The festive season is a time of joy and celebration, but for small business owners, it can also bring financial challenges. Balancing the books while spreading holiday cheer requires careful cash flow management.  

In this blog post, we’ll explore five steps that small business owners can take to ensure smart savings during the festive season.  

Reduce Expenses 

December poses a challenge for businesses, primarily due to the common expectation for business owners to provide employees with a 13th cheque or a bonus equivalent to a portion of their salary. While it’s customary to reward employees during the festive season, it’s essential to do so in a way that aligns with your business’s financial goals. Instead of handing out large cash bonuses, consider alternative rewards such as gift cards, extra time off, or company-sponsored events. This not only maintains staff morale but also keeps your cash reserves intact.  

If necessary, also consider moving budgeted items for December and January to a later stage when financial conditions may be more favourable. By carefully assessing and adjusting expenses, businesses can navigate the financial complexities of the festive season without compromising their long-term financial health. 

Accelerate Invoicing for Timely Payments 

In the hustle and bustle of the holiday season, businesses often experience closures and reduced operational capacities. To ensure prompt payments before the end of the month, adopt a proactive invoicing strategy. Send out invoices to customers as early as possible, increasing the likelihood of receiving payments before the holiday hiatus. Swift response to invoice requests ensures timely payments, contributing to a healthier cash flow and alleviating financial stress during the festive season. Another proactive approach would be offering your clients an incentive discount for an early payment. Managing invoicing wisely not only streamlines operations before the holidays but also sets the stage for a financially stable start to the new year.  

Optimize Inventory Management 

One of the significant costs during the festive season is often related to increased inventory. Small business owners should carefully analyse historical sales data and trends to optimize their inventory levels. This prevents overstocking, reduces carrying costs, and frees up cash that can be used for other essential expenses.  

Plan Employee leave 

Some businesses, like retail and hospitality, are busiest during December and January. To keep things running smoothly, small business owners in these sectors should set up a staggered leave schedule. This allows employees to take breaks at different times throughout the year, ensuring the business stays productive and meets customer expectations. By strategically planning employee leave with the help of an efficient payroll system, small business owners can find a balance between giving their staff time off and meeting business demands during the festive season. This approach fosters a positive work environment while also safeguarding the financial health of the business. 

Negotiate Supplier Terms 

Building strong relationships with suppliers can be beneficial during the festive season. Negotiate favourable payment terms that align with your business’s cash flow. For example, you might explore extended payment terms or early payment discounts. Clear communication with suppliers about your business’s holiday schedule and expected payment dates can help foster a positive relationship and ensure smooth operations during this busy time.  

Successfully navigating the festive season requires strategic cash flow management, and small business owners must prioritise financial stability while spreading holiday cheer. By implementing some smart saving tactics entrepreneurs can set their businesses up for success during this joyous but financially challenging time and enjoy a prosperous festive season while ensuring the long-term financial health of their enterprises. 

The difference between an informed decision and a wild guess is whether data is used. Accurate data and reporting play an integral part in helping business leaders assess the full costs and organisational impacts of both large and small decisions. The same holds true for payroll data. So, why is payroll data important? 

Whether you’re a business owner, in charge of HR and payroll, or simply want to better understand the payroll side of the business, payroll reporting can help: 

Guide better business decisions  

Payroll data can be a useful strategic tool for senior management in making decisions about the future of their company. Data collected by the payroll department can be used to analyse salary costs to develop business strategies and accurately predict what payroll is going to cost the business over the next quarter or year. Therefore, the data needs to be right and accurate, using the correct payroll software can help you achieve this.  

Help manage cash flow 

Payroll is one of the most significant expenses that can create cash flow issues for many businesses. Having the correct data and payroll report handy will not only keep your business in check but also ensure that you are not underpaying or overpaying any of your employees. Most payroll software can accurately report, and track hours worked, overtime, sick days, employee taxes, and tax deductions. 

Stay compliant with taxes 

As a business owner, you are responsible not only for paying your own taxes but also the taxes of your employees. Automating your payroll process with a payroll software management solution can help you stay up to date with the latest legislation and keep all tax documents and reports in one place for quick reference or changes, making filing tax returns a lot easier, and lowering your chance of being penalised by SARS.  

Minimise errors 

Payroll errors can be tiresome. They can take your payroll team ages to rectify when they crop up, reducing time spent on other tasks. Processing errors in payroll can therefore quickly become very expensive, no matter how small they are. Having knowledge about your payroll data and tracking them through payroll software enables you to quickly identify and correct errors, which will ultimately allow you to avoid financial losses. 

