How to Deal With the Christmas Cash Flow Crisis


How to Deal With the Christmas Cash Flow Crisis

We all know that Christmas is just around the corner and if you’re like the majority of people I know, it’s crept up on you, and you’ve yet to even start thinking of shopping for presents.

Then there’s the parties you have, the extra cost of family visiting (and needing to be fed) and potentially a family trip too.

Christmas can be an expensive time of the year.

My fellow Smallville contributor, Georgia Thomas, has written a great article, 10 Small Ways to Shop Big this Christmas, about buying gifts, which is well worth checking out.

But what I’m talking about is not only the toll of the additional costs at Christmas but also the cash flow crisis that can arise due to a number of other factors.

1. Your clients or customers take holidays in December/January.

This allows them a perfect excuse for paying your invoices late. It’s either that the bookkeeper is away, so nothing gets paid, or that the boss is away and they’re the ones who process the payment through the bank account. Either excuse and you’re out of luck for payment.

I recommend having a talk with your key clients or customers now. Ask them to advise whether they will be able to pay in January as usual. Offer to invoice them early so that the payment can be processed before everyone goes on leave or ask them to set up a payment for January of an estimated amount (if your invoices amounts differ each month).

2. You take holidays in December/January or shut down the business for a couple of weeks.

This means that you’re not selling at all unless you’re an online business. The impact of not selling in December/January may flow through into February and March.

It would be great if you’d thought about this a few months ago and planned for it by putting money aside to cover the bills during these months, but if you haven’t all is not lost. Using your best intuition and knowledge of your clients and customers (and in conjunction with the results from point 1 identify what funds you expect to receive in December, January and February.

Then look at all your usual expenses and identify any that you could have a chat with your supplier about delaying payment and have that conversation. Add in the extra costs that you will be spending over the holiday period and calculate whether you will have the funds to cover all the payments or whether there is a shortfall.

If you have the funds to cover – that’s awesome. Go and have a wonderful stress-free holiday. If you don’t, then go to point 3.

3. If you expect to be short of funds, there are a few options open to you:

  • Consider taking a cash advance from your credit card.

Now whilst I’ve used credit cards to shore up my business over the years, it’s not a great way to go. However, if you know that you’ll have the funds in February/March to clear the card in full, then this is an easy option for funding a shortfall.

  • Look into the new financing options that will provide funds against invoices.

Whilst this is not available for all types of businesses, this can work really well as the finance company pays you a percentage on the issue of your invoice and then when your client or customer pays, you get the balance.

There are costs involved which may work out to be cheaper than interest on a credit card. If you use Xero check out the App marketplace.

Each is different, but they all connect to your Xero data to make the application and use of them simple. I have clients who’ve used Waddle for funding invoices and Prospa for a business loan. Disclaimer: this is not financial or accounting advice and you should seek professional advice before proceeding with any of these products.

  • Cut back on your spending.

There I’ve said it. Now I’m Miss Unpopular. But seriously, if you can’t afford it, all you’re doing is creating more stress for yourself and you won’t enjoy the holidays anyway. You’ll spend the entire time worrying about how you’ll pay the bills that will inevitably turn up, or how you’re going to pay the business bills, not to mention that dreaded Business Activity Statement that will be due by the end of February.

Be realistic and keep a reign on your splurging.

With all that said, it’s time to think about the presents, the food and the family time. It’s time to relax and enjoy.

Get your finances sorted in the next week or two and then you’ll be able to go into the Christmas holiday period without the stress of the Christmas cash flow crisis.

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