This is the time of the year when many businesses experience a dip in their cash flow. With several staff members away and a number of public holidays compounding on each other, it’s not unusual for the holiday break to be stressful for business owners. I have seen businesses of all sizes struggle with managing their cash flow during the holiday periods, and I have compiled some tips to help you navigate the festive season while maintaining good cash flow.
This is the perfect moment to establish positive habits so that next year, you can enjoy the holiday season confident in your business’s financial readiness.
Plan ahead
We all know we should do this, but very few business owners do it. The best time to start planning for the holiday season is at least six months before the year-end festivities begin. Right now, you can analyse your business’s cash flow statements from last year and identify the periods when cash flow was at its lowest. With this information, you can take the necessary steps to minimise the impact of reduced cash flow. Creating a financial calendar that outlines expenses, revenues, or expected inflows will help you stay on track through the year and even set aside a buffer for the next holiday period.
Track your Spending
Christmas can be an expensive period for businesses, with bonuses, parties and holiday wages. Plan a budget within which your business can run through the holiday season. Adequate budgeting will help you enjoy the festivities without getting caught up in overspending and starting the new year on the back foot with a cash flow crisis.
The start of a new year is a good time to set your business’s financial goals for the year ahead. When you are compiling your forecasts for the year, consider factoring in all costs, including annual leave entitlements and end-of-year bonuses, into your budget. Including these costs in your budget now can help you be prepared for when the festive season rolls around.
You may even want to consider these expenditures the same as any other recurring business cost and add them as a category to your business expense tracking. Being prepared is key to maintaining healthy cash flow and ensuring your business thrives at any time of the year.
Proactive Invoicing
Depending on your business type, during the holiday period, some customers may be late with payments if they fall during their business closure, and the resulting delays can cause a cash flow shortfall for your business. Before the holiday season, encourage customers to make prompt payments or pay invoices early that are due during the holiday period. This can help prevent cash flow issues during the festive season.
Embracing automation can be a game-changer for managing your cash flow during the holiday period. If your business has regular clients with whom you’ve established a repeating billing cycle, consider setting up automatic invoices. Most accounting software can schedule invoices to be sent out at predetermined intervals, ensuring regularity in your cash inflows.
This means your business’s invoicing carries on in the background, even if you’re soaking up the sun on a beach or carving up the ski slopes. Not only does this provide peace of mind, but it also frees up valuable time that you can use to focus on strategic tasks, ultimately contributing to your business’s bottom line.
Keep Your Employees Productive
Many employees take time off to travel or rest during the holiday period. The impact on your business’s productivity can be enormous, and then you may find that you scramble to get jobs completed before holiday closures or are starting the year with a backlog of work.
Some businesses add extra resources in the lead-up to the busy period to make sure jobs stay on track, but resources such as staff need to be paid so it is important to make sure you have budgeted sufficiently.
Stay Active Online
If you have an online store, online payments provide a seamless customer payment experience. Many businesses will let customers know there is a delay in the delivery of goods and services during the holiday period but will continue to take payments online during this time. But the good news is that although your shopfront may close over this period, your online store stays open.
Final thoughts
Managing cash flow over the holiday period doesn’t have to be a hassle. Proactive planning, expense control, prompt customer communication, and smart employee scheduling can help you avoid the stress of a cash flow shortfall this season. These tips should help you maintain a healthy cash flow so that your business can thrive during and after the holiday season. If you need professional advice on managing your business’s cash flow, please reach out for a chat.