Christmas can be a wonderful time off year - a season full of Christmas parties, bonuses if you’re lucky and holidays. If you’re an employee.
But if you’re a business owner, Christmas can be a dreaded time of feeling like keeping your head above water until the new year begins. Which hopefully brings a few days break, unless of course you’re in retail.
Dealing with a cash-flow crisis either in the lead-up to Christmas or in the first quarter of the year, the stress of a business owner compounds. Depending on the type of business and psyche of the business owners, the stress can be caused by many factors. It might be from receiving a high volume of sales in the lead-up to Christmas and the owners spending all the money in the bank account, it might be the result of disappointing Christmas sales or from having to fork out holiday and leave pay while less money is flowing in.
Of course, like most things to do with our finances, there's choice involved. And sensible decisions now can avoid cash-flow crisis in the new year.
Implementing some or all of the following is critical:
Budgeting is never sexy or exciting (maybe for some). But running blind won't help the outcome or the end of year anxiety. Budgeting cash inflows and outflow will help you manage any shortfalls. It means you can start to prepare for them now, rather than becoming reactive or stuck when cash flow is low.
Put money aside
Just like a personal savings plan, the theory is the same for business owners. By budgeting for when large expenses will incur and knowing when shortfalls are, you in a position of control. By knowing how much you need to put aside and securing it into a separate bank account is critical.
Understand when you are being paid
Whether you operate business to consumer, or business to business - if your payment method doesn't happen at point of sale, December to March can be a difficult time for cash flow. That's because business owners are on holidays or have Christmas commitments themselves. So if you're not chasing payment in December then you may be waiting until February or even March to receive your money. So be proactive about invoicing and chasing payments. Don't wait to invoice – invoice quickly and follow up, make sure yours isn't forgotten about.
Running a business can be tough so make sure you are doing all that you can to remove stress by managing your cash flow leading into the silly season. Keep an eye out for Part 2 of 'Surviving the Christmas Cash Flow Crunch' to come soon.