Top tips for your business this new year, use this chance to grow your business, don't repeat mistakes and take...
Christmas Cashflow for companies.
Christmas can be a challenging time for many businesses. Whether you’re in the retail sector or not, it’s unlikely your business will be completely unaffected by the festive period. You might find that your suppliers or your customers are having to arrange their own finances as the season dictates, which could well affect you indirectly.
The biggest cashflow hurdle for many companies is that while your customers, your suppliers and your staff may all get a week or two off for the festive period, your creditors won’t give you the same. Your inward flow of funds may slow to a trickle, but the outward flow continues unabated. If you haven’t set yourself aside a pool of funds, there’s a chance you could see your finances running dry.
Pay very close attention to your cashflow
If your business habitually closes down for Christmas, make sure you factor this into your cashflow. You’ll have a week or two of little to no productivity, but things like premises rent, staff salaries, business rates etc won’t cost you any less. Even if you don’t close down, bear in mind that your customers might well do. Most businesses DO close and most individuals switch their attention to more festive pursuits, so chances are that you’ll see a slowdown in trade even if you continue trading.
If you haven’t factored this in, then make sure you put contingencies in place for when the money runs out, or you might start the new year with a stack of ‘past due’ letters on your doormat and an answerphone full of ‘assertive’ messages.
Getting your pre-Christmas billing in order is the surest way to shore up your accounts. If your usual billing cycle is to send invoices on the last day of a calendar month, you may wish to spend December invoicing as soon as is practicable.
Chances are, that neither your staff nor those of your customers, will be available to issue invoices or pay them before the first week in January. If you’ve done a billable job in early December, then miss your usual end of month billing cycle due to Christmas and consequently end up sending your invoice in early to mid January, you’ll have given your customer an extra week or two of credit at your own expense. This additional period of credit may be even longer if you hang on until the end of January before you bill.
Surely it makes sense to bill as you go in December and if the credit terms you usually give your customers means that those bills fall due while they’re off for Christmas, there’s a possibility they’ll pay early rather than risk being late.
Follow up your overdue invoices assiduously
If you have a credit control department, make sure they engage in a big pre-Christmas push on following up overdue invoices. You’ll no doubt know which of your clients might ‘accidentally’ forget to pay on time and then close for Christmas leaving them unable to pay until January, so chase them as soon as is practicable.
Put off that purchase
If you’re in the market for a big ticket item for your business, it might be best to put off the purchase until the New Year if practical. The item may be cheaper in the New Year and the cash for the purchase might be best sat in your account as a buffer until things return to normal. Similarly, it might be best to be ruthless in all your purchase activities during December. You might surprise yourself how much you can reduce spending by insisting on every purchase being fully justified before placing an order.
Make sure you have the credit facilities to cope
Used responsibly, credit facilities are a useful means to cope with the bumps in the financial road. If your pre-Christmas planning leaves you short, then it’s worthwhile looking at alternative means of finance to keep the cash flowing. A simple business overdraft from your company bank might well be sufficient. Normally though these must be applied for in advance rather than arranged at the last minute. This is where your business cashflow forecast can save the day. If you’ve projected that your finances may take a dip in the coming weeks and months, you can make the necessary call in enough time to get an overdraft in place.
What if this isn’t enough?
If this pre-Christmas planning doesn’t allow you to make it through to New Year without problems, then perhaps this realisation can be used to prompt you into action. If, despite your best efforts, you have more to pay than you have the funds to satisfy, you could be in the early stages of insolvency.
Insolvency isn’t a certain end to your business, but it can be if no action is taken. The sooner you do take action, the more likely you are to succeed in saving your company.
At Lines Henry, we specialise in helping businesses in financial difficulty and if your festive finances are looking on the bleak side, don’t wait until January to make a resolution, get in touch with us now and take your first steps towards a better 2018. Get in touch, we can help.