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How to tackle Christmas cash flow challenges

In Planning growth, Raising finance, Rapidly scaling - 6 days ago - 5 min

How to tackle Christmas cash flow challenges

Christmas is fast approaching, and for many businesses owners this can be a challenging time.

For some it will be a very busy period with higher demand than usual, whilst for others trading will slow down because of a seasonal dip. In either way Cash flow can become a challenge, and it will pay to plan ahead.

Here are a few tips to help you avoid cash flow woes this Christmas:

Use cash flow forecasting software

Christmas can be an unpredictable time for many businesses. Different industries will have to deal with different challenges: for example bad weather conditions can disturb construction firms, and Black Friday and Christmas shopping can leave retailers struggling with stock levels.

Cash flow forecasting software can help you understand how these scenarios may affect your cash flow in the best- and worst-case scenarios. It can also give you an idea of the figures involved if you need extra funding for more stock or to bridge cash flow gaps.

Prepare for your tax bill

Many firms need to pay their Corporation Tax in January, which can be difficult if you’re already struggling with squeezed cash flow over the Christmas period. Whether you put money aside in the months before or apply for external funding, tackling this issue early can make a big difference.

There’s funding specifically designed to finance a tax or VAT bill, which can be useful if your cash flow is restrained over Christmas.

Plan for absence of employees

It may be due to winter illnesses or planned annual leave, but at this time of the year your staff absences are likely to increase. This may also apply to other companies you’re working with, so bear in mind that your business partners may not be available as much as you’d like

It can be helpful to take these factors into account when you do your financial planning. Perhaps you have to add a couple of days’ buffer to your delivery deadlines, order stock early, or even hire additional staff — especially if the demand is particularly high in your business sector during this time of the year.

Keep track of your invoicing

If your business is invoicing customers or dealing with purchase orders, you should pay extra attention at this time of the year. Due to the busy season, the chances of misplaced orders, delayed invoices, or missed payments could be higher.

If your cash flow is fragile, you could use invoice finance or trade finance to help you bridge the liquidity gap. Try to keep the lines of communication open with your suppliers and customers to ensure everything is going smoothly.

Prepare for irregular payments

Christmas can lead to some unique challenges, especially from an HR point of view. Many firms will run payroll earlier than usual or decide to pay for a Christmas party. Combined with some late payments or a shortfall in sales it could leave you struggling with low cash flow levels.

Taking irregular payments into account at this time of the year isn’t only important from a financial perspective. Making sure that things are going smoothly, especially when you may rely on your employees the most, can have a positive effect on staff morale.

Don’t neglect your books

When the year is coming to its end and Christmas is keeping you busy, it’s easy to forget about important administrative tasks. If your books are tidy, it’s easier to spot any irregularities, so make sure you don’t neglect the paperwork. In return, this will help you prevent problems before they happen, rather than needing to spend time solving them.

Another positive effect is that if you decide to look for business finance to maintain steady cash flow, having the paperwork ready will make the process a lot easier and faster.

Have a look at your business finance options

While you may be able to prevent many of the challenges we’ve talked about here, there can always be some bad surprises. It doesn’t hurt to do some preliminary research — that way you can move quickly when you realise you need additional funds.

It might be that you need to rent more warehouse space, buy more stock or temporarily need to hire more staff. In this case a business loan could be a good option. If you need some funds to tide you over to the next payment, a revolving credit facility could unlock cash as and when you need it.

No matter what the reason may be, there’s a variety of funding options out there to help you tackle Christmas cash flow challenges. While they all have different requirements, there are some rules of thumb that apply to all of them: having your business bank statements and the directors’ details ready can reduce your approval time from days to hours.

Enjoy the season

Running a business is hard, and while it’s very important to stay on top of things, you shouldn’t forget to have a merry Christmas. So make sure you take the time you need to relax and recharge. This way you’ll be prepared for the year ahead and better equipped to deal with potential cash flow woes.

If you’re thinking about raising investment and want to understand your options, get some free guidance from one of our team today on 08081 722350 or drop us an email: G.Enquiries@uk.gt.com

Guest author:

Conrad Ford is founder and CEO of Funding Options, the online marketplace for businesses finance. Funding Options is helping the small walk tall. Funding Options helps businesses find the right funding for their situation — whether they want to grow, they’re fighting for survival, or simply need to pay a tax bill. @FundingOptions