Managing your business cash flow over Christmas and New Year
December is usually the busiest time of the year for retail and hospitality businesses. However, businesses in other sectors often find that their sales slow down and their customers stop paying them fora few months. This means cash flow dries up, turning their January and February into cash flow nightmares.
Whether your business is large or small,well-established or in start-up mode, you need to take a planned approach to managing cash flow during the holiday season. Here are few tips for keeping on top of cash flow management during the Christmas and New Year holiday period.
1. Keep invoicing in the lead up to Christmas
Don’t let your business administration slip in the rushed lead-up to Christmas. This is the most important time of the year to stay on top of your invoicing. You may find that many customers will be slow to pay because their businesses are closed over the Christmas period.
2. Set clear expectations with your customers
Be clear with your customers that you expect them to pay within the pre-arranged credit terms over the Christmas period. Phone regular slow payers a few days before payment is due to confirm that they’ll be paying on time. The phone is generally a more effective method than email.
3. Service businesses – offer a discount for the ‘quiet time’
If your business is usually quiet in January, why not offer your clients a 10% discount if they book you in for January? Why not offer them a 15% discount if they also refer a neighbour or a friend? Set whatever discount amounts work for you. A strategy like this will keep your business busy and some cash coming through during the usually quiet period.
4. Use the quiet time to work on your business
If sales are a little slow in the lead-up to Christmas or after Christmas, use the time wisely to hit the ground running in the new year.
The pre-Christmas slowdown is a great time to work through the to-do list you’ve been compiling all year. This might include taking a thorough inventory, searching for more suitable lending alternatives,completing a comprehensive competitor analysis or researching the market for new products and suppliers.
5. Set up a cash flow budget for next year
To our surprise, many businesses don’t have a budget or cash flow in place. These are essential tools in forward projections of the ups and downs of your business’s cash flow, and allow you to set strategies in advance to manage these. They also help you to project future profitability and areas you need to tweak to achieve your goals. WLF can assist you to set a realistic budget for the new year and most importantly to help keep you accountable to it.
As they say, ‘cash flow is king’ and with some forward focus you can relax over the break knowing your cash flow is under control. For help with any of the above, please feel free to talk to the WLF team.