Considerably more stock or raw materials may be needed. More staff are required too, meaning higher wage bills and in addition year-end bonuses may be payable to permanent members of staff. It’s a time of high running costs, so if you’re not careful you could have a cash flow crisis on your hands. For those beyond retail, manufacturing, consumer goods, transport and logistics, Christmas is a quiet time of year. Business gradually quietens down through December before there is something of a shutdown that may last right through to mid-January. These businesses won’t suffer a cash flow crisis in December – it’s at the end of January or into February when the absence of money is felt. Then there are other factors that affect all small businesses alike, regardless of sector. Some suppliers use the Christmas shutdown in business as an excuse to not pay outstanding bills or delay sending payments. Finance offices close, and this means the festive season could potentially lead to a cash flow crisis with the knock-on effect of missed payments or late payment of invoices. To top it all, the colder weather means that utility bills can make unpleasant reading, while for many companies quarterly rent bills are due after Christmas. Then there’s the matter of Self Assessment tax returns at the end of January which could apply to many company directors and sole traders on a personal level. For many SMEs the dust (and cash) has settled down by late January/February, whereby it’s easy to see that Christmas was a profitable time. It’s just getting there that’s the issue! So, what can small business owners do to ease this tricky Christmas tale? My four key tips would be: (1) There’s no such thing as over planning – There’s really no substitute for making the effort to forecast cash flow as minutely as possible to see where the pinch points are going to come. Don’t just plan for the Christmas period either, look ahead to the inevitable New Year’s dip that’s to follow too. (2) Anticipate late payments – Build in a buffer that assumes you will have an indefinite higher proportion of late payments than normal during this period. (3) Control all spending – What can you do to manage spend? Are there some things that are unnecessary or could be postponed until there is less cash pressure? If so, then put it on the backburner till February. (4) Consider external funding – Getting some finance in place could help to remove that stress and worry. When it comes to finance there are a number of options available. Invoice finance is where a funding partner will advance you up to 90 per cent of what you’re owed on invoices you have issued, whereas a business loan provides an injection of cash for a short term period – both can smooth your cash flow and be cost effective and flexible solutions. Ultimately, this sort of planning and analysis is actually good business discipline to keep all year round if possible. What’s more, with the early months of the new year often a quiet time for many, the tips above can help you get your business in shape. Exploring various finance options could help to deliver you a happier Christmas. Rob Mercer is senior regional sales director of Ashley Finance [rb_inline_related]
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