel, subscriptions, and other variable expenses.

Controlling your outgoings gives you more breathing room to manage the essentials.

Revisit your pricing

Is your pricing strategy still sustainable? Inflation and rising costs may mean it’s time to make adjustments:

• Review your profit margins: Ensure your pricing adequately covers costs and leaves room for profit.
• Communicate with customers: If you need to increase prices, be transparent about why. Most customers understand when pricing reflects rising costs.
• Introduce value-add services: If a direct price increase feels daunting, consider adding premium services or bundles to justify a higher price point.

Getting your pricing right can make a significant difference to your cash flow without needing to drastically increase sales volumes.

Reignite sales

A post-holiday sales slump is common, but there are ways to jumpstart activity and bring cash in faster:

• Run a promotion: Discounted offers, bundles, or limited-time deals can encourage customers to act quickly.
• Target your loyal customers: Reach out to your most engaged clients with personalised offers or incentives.
• Leverage digital marketing: Use email campaigns, social media, and online ads to drive traffic and sales.

Focus on activities that deliver quick wins, while keeping an eye on profitability.

Build a cash buffer

The holidays may have depleted your reserves, but rebuilding your cash buffer is crucial for long-term stability:

• Set aside a percentage of each sale: Allocate a small portion of incoming revenue to a dedicated cash reserve account.
• Reinvest wisely: If you experience a sudden cash injection, avoid the temptation to overspend and instead prioritise rebuilding your buffer.
• Use forecasting tools: Plan for seasonal ebbs and flows to ensure you’re always prepared for leaner months.

A solid cash buffer gives you the confidence to weather future challenges without disrupting your operations.

Use technology to your advantage

Digital tools can simplify and streamline cash flow management, freeing up time and reducing errors:

• Automate invoicing and reminders: Most accounting software offers tools to send invoices and follow up on late payments automatically.
• Track cash flow in real time: Use apps like Xero or MYOB to keep a close eye on your financial position.
• Set up payment systems: Offering multiple payment options, like credit card or online payment gateways, makes it easier for customers to pay on time.

Adopting technology can make cash flow management less stressful and more efficient.

 Seek professional advice

When cash flow feels overwhelming, a fresh set of eyes can make all the difference. An experienced accountant can:

• Help you develop a cash flow forecast: Planning ahead lets you predict and prepare for future cash shortfalls.
• Advise on funding options: If cash flow is critically low, they can recommend options like short-term financing or business loans.
• Identify cost-saving opportunities: A deep dive into your finances may reveal inefficiencies you hadn’t spotted.

Don’t wait until it’s too late – reaching out for help early can prevent a cash flow problem from turning into a crisis.

Set your business up for success in 2025

January is the perfect time to reset and refocus. By proactively managing your cash flow, you’ll start the year with a stronger financial foundation and be better equipped to tackle challenges head-on.

If you’d like support creating a tailored cash flow strategy, contact us at Munro Benge. Let’s make 2025 a year of growth, stability, and success for your business.