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NZ Businesses Need To Plan Ahead To Avoid Christmas Cash Flow Crunch

Contributor:
Fuseworks Media
Fuseworks Media
NZ Businesses Need To Plan Ahead To Avoid Christmas Cash Flow Crunch

8 December 2008 - Christmas is one of the most difficult times for businesses when it comes to cash flow. As well as having to invest in extra marketing, stock, and freight, the festive season also sees a rise in overtime, a big jump in leave payments and extra labour bills for casual staff.

The Interface Financial Group, the country's largest alternative funding source for small businesses says that this year will pose even more of a financial challenge, with those operating in the retail sector being particularly hard hit. Research New Zealand statistics reveal that almost half of customers are planning to scale back on their spending in response to the recent economic turmoil.

According to Chris Reid, NZ director of Interface, which provides invoice financing (often called invoice discounting), planning ahead is crucial for companies wanting to get through December and January unscathed.

``Business owners are really feeling the pressure, especially in the run up to Christmas,'' says Chris. ``The main mistake that companies are making is not looking for a solution to their cash flow problems until it is too late. Finance providers are turning away record numbers of applicants as business owners are letting themselves get in too deep before reaching out for help.''

In the UK, business leaders have predicted that hundreds of small firms will go bust by Christmas if they are unable to access additional funding. The Federation of Small Businesses has estimated that 50 businesses a day are going under, with this failure rate set to double by the New Year.

The situation doesn't look much better in New Zealand with many companies being forced to make dramatic cutbacks. More and more redundancies are being announced every day.

``Smaller organisations are the most vulnerable and should be thinking about the best way to tackle cash flow issues now, rather than later,'' warns Chris. ``Considering alternative finance options now and putting a plan of action in place will provide ease of mind and will ensure that businesses can keep their heads above water throughout these testing times.''

Other top tips for managing cash flow at Christmastime include: Try to negotiate a pre-Christmas settlement of accounts with debtors Invest in a cash flow management system Keep strict tabs on customer credit limits Follow up overdue accounts aggressively Issue invoices for that period as early as possible.

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