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5 ways to handle your holiday cashflow

If your end-of-year cashflow graph undulates like a row of Christmas trees, it’s time to find out how you can add tinsel to your peaks and troughs.

The end-of-year holiday period is an awkward one for most businesses: I know very few that operate ‘business as usual’. Either it’s your peak time, in which case you rack up expenses like a credit card on Boxing Day, or you slow right down, which means your income trickles in like the last of the New Year’s champers.

Here are five cashflow considerations you should make over these holidays so you can start the New Year with fireworks rather than nursing a 2011 hangover.

1. Sales aren’t payments

If the summer holidays spell hot sales for you, remind yourself that sales don’t necessarily ring in the money. Businesses can get so sale-oriented that they forget to do debtor checks to ensure the customer can pay. Also ensure that payments are made in a timely fashion by having a process in place to hold a debtor to account or you could be out of pocket, chasing down invoices.

2. Manage your staff

If these holidays correspond with a peak period, you may need to bring in extra staff. Understand how much you may have to outlay based on casual or contract rates, and holiday loading.

If December/January is a slow time for you, then consider closing down your business for a couple of weeks. This ensures that staff take their annual leave rather than twiddling their thumbs. While you’ll still be paying labour expenses, this will reduce other overheads such as office running costs.

3. Get the balance right

Cashflow is all about balancing expenses and earnings and the rush of a holiday period can make it hard to see where the money is going and from where it will come. A solid analysis of your usual cashflow cycle tempