Keeping your cashflow strong in a tough economic climate
19 July 2023
In a tough economy, small businesses are particularly vulnerable, with overheads and wages that still need to be paid, despite slow sales. To help you weather tighter economic times a bit of pre-planning and proactiveness can make all the difference. You’ll need to have a clear picture of your payroll and any other planned expenses. If running those numbers means there’s a possibility of a shortfall, it’s important to meet this head-on and not hope it works itself out. This could mean talking to your supplier(s) or creditors to figure out an arrangement, or re-evaluating other business outgoings to ensure that the business and staff won’t suffer.
Minimise the stress of cash-flow
Invoice early
- Send any invoices that you can, and in advance if possible. Perhaps consider whether you have any regular clients or customers that you could offer a retainer or similar deal to if they book services or make a purchase from you in advance
Chase payment
- Use this opportunity to chase up any outstanding payments. Strong communication and relationships matter - talk to clients and chase invoices.
Talk to suppliers
A little honesty can go a long way. Perhaps they can extend a line of credit for your payments to them. In most cases, a good supplier would rather offer a little flexibility to keep an ongoing business relationship.
Review Inventory
- Are you holding a lot of inventory? Could you devise a way to hold less inventory that won’t affect your ability to do business. Could you switch suppliers for some products, to reduce shipping costs and allow you to hold less inventory at a time?
Review your costs
- It’s a good idea to do a general review of expenses. Business costs can creep up, and it’s a great idea to make a time to check on your expenses regularly, no matter what your financial situation. Review all of your regular payments and subscriptions as well as upcoming costs. There may be travel, functions or purchases which you can decide to take an alternative approach to.
Talk to us
If you predict cashflow could be tight, talk to us about ways to implement strategies to protect your business for the long term and help you alleviate cashflow worries.
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As an employer, there are several obligations and expectations set by the Inland Revenue Department (IRD) that you must adhere to. Understanding these requirements is essential for maintaining compliance and avoiding any potential penalties. Let's take a closer look at what the IRD expects from you as an employer. Register as an Employer Before you hire your first employee, you are required to register as an employer with the IRD. This is a crucial first step in ensuring that you can meet all tax and payroll obligations. Accurate Record Keeping The IRD requires you to keep accurate and detailed records of all employment-related transactions. This includes: Employee personal details Wages and salary paid Payroll dates and methods PAYE deductions and remittances Details of benefits or allowances provided to employees Maintaining proper records helps ensure that you are reporting and remitting the correct amounts to the IRD. Deduct PAYE Tax You are responsible for deducting PAYE (Pay As You Earn) tax from your employees' pay. This involves calculating the correct amount of PAYE and ensuring it is deducted from each employee's salary or wages before their net pay is provided. Pay Employer Contributions In addition to PAYE, you may also be responsible for contributing to your employees' social security and retirement benefits, depending on the country you operate in. These contributions are typically paid in conjunction with PAYE tax. Issue Statements and Forms At the end of the tax year or upon employment termination, you should provide each employee with a statement showing their total earnings and PAYE deductions. Additionally, filing the appropriate end-of-year PAYE schedules with the IRD is required. File Employer Returns Employers are required to file regular returns with the IRD, which could be monthly, quarterly, or annually, depending on specific regulations. These returns should accurately report all payroll activities, including PAYE deductions. Handle Tax Codes and Changes It's crucial to apply the correct tax codes for each employee's circumstances. Any changes in employment status or tax code must be updated promptly to ensure accurate tax withholdings. Comply with Audit Requests The IRD may audit your business to ensure compliance with employer obligations. As such, being prepared to provide all requested information and records in a timely manner is vital. Adhering to these expectations from the IRD is not just about compliance; it's about fostering a transparent and trustworthy relationship with your employees and the tax authorities. If you need assistance with understanding or managing your obligations as an employer, consider reaching out to a professional accountant. Our team is here to help you navigate these responsibilities seamlessly, ensuring peace of mind and allowing you to focus on growing your business. Feel free to contact us for further information or assistance.
Thinking of starting your own sole trader business? The Sole Trader Toolkit from the Ministry of Business, Innovation and Employment has all the basic advice you might need.
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