How to full proof your Christmas cashflow
It’s that time of year again, where festivities ramp up, routine winds down, and cash flow goes out the window. If you’ve ever experienced a Christmas cash nightmare, you’re not alone. The rate of business insolvencies in Australia peak in February as a result of many businesses failing to prepare for the blow to cash flow the holiday period typically brings.
But the good news is with some solid planning and close monitoring, you and your business can cruise through Christmas. Here are some top tips to get you started:
1. Monitor your cash flow
In a perfect world, this would be a redundant statement, however far too often small businesses don’t have a proper picture of their regular cash flow. In the lead up to Christmas track and plan your cash flow – then keep a close eye on it. There are some great online tools and cloud based software options that offer easy to use cash flow monitoring. Make sure you know exactly when any big expenses can be expected, then plan for more.
2. Prioritise your expenses
Take the time to sit down and write a list of all your expected expenses and split them into the old ‘want’ vs ‘need’ categories. Then go through the two lists and prioritise each expense. Incorporate any expenses that are urgent or high priority into your cash flow planning, and leave low priority or ‘want’ expenses for the new year.
3. If you rely on invoice payments, get in early
Remember that everyone feels the crunch at Christmas, including clients and customers who you rely on for payment. Send your December invoices as early as possible, and make sure you update your payment terms to accommodate for any changes such as public holidays or shut down periods.
4. Be aware of your salary costs and payment dates
Just as you will be planning your invoices well in advance, so too will your suppliers. Make sure you’re across your accounts payable, and figure out the latest date you can pay without harming your relationship or incurring late payment fees.
For businesses with staff you will likely have to pay your wages earlier than usual, so make sure you take into consideration all public holidays and loading rates when nutting out your cash flow plan.
5. Be prepared with emergency funding options
Have a good think about what you will do if you encounter a cash shortfall, and plan for it. Ensure you have enough leeway on business cards, or be proactive and apply for an unsecured loan you can draw down if and when you need. If you don’t have to use it, then great! But if you do, you can minimise any down time, fees or harmful situations that a shortfall might cause.
While you will inevitably be hit with some unexpected curve balls (it is the silly season after all), by following these simple steps you can ensure you give your business the best chance at surviving Christmas.
Want to be proactive? Apply for a small business loan and insure against any holiday shortfalls for a stress-free Christmas.
Disclaimer: Information is of a general nature. Please consult your Account or Financial advisor for advice.