For some, it signals an exciting time of celebrating, gift giving (and receiving, because who doesn’t like presents?) and the time of year where you eat more than two servings of every course (not to mention having a few too many drinks as well).
However, for some small business owners, it can serve as a reminder that the slower period of the year is about to set in.
Here are a few tips for keeping on top of cash flow management during the Christmas and New Year holiday period.
Get on top of your work, early
When the end of the year rolls around, it can be hard to want to motivate yourself into working harder. However, in the lead up to the holiday season, getting on top of your work as early as possible can work wonders to you and your cash flow.
Not only does it mean you can ease into relaxing for a much-earned break, but once you’ve completed your work you’re able to charge the customer. It’s important to get these invoices sent out as soon as possible to then see the payments coming in.
Rather than waiting for the end of the month, change up your routine slightly and invoice customers as soon as you’re done and make the payment terms clear. This also leads us into our next point.
Don’t wait to collect
As we all know, the holiday season is a busy time of year for most people. But even when there’s a lot going on (both inside and outside of work), it doesn’t mean you should wait to collect your payments. Set up your accounts payable system to ensure you’re notified of any late payers the moment they tick over to overdue.
This also leads us to remind you to be nice, but not too nice. Once you receive the late payment notification, don’t be afraid to chase it up as soon as you know you have not received it. You may feel like you’re pestering a customer, however you were clear about your payment terms.
Also consider contacting regular slow payers a few days before payment is due to confirm that they will be paying on time.
Identify any challenges and forecast your cash flow
Before these months sneak up on you, think about where your business will stand during this period so you can start preparing rather than reacting. After assessing your potential cash flow, it’s time to make some decisions.
If your cash flow is tighter, you might consider shutting shop or reducing work hours to cut expenses. Something to keep in mind is you’ll need to pay your employees for their paid leave, as well as maintain any other major payments such as loan repayments. These expenses shouldn’t come as a surprise and need to be factored in to your cash flow forecasting.
Or, it may be a time where you are the most busy and need to consider how you will pay for the extra staff and supplies to keep up with the demand. This may mean you could need extra funding or to shift your money around.
When you’re in business, having the right finance and risk planning in place can mean the difference between thriving and surviving. No one is better placed to understand your needs than another small business owner.
Chat to your local Mortgage Choice broker to discover how they can help in the lead up to the busy holiday season.