Avoiding A Christmas Cash Flow Nightmare
Aerial shot of hands typing on laptop in santa costume, with santa hat nearby

Can you believe the Christmas countdown is on?  Every year it seems to happen earlier.  And while thoughts for some turn to holidays, parties or end of year bonuses, for many small businesses the Christmas period can be a huge source of anxiety.

For some businesses, particularly in the retail sector Christmas is the busiest time of the year, as sales during this period are a key measure of success.  However, many large companies now slow down production or put off making big contracting and purchasing decisions until the new year – meaning cashflow can dry up for their suppliers. Unpaid invoices and additional outgoings – like holiday leave – can result in businesses facing a cash flow crisis that stretches well into the new year.  Planning and early preparation are key to managing the financial health of any business, which is why we’re helping out with the following checklist:

1. Budget and Put Money Aside

When it comes to budgeting for businesses, you should approach it the same way you do in your personal life. By budgeting earlier in the year for large expenses and outgoings over the Christmas period (in a separate account if possible), you will have the funds available when you need them, and avoid going into debt.

2. Get Your Invoices Out Early

Don’t wait till the end of the month; invoice as soon as the work is complete, and consider requesting a deposit. Late payments can have a serious impact on small businesses, and with the number of businesses that shut down or have key personnel on leave over the period, the payment of invoices may be pushed out well beyond your terms.

3. Deal with Your Potential Late Payers

You know who they are! Have a strategy in place – early invoicing, making your terms clear, chasing payment, etc. Get on the phone and make sure you build good relationships with the right people in your clients’ accounts teams.

4. Clear Overstocks and Calculate Demand

Sell stock that is taking up space at a discounted price in advance of the Christmas period. Anticipate demand by looking at your sales from last year as well as other variables; consumer confidence, political climate and other economic and social factors that might influence the behaviour of your customers.

5. Use Invoice Finance

Convert your unpaid invoices into cash now. Invoice financing allows businesses to leverage their own assets (accounts receivables) to create an immediate influx of cash and negate the need for loans or overdrafts over the Christmas period.

6. Close Up Shop

There’s no point in keeping your business open and incurring costs if you aren’t busy over the holiday season. Consider shutting down or running a skeleton staff to keep costs down.

7. Plan for the Long Term

Christmas and the New Year is a great time to revisit your business plan and budget, speak to a financial advisor about budgeting, and creating a cash flow forecast to plan for the future.

For more information on how invoice finance can help your business over the Christmas period contact Apricity.