5 tips to manage your business cash flow over the Christmas break

For some businesses, the Christmas period is one of the busiest times, and most profitable times of the year. This is predominantly for those in the retail and hospitality sectors.

But for most service-based businesses the December and January period slows down – customers are on holidays or in holiday mode, and are not necessarily looking to engage with your business until at least the first or second week of January.

When your sales and customer requests slow down over the Christmas break, your cash flow is severely impacted, so it is a good idea to plan ahead for any cash shortages.

Here are 5 tips to manage your cash flow:

1.     Forecast your cash flow

If your customers are closing down over the Christmas break or taking holidays, they may not be back on board till the first or second week of January.

In the lead up to Christmas, make sure that you plan to put funds aside to pay your bills during the quiet period.

Making use of a Cash Flow Planner can help you to forecast upcoming income and expenses. You will understand your cash flow seasonality and have action plans in place so you don’t run out of cash in December and January.

You can download our FREE 12-week cash flow planner here.

2.     Send invoices early

Don’t leave it till the end of the month to invoice as many businesses will be closing and customers may be going away.

You are more likely to receive payments if you are proactive and invoice earlier in the month. Be explicit about due dates and offer discounts for early payments. Always make sure you have automatic invoice reminders set up!

Once you have sent the invoices, follow up with a phone call to make sure they have been received – while you are on the phone see if you can collect payment straight away! Or at least get a firm commitment as to when the invoice might be paid.

3.     Chase up your debtors

Make sure you chase up your slow paying debtors promptly by giving them a call. You have bills to pay over the break and need the cash flow.

 Any old debtors on your list should also be emailed reminders and be given a courtesy call. You have provided the goods or service and deserve to be paid for it!

 Consider offering payment arrangements for late or reluctant payers. Using services such as EziDebit  or QuickFee could be useful to provide your clients with direct debit or instalment payment options.

 If the debt remains unpaid by Christmas shutdown, the harder it will be for you to collect monies in January.

4.     Managing your cash reserves

A financial buffer is always a good idea for unexpected expenses and taxes to ensure you don't dip into savings. Now is the time to put away additional funds to make sure you have that buffer in place before the end of the financial year. A good idea is to have a reserve cash fund to cover at least six weeks of business expenses.

Speak to your suppliers in early December about prompt payment discounts or possibly extending payment terms until January. You could even set up payment plans for large bills to be paid in increments. This will help you better manage cash flow. 

5.     Reduce non-essential expenses

To help with your cash flow over the Christmas period, reduce or eliminate any expenses that are really not essential.

 Maybe you could postpone these purchases until cash flow picks up, or have a good hard look at your spending and determine if they are really necessary.