While the end of year period can be the busiest and most profitable season of the year for some industries, ironically it also puts a massive financial strain on many businesses. Many large companies slow down production or put off making big contracting and purchasing decisions until the new year – meaning cash flow can dry up for their suppliers. Unpaid invoices and additional outgoings like holiday leave can result in businesses facing a cashflow crisis that stretches well into the new year.
Planning and early preparation are key to managing the financial health of any business, and it’s important to give yourself time to prepare accordingly.
These are our expert tips to managing cash flow:
You know who they are! Have a strategy in place – early invoicing, making your terms clear, and chasing payment. Get on the phone and make sure you build good relationships with the right people in your clients’ accounts teams.
In advance of the end of the year, sell any stock that is taking up space at a discounted price. Keeping an eye on the volume ordered from your manufacturer and on the subsequent sales is key to avoid long-term cash flow problems.
The end of the calendar year is a great time to revisit your business plan and budget. Speak to a financial advisor about budgeting, and get on the front foot for the new year ahead by creating a cash flow forecast to plan for the future.
The importance of planning is highlighted by a famous quote from Abraham Lincoln, “Give me six hours to chop down a tree and I will spend the first four hours sharpening the axe”. The common theme among all these strategies is the value of cashflow planning.”