Gaining insights from your payroll software through custom or pre-built reports means you’re better utilising payroll data to drive business choices. Business decisions should be guided by facts, which data provides, and having access to this information gives you a competitive advantage in your business. 

You have the upper hand if you can confidently make strategic decisions without guesswork. 

Human capital most often represents the highest cost of any business. It is imperative, therefore, to maximise the value of this resource and keep costs to a minimum without compromising the wellbeing of employees. There are several ways to analyse the optimal payroll balance, but one of the most useful is to keep payroll around a certain percentage of gross revenue, utilising the principle of payroll-to-revenue ratio. So, here’s how to balance payroll costs against revenue.

Gary Epstein, MD of EasyBiz Technologies, discusses the costs and processes involved in managing payroll, and the merits of protecting the company’s most valued but most costly asset … its people.

Keeping payroll costs to a minimum is on every company’s agenda, but how do business-owners know whether they’re spending too much on it? Therefore it’s important for businesses to analyse payroll data, which is the collection of metrics that contribute to the overall business expense of paying people for work performed at the company.

There are more than just base salaries to consider. Other payroll metrics include:

• Any contractor or freelance wages outside of official payroll
• Any bonuses offered throughout the financial year
• Withheld taxes
• Benefits paid to employees
• Communication expenses that contribute to payroll
• The cost of remaining compliant with payroll regulation.

Having this information available allows businesses to accurately predict the total cost of payroll and mitigate the risk against any future payroll changes – or revenue changes. A good method of determining whether a company is paying too much is by using the payroll-to-revenue ratio principle. Determining the gross payroll-to-revenue percentage is achieved by dividing the gross revenue by the total cost of payroll and converting the result into a percentage.

For example, if a company’s gross annual revenue is R5 million and R1 million is spent on payroll for the year, the gross revenue to payroll percentage calculates as R5 000 000 ÷ R1 000 000 = 5, or 20%. Total labour costs or the percentage of gross revenues spent on payroll, can vary dramatically by industry, from 10% to as much as 80%. Generally, payroll expenses that fall between 15% and 30% of gross revenue is the safe zone for most types of businesses.

The cost of staff turnover

Reducing employee turnover is one of the most underrated ways to lower the costs of the payroll process. Losing staff brings with it numerous costs, including advertising new roles, interviewing, training, and onboarding. These additional costs can be avoided by retaining employees in their current roles, with the help of the HR team.

Consulting with HR

Working closely with the HR department will typically increase the transparency in the payroll process, which can result in lowering costs. Having full insight into where the salaries are going to (using reports and other features) is key in being able to do this.

A helping hand from technology

Payroll software manages, maintains and automates payments to employees. Efficient, integrated and properly configured payroll software can help businesses of all sizes maintain compliance with tax laws and other financial regulations, as well as reduce costs. This frees HR teams from routine tasks so that they can spend more time on planning, budgeting, and other vital business functions.

How does payroll software help businesses?

The benefits of implementing an efficient, compliant, and configurable payroll software solution go beyond the tactical tasks of paying employees. It also helps companies to:

• Improve morale. Avoid instances in which employees are paid the wrong amount, are not paid for overtime or other work, are paid late, or are not paid in their preferred way.
• Tighten security. Payroll systems help ensure that the right people have access only to the appropriate information. It’s also critical for organisations to have software in place that prevents double payments, confirms that every payment is correct, and automatically calculates the appropriate benefits and tax payments for each employee.

Payroll software is designed to automate payroll processes, improving effectiveness, accuracy and productivity. It will also enable HR professionals and business-owners to assess immediately whether the company’s payroll-to-revenue ratio is too high or whether it’s at a healthy level.

The hardest challenge with payroll data is ensuring that there’s a stream of consistent, high-value data to gather and analyse. Forecasts and predictive analysis are built by analysing a wide range of historical data over time. To do this accurately, the right technology is needed. Only then can one build a picture of payroll data and understand how it impacts the wider business and begin to make adjustments to improve the bottom line.

Choose payroll software that allows you to easily access and gain insights from your data. A good example is Quick Payroll. This software can process the payroll for up to an unlimited number of employees and allows HR to:

• Process weekly, fortnightly, and monthly pay runs with ease
• Record and manage staff leave
• Have regular software updates to cover new legislation
• Benefit from training and support
• Generate customisable payslips
• Be fully SARS compliant.

Payroll data, facilitated by technology, is key to gaining effective insights into payroll processes.

By monitoring and benchmarking this data, companies can begin to achieve the perfect balance between compensation, performance, and loyalty, and maintain the financial health of their business.