Although many Australian businesses experience their highest sales during the Christmas period, for some it can be the toughest time to maintain healthy cash flow.
Businesses in a number of sectors suffer a decrease in production and sales and may shut down completely for a couple of weeks.
At the same time, they still have to pay wages to staff who may be away on holidays, as well as keep up with other fixed costs like loan repayments and rent.
Furthermore, many industries often find that their customers aren’t interested in transacting in this period or have gone away, and this can cause issues for your cash flow too.
If you stay aware of some of the different conditions you may face in the Christmas period, you can make sure your business survives during this time. Here are some tips to help you plan ahead for the festive season.
Plan for Expenses and Conditions That Are Uncommon
Factor in costs that may come about as a result of the season, such as Christmas parties and staff bonuses.
You will also need to take account of your holiday pay requirements and plan for this. Be aware of public holidays and the impact of penalty rates on your profitability and cash flow.
It is also important to check the number of trading days in the month of December as this will likely be fewer than normal.
Delay Expenditure That Can Wait
Put off unnecessary spending in this period, such as repairs and maintenance that may be able to wait until cash flow is more abundant.
Get Your Money From Your Customers
Ensure that your clients are meeting your payment requirements.
Overdue accounts you overlook in December may not be paid until late January or even later, and delays in sending out invoices can have an even longer impact on when the full payment could be received.
Don’t wait to invoice – invoice quickly or risk being forgotten!
Invoicing is the first step, but then you need to put extra effort into following up debtors. The closer you get to Christmas, the more difficult it will be to collect the money owed to you.
February can be the worst month of the year for business cash flow, so if you aren’t successful in following up, it might be a long time before you get paid. You could also consider offering an incentive for timely payment.
Use invoice finance to cover cash flow shortages
The better way to solve the end-of-year cash flow problem is by using invoice finance to access the money you are owed much sooner.
Even Australia’s largest and most successful companies regularly use invoice finance to improve cash flow.
The Invoice Market gives you fast access to flexible and very competitive working capital by selling your invoices via a secure online platform.
By connecting you with a range of approved institutional and private funders competing for your business in real time, we can turn your invoices into cash in within a couple of days – and you remain fully in control with no lock in contracts requiring you to fund all your invoices.