The summer close-down: planning cash from December to February

For a lot of New Zealand businesses, the year effectively ends a few days before Christmas and restarts somewhere around the middle of January. That’s a wonderful thing for everyone’s sanity and a tricky thing for cash flow. Money keeps going out, very little comes in, and one of the busiest tax days of the year arrives just as the doors reopen.

Why is the summer break so hard on cash?

Several things stack up at once:

• Revenue pauses. If you close, sales stop. If you stay open, many trade customers are away.
• Wages don’t. Staff taking annual leave are paid holiday pay, and public holidays falling on days they’d normally work are paid too.
• Customers’ accounts teams close. An invoice that arrives in a closed office on 20 December is often first looked at in the third week of January.
• Suppliers want paying before the break. Many send statements early and expect payment before they close.
• 15 January. GST for the period ending 30 November is due, and for most businesses on a 31 March balance date, so is a provisional tax instalment.

For some businesses, such as hospitality in holiday towns, summer is the peak, not the pause. They face the opposite problem: lots of GST collected over summer that falls due in March and May, after the crowds have gone. The principle is the same: match the tax money to the season that earned it.

What lands on 15 January?

Payment	Who it applies to
GST for the period ending 30 November	Monthly and two-monthly filers whose period ends in November
Provisional tax, instalment 2	Standard and estimation option, 31 March balance date
Provisional tax, instalment 4	Ratio option, and AIM for two-monthly filers
PAYE for December payrolls	Due 20 January for small employers

For a typical two-monthly GST filer on the standard option, the first fortnight back from holiday includes GST, a provisional tax instalment and, a few days later, PAYE and KiwiSaver deductions for December. Our page on provisional tax dates has the full list.

A worked example

Illustrative example. A Christchurch building company with eight staff closes from 20 December to 11 January. Its plan for the eight weeks from 1 December to 31 January looks like this:

Item	Amount
Cash at 1 December	$72,000
Customer receipts, December (mostly November invoices)	+$125,000
Customer receipts, January (slowed by the break)	+$50,000
Wages, holiday pay and public holidays	−$96,000
Suppliers paid before the break	−$58,000
PAYE and KiwiSaver (20 December and 20 January)	−$34,000
GST for period ending November (15 January)	−$26,000
Provisional tax instalment (15 January)	−$21,000
Rent, vehicles, insurance and other costs	−$24,000
Cash at 31 January	−$12,000

The business is profitable and busy, but on paper it runs out of cash in mid-January. Seen in October, that’s solvable: invoice faster in November, ask for deposits on January starts, set aside more for tax in October and November, or arrange a facility. Seen on 14 January, it’s a crisis.

How do you plan for the close-down?

Start in October. Build a simple week-by-week forecast from 1 December to mid-February. Include every wage run, holiday pay, PAYE, GST and provisional tax payment. The GST & provisional tax set-aside planner gives you the tax amounts and dates.

Invoice early and completely. On 20th-of-the-month terms, an invoice sent on 30 November is due 20 December; one sent on 2 December isn’t due until 20 January. Finish and bill as much work as possible by the end of November.

Ask for December payment from your biggest customers. A friendly note in mid-November asking whether they can pay before their own close-down often works.

Pre-fund the tax account. Top up GST and provisional tax savings in October and November so 15 January is already covered before you leave.

Plan leave sensibly. If you have a closedown period, follow Employment New Zealand’s closedown rules on notice and annual holidays, and budget the holiday pay. See holiday pay basics.

Agree supplier timing. If your suppliers want payment before Christmas, ask whether some accounts can move to January terms.

What about businesses that boom over summer?

For a café in Waihī Beach, a campground in Golden Bay or a kayak hire business in Abel Tasman, December to February is the year’s harvest. The risk is the reverse of a closing business: GST collected over summer falls due in the March and May returns, and provisional tax is still due on 15 January and 7 May, often after the crowds have gone home. These businesses should set GST aside on actual weekly takings throughout summer, not on an annual average, and think about whether the estimation or ratio option would let provisional tax follow the season more closely. The money earned in January has to stretch to cover the quiet months through to October.

What if the gap is still there?

If your forecast shows a January shortfall even after those steps, act before the break, not after. Options include talking to Inland Revenue about an instalment arrangement for the GST or provisional tax, delaying a planned purchase, or arranging short-term working capital to bridge the few weeks until receipts return. You can check what you could qualify for without a credit check.

The broader lesson is a reserve: a business with a few weeks of outgoings set aside handles January easily. How big should your cash reserve be? helps you pick a number.

Enjoying the break

The best summer close-down is one where the tax, wages and suppliers are already covered before you lock the door. If the business needs a bridge to get there, or wants funding in place for a busy February start, talk to us in good time. Asking won’t affect your credit file, your enquiry stays with our team and isn’t sold to other lenders, and a real person reads what you send. The more accurate your answers, the more useful our first call. Start your enquiry.