6 Ways to Avoid Business Cash Flow Blues this Christmas

  • Anil Kanda
  • 23 Nov, 2015

It’s almost that time of year again! Christmas will soon be upon us, and for many SME businesses it can be an extremely busy time, especially for those in the retail and hospitality sectors. However, other types of businesses experience the opposite with a rather quiet period, and all too often many well-run businesses can be susceptible to a cash-scarce December to January.

As well as these months being habitually slow for some businesses, there are upcoming deadlines such as commercial rent (falling on the 25th December) and Self Assessment Tax Returns due for January 31st. Is it any wonder small business finances can suffer?

Whether you are a retailer enjoying profitable December, or you are a company where trade drops over the festive period, it may be worth considering these four tips to help you combat Christmas cash flow blues:

1. Plan in Advance
Is the beginning of the year a slow earner for you? If so, you need to plan business finances in advance and make sure you get a hold on your incomings and outgoings. Imagine the worst case scenario for your cash flow, then factor this into your finances. You need to make sure you have the capital available to cover any unexpected bills, absent staff, late payers etc.

2. Use Quiet Time Effectively
This is the time to conduct staff reviews, find new suppliers or even catch up on the pile of paperwork that has had to be placed on the back-burner. How about setting targets for the year ahead? Maybe request feedback from your customers/clients and get their input on changes they would like to see in 2015. It’s a great way to spark new ideas, and your customers will feel their opinion is valued too.

small business finance advice - using quiet time effectively

3. Curb Spending

When your business benefits from the pre-Christmas rush, we know it’s tempting to spend more than usual… but this is where you need to refrain! Even though that employee does deserve a Christmas bonus, you must first ensure your business has the capital to cover their January wages! Similarly, if your business slows down over the Christmas season, you don’t have to go all out Scrooge, but do try to find ways to minimise your non-essential spending; perhaps swerve business lunches, overnight stays or footing the bar tab at the office party!

4. Expect Late Payments
So, if there’s a chance you could experience a cash-scarce December to January, your customers could experience cash flow problems too (here are 4 other ways to improve your cash flow). How can you protect your business from this? You will need to budget for late payments. Another strategy could be to offer incentives for customers when they pay early.

5. Quarterly Rent
With most businesses having to pay quarterly rent on Christmas eve, this can be rather disruptive to cash flow. How can you take the pressure off? Well here’s where your forward planning comes into play. Save your rent on a month by month basis so you’re not struggling to find the full amount when it comes to the Christmas quarter.

small business finance - additional funds

6. Get Additional Funding
Whether the festive period is a busy or quiet one, it’s common for businesses to experience a cash deficient January, but what can you do in this instance?

You may be able to ask your bank for additional support (for example extending your business overdraft). Another option is to speak to a finance company specialising in small business finance. They can provide additional funds quickly to help improve cash flow.

There are different types of Business Finance available to cater for the specific needs of smaller businesses such as Business Loans, Supplier Finance, Invoice Finance and more.