With the festive season fast approaching, it’s time to relax, look back on the past year and focus on next year’s goals, right?
Maybe not.
According to global commercial insight specialists D&B, poor cash flow is the reason four out of every five small businesses fail.
So, it’s essential businesses prepare a cash flow forecast this silly season and avoid becoming another statistic.
A cash flow forecast is an educated estimate of incoming and outgoing cash over a future period.
Unlike cash flow tracking, which is a record of payments made and received, a cash flow forecast projects where cash may sit in both the short and long term.
Having a plan of attack to ensure you’re never left in a cashless situation is vital to the survival of any business.
Here are some other tips for managing cash flow around Christmas:
Plan for expenses in advance
Christmas parties, gifts, holiday pay and bonuses are all expenses that can quickly add up over the festive period, so make sure to account for them well before they arrive.
Businesses often use working capital finance to manage short-term expenses without disrupting day-to-day operations.
Make the most of any quiet time
If trade slows over Christmas, use the quieter period to ensure your business hits the ground running in the new year. Why not tackle that to-do list that’s been growing all year?
It’s also a great opportunity to address overdue accounts and finalise payments to improve incoming cash flow.
If slow-paying customers are creating pressure, solutions such as invoice finance can help unlock funds tied up in unpaid invoices.
Hold off on non-urgent spending
Only place orders that are necessary before the holiday season.
If it’s not crucial to sales and operations, consider postponing the purchase. This helps avoid unnecessary spending and keeps funds available where they’re needed most.
Improve for next year
Any successful business needs to learn from mistakes and continue improving.
Once the festive season is over, review what worked well regarding your cash flow management and identify areas that could be improved.
Need ideas? Read our guide on overcoming a cash flow crunch.
Talk to a broker about short-term business funding
A QPF Finance Broker can help you access additional funding this Christmas through options such as cash flow loans or a business overdraft.
Of course, every business is different and we make it a priority to understand the complexities of yours.
Working on your cash flow management will not only help you avoid nasty surprises this festive season but can also help you position your business for future growth.
If you’d like to discuss your options, get in touch with our team.
