For small businesses, other than the retail and tourism sectors, Christmas can really test the cash flow. Not only because we’re constantly spending on presents, food, festivities and holidays, but also because work slows down for a lot of industries round mid December and doesn’t start to pick up until February/March the following year.

Is this the case for your business?  If so, here are some tips to help you manage post-Christmas cash flow:

1. Make sure you understand your cash flow. If you need help you might consider using a cash flow program or talking to your accountant about ways to help your finger on the cash flow pulse.
2. Put an emphasis in your business plan for a marketing campaign during the Christmas lead up to squeeze the last drop of sales out before Christmas and fill up your workflow and sales lead funnel for late January and February the next year.
3. Issue invoices as soon as jobs are completed rather than the end of the month to get the payment process rolling asap.
4. Stay on top of your debtors, possibly contact clients as a courtesy a few days before invoices are due to make sure your invoices are in their system ready to be processed.
5. Consider charging a percentage upfront for new sales, particularly if you need to cover out of pocket expenses.
6. Reduce your payment terms for example from 30 days to 14 days, particularly for new clients
7. Incorporate the charging of late fees into your invoicing. Why not? The banks and utilities do it, why shouldn’t you?
8. Start pulling back on expenses as early as possible towards the end of the year. What can wait until the New Year?
9. Maintain ongoing tracking and planning for superannuation and GST BAS payments there are two straight after Christmas (January for Super and February for GST).
10. Go easy on the Christmas party spending, perhaps even do something low-key and save the big celebrations for a Christmas in July celebration instead.
11. If you are owed a large sum of money that you don’t expect to be paid for until after Christmas and you are really cutting it fine with your cash flow, you could consider debtor financing. A debtor financing company can provide up to 80% of the value you are owed and your customers pay the debtor financing company. Once all the invoices are paid you are paid out the remainder less the debtor financing companies commission (1-2%).
12. Make sure you are giving back as well. Your creditors are trying to manage similar issues. Keep communication channels open with your creditors if you are facing lean times and agree on a payment plan if necessary.
13. Consider offering a discount for full fees paid upfront.
14. If you manage stock be careful not to bulk buy stock that may be difficult to move.
15. Finally consider reviewing your cash flow plan before heading into the challenging Christmas period and potentially also refresh it in the New Year looking for new ways to address cash flow deficits across the year.5

Have you come across other ways you can manage post-Christmas cash flow?

If you are uncertain on this subject and would like advice and guidance on this matter, please call Mark and the team at Trak on 07 5512 6106.

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