Small business BIG growth®
Words by Lex Brown, Finance Specialist
Retail is a great business to be in at this time of year, and many retailers experience their highest sales during the Christmas period. For other small businesses, however, it can be quite a difficult time of the year.
Businesses in many sectors experience a slowdown in production and sales and many shut down completely for a couple of weeks. Wages, rent, loan repayments and other fixed overheads don’t take a holiday unfortunately, and still need to be paid. And to make matters worse, it is difficult to collect cash at this time of year, because many clients can either be experiencing their own cashflow issues, and, or may also have closed down for a break. All of which can lead to a tightening up of your cashflow.
Staying aware of some of the things that could possibly affect cashflow at this time, can help you to plan ahead and manage the situation before it becomes a problem.
Here are a few things to consider:
Plan for unexpected expenses
Include in your projections: Costs that may come about as a result of the season, such as Christmas parties and staff gifts; Take account of holiday pay requirements and plan for this; Be aware of public holidays and their impact on your profitability and cash flow; Check the number of trading days in the month of December as this will be fewer than normal.
Delay expenditure that can wait
Put off unnecessary spending, i.e. repairs and maintenance that may be able to wait until cash flow is back to normal.
Collect money from your customers
Follow up clients and ensure they are meeting your payment requirements. Accounts overdue in December may be stretched out until late January or beyond if not followed up. Don’t delay sending out invoices. The earlier you get them out, the sooner you can get paid. 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.
Understand your cash flow cycle
Use simple accounting software to get a snapshot of where your business is at, and what your regular cash flow cycle looks like. Keeping an eye on this will enable you to make important decisions, not only in these crucial times but throughout the whole year.
Running a business can be invigorating, but keeping your cashflow in check can keep the surprises to a minimum, and give you the freedom to enjoy this festive season.
If you are expecting that slow paying debtors are likely to disrupt your cashflow in the next few months, and your business could use a hand with some invoice finance please give me a call. Lex Brown, Cashflow Finance Specialist 0418 596 196.