How public and school holidays impact small businesses

Do short weeks mean longer days for business owners? Using April as an example, Craig Hudson examines how public and school holidays impact on small businesses.

Positive cashflow can mean the difference between life or death for a small business and getting paid on time is one element that can significantly increase the chances of success. However, we know from Xero Small Business Insights (XSBI) data that on average across the last 12 months, small business invoices were paid just over nine days late. While this is an improvement from previous years, it still presents a challenge as even a few days delay can have a broader impact on business conditions. This combined with last month’s public and school holidays, and the 20th of the month landing in the middle, may have resulted in the perfect storm for many small business owners.

With many parents on leave during school holidays, and Easter and ANZAC Day aligning to create two short weeks this year, it’s important to look at how this could affect payment times – and then construct a plan to make up for any delays. The condensed working weeks mean we see slower bank processing times, the shutdown of some businesses, a decrease in productivity and leaner businesses operations where some tasks, such as invoice chasing, may slip through the cracks. On top of this, many Kiwi business’s payment terms are on the 20th of the month, which landed during Easter this year adding that extra element of complication.

Looking at annual trends helps us better understand what to expect this year and how small businesses can get back up to speed after a disjointed April.

In the last couple of years, Xero Small Business Insights (XSBI) data has highlighted a trend of decreasing productivity in April each year. This is based on the number of invoices per organisation slowing massively for the month, following a three month rise with a March peak. We assume this spike is influenced by the rush of end of financial year and come April teams can enjoy a well-earned breather. And while not the lowest month for productivity in the year (that honour unsurprisingly goes to January following the Christmas and New Year holidays) we need to consider that it is not just the public holidays slowing things down this month – there are other factors at play.

While productivity is up in March, it would appear payment times are not. At more than 13 days late in March 2017 and almost 12 days late in 2018 this is significantly higher than the annual average. The good news though is that significant improvements are made in April with payment times for April 2017 sitting at 8.7 days late and 9.4 days late in 2018. We can assume this year that the trend will continue, hopefully creating somewhat of a buffer for small businesses from the delays surrounding the public holidays. It’s important not to rely on this solely though as Easter is often a moving feast each year and the combo with ANZAC Day has created an unusual situation.

Here are some tips to help you get your payments back on track after the last two short weeks:

• Invoice your clients straight away to be included on their next pay run. Customers are usually more open to paying when they’ve just received the goods or services that you’ve provided them with, as it will be fresh in their minds. They also can’t pay you until you’ve invoiced them, so why wait? Ensuring your accounting software also has a mobile app makes your life that much easier too as you can do a lot on the go.
• Get paid directly from your invoice by utilising technology solutions that make it easy to pay. According to our research, giving your customers options attached to your invoice for credit card payments through providers such as Stripe or Paypal shows that those invoices will get paid up to 10 days sooner than those without.
• Set up automatic invoice reminders. Ensure your accounting software can automatically email customers with overdue invoices to prompt payment. In the first 25 days after payment is due, overdue invoices with reminders get paid an average of four days sooner than those without. Plus, automating a task like this means you can have confidence that it’s done and frees up your time to do what your passionate about – like spending time with your kids over the school holidays.
• Import contact details into your invoicing software for your regular clients to speed up your invoicing. They’ll be ready and waiting, so you can invoice them straight away.

Being paid on time or with as little delay as possible is crucial for positive cash flow and ultimately, business viability. While we know there is a dip in productivity for April which may be further exacerbated by the public holidays, we can expect to see payment times settle around the annual average mark. This should hopefully create a buffer for small businesses but it’s important to be proactive to get yourself back on track and into the regular business routine. By utilising technology and being smart about how you engage with suppliers it can mean that the public holidays and short weeks don’t have to have as much impact on your business as you may have thought.

Craig Hudson is Managing Director New Zealand & Pacific Islands, Xero.