How to Improve Your Christmas Cash Flow

Although a number of businesses, especially those in retail, experience their highest sales during the Christmas period, for other small businesses it can be one of the most difficult times of the year. Businesses in a number of sectors suffer a decrease in production and sales and may shut down completely for a couple of weeks.

At the same time, they still have to pay wages to staff who may be away on holidays, as well as keep up with other fixed costs like loan repayments and rent. Furthermore, many industries often find that their customers aren’t interested in transacting in this period or have gone away, and this can cause issues for your cash flow too. If you stay aware of some of the different conditions you may face in the Christmas period, you can make sure your business survives during this time. Here are some tips to help you plan ahead for the festive season.

1. Plan for Expenses and Conditions That Are Uncommon.

Factor in costs that may come about as a result of the season, such as Christmas parties and staff gifts. You will also need to take account of your holiday pay requirements and plan for this. Be aware of public holidays and the impact of penalty rates on your profitability and cash flow. It is also important to check the number of trading days in the month of December as this will likely be fewer than normal.

2. Delay Expenditure That Can Wait. 

Put off unnecessary spending in this period, such as repairs and maintenance that may be able to wait until cash flow is more abundant.

3. Get Your Money From Your Customers. 

Ensure that your clients are meeting your payment requirements. Overdue accounts you overlook in December may not be paid until late January or even later, and delays in sending out invoices can have an even longer impact on when the full payment could be received. Don’t wait to invoice – invoice quickly or risk being forgotten!

Invoicing is the first step, but then you need to put extra effort into following up debtors. The closer you get to Christmas, the more difficult it will be to collect the money owed to you. February can be the worst month of the year for business cash flow, so if you aren’t successful in following up, it might be a long time before you get paid. You could also consider offering an incentive for timely payment.

4. Understand Your Cash Flow Cycle. 

Use the simplest small business accounting software to get a snapshot of where your business is at, and what your regular cash flow cycle looks like. This will enable you to make important decisions, not only in these crucial times but throughout the rest of the year.

Running a business is tough at the best of times, so make sure that you do all you can to reduce some the stress on your cash flow so you can enjoy this festive period.

Article from cashflow-manager.com.au

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