Can You Take A Christmas Break And Keep Your Cash Flow Working At The Same Time

background 20126 1920As the year closes to an end, it is every business owner’s dream to welcome 2016 with a big bang especially in terms of finances. This is why setting priorities before the year ends can help you with your financial forecast. For months of doing the number crunching and analysing where your business is going, it is high time you take a break so you can meet the challenges and adjust the direction of your business. However, if cash flow is not available to fund your efforts, your growth targets for 2016 will be impossible to meet.

Trade payments have the tendency to slow down during the holidays and this is going to be an issue for business owners as untimely trade payments can leave businesses struggling especially when it comes to meeting fixed costs. As a result, New Year plans are instantly forgotten. Taking a holiday is a good thing, so long as your cash flow does not also take a holiday.

Depending on the business you own, the holiday season can either bring you financial luck or deny you of healthy cash flow. The main challenge for most businesses is ensuring that payments are received in a timely manner. Unfortunately, this is beyond the businesses’ control. There can be times when payment collection process is slowed down because customers are busy planning for the holiday. Payments are often made in January, but this could affect your supposed steady cash flow. 

Businesses need to be mindful of strategies so Christmas cash flow crunch can be minimised:

Review your previous cash flow experience: it is easy to obtain a detailed cash flow forecast if you already have an idea of your cash flow experience in the past. This way, you can prepare in advance and formulate plans that can protect your business when cash flow starts to slow down.

Make collections your top priority: Before the holiday season kicks in, make sure you have already issued invoices so customers will have time to prepare payments and you can also follow up on those who have not lodged their payment yet. Giving customers timely payment reminders and overdue notices can reduce the risk of not receiving any payments during the holiday season.

Keep your stock in check: It can be difficult to control inventory levels during Christmas but you can still put unsold stock to better use by selling them cheaply so you can continue to meet on-going expenses.

Establish a backup: A steady cash flow helps you survive the season and to maximise your cash flow, make sure you reserve your cash into a high interest savings account.

Tighten your payment terms: You can also improve seasonal cash flow by testing your payment terms. You can either offer early payment discounts to encourage timely payments or negotiate full or part payments ahead of time.

Seasonal bumps are inevitable, but they can definitely be controlled with some effective strategies you can use such as managing unpaid invoices and fixing expenses with the use of debtor finance. While taking a well-deserved holiday is a good way to start fresh, you can throw your worries away once you are assured that your working capital is still intact.

Andrew Donnelly

Written by : Andrew Donnelly

Andrew Donnelly is a degree qualified accountant and registered tax agent. He is the principal of Brisbane Bookkeepers, which provides bookkeeping services to small businesses in Brisbane and its immediate surrounds.

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