How To Avoid the Christmas Cashflow Crisis


How To Avoid the Christmas Cashflow Crisis

Christmas without cashflow can mean a crisis, but it doesn’t have to be.

The Christmas decorations are already out in the shops, and we’re starting to think about the holidays. It may be that you shut down your business for a week or two (or more), or it may be the impact of others shutting down business and/or taking holidays then to enjoy our Aussie summer.

Either way, as a business owner, Christmas may mean an impending cashflow crisis.

Here are my three tips to help you through this time:

Tip #1 – Talk to your clients or customers.

Regular customers or clients can help with your cashflow if you have a conversation with them. Yes, a real conversation. You know the one. Pick up the phone and talk to them. Or if you’ve got a meeting, even better, talk to them face to face. Don’t be afraid to talk to them about cashflow.

Tell them that you’re looking into your cashflow over the upcoming couple of months and ask them to arrange to pay their invoices before they shut down or consider a part payment with the balance when they’re back at work. 

I’ve found with the clients I’ve worked with who have taken the time to have those conversations, they’ve often had payments made in advance, estimates of amounts due paid early or agreements on exactly when payments will be made.

You may be pleasantly surprised and find that this is met with positivity, encouragement and kudos for taking action ahead of time.

Whatever the result of the conversation, you now have information on when you can expect payments and how much they will be.

It should go without saying that you need to be chasing up outstanding invoices too and getting as many of those paid before the holidays as you can. There’s nothing more demeaning than having your invoices unpaid only to find out that your customer or client took the family overseas for the holidays.

Tip #2 – Talk to your key suppliers.

This is the same as tip #1 except in reverse. This time you want to talk about extended credit terms so that you can pay your bills later than they are due without any “penalty” from the supplier. 

The supplier may ask for a part payment before the holidays with the balance payable when you’re back. 

This is a negotiation and any concession you get from your supplier on the timing of payment, is a good thing for your cashflow.

One of my clients has negotiated 90-day payment terms as a result of this strategy. This came about due to their level of business and longstanding relationship.

While this was an unusual situation, arrangements to defer payments can be agreed with some suppliers.

Tip #3 – Prepare a detailed week by week cashflow forecast.

Prepare a detailed cashflow forecast. List your clients or customers, when they’ve said they’ll pay and how much. Then list your suppliers with agreed dates and amounts. 

Add onto the list any other income based on your conservative best guess. Include all the other expenses with amounts and due dates. This needs to include wages, rent, taxes, and so on that you’ll have to pay on time or that are automatically charged.

Then see what the result is week-by-week, taking into account how much money you have in the bank right now. Is there a shortfall in any of the weeks? How much is it? Are there several weeks of shortfall? How much is the total shortfall?

Once you have this information, you’ll know exactly how much money you need to cover the Christmas cashflow crisis.

Watch out for my article next week when I’ll cover ideas of how to fund the crisis if you expect to have one.

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