The Christmas break is near! Staff Leave – have you planned for that financially?
It’s critical, particularly for small business, to plan ahead and ensure there are funds set aside for when staff take leave. That includes both personal/sick leave and annual leave.
An obvious, common example for preparing to pay out leave is over the Christmas period. Most staff want to take leave at some point during Dec/Jan/Feb or perhaps your business may shut down for a couple of weeks, whereby you need to pay everyone annual leave. For many businesses, this can be some of the quietest months of the year for revenue. You will need to ensure you’ve got the funds readily available to be able to pay the leave entitlements to your staff.
I encourage you to run a report after the end of each month or fortnight (depending on your cash flow), which will provide you with the dollar value of the total staff accrued leave. Making a habit of putting the funds aside on a regular basis gives you complete comfort in knowing you will never be caught short financially when a staff member takes leave.
Allowing for this in your business gives you a bit of a buffer when, for example, a staff member has to take unexpected, extended sick leave.
For large business, this planning is also known as “provisions”. In this situation it is known a liability (something the business owes) and can be found on the Balance Sheet.
For small business, it doesn’t necessarily need to be on the Balance Sheet but it IS important to have the actual funds readily available (preferably in a separate business bank account).
Be prepared – don’t get caught short if your staff need to take unexpected leave. Planning will give you comfort knowing your business can manage financially under any circumstance. And who doesn’t want THAT kind of comfort!
Supporting you in your business success
Karen Whitely
Educating & empowering small business for long term profitability
61 482 080 430
karen@rightclickbusiness.com.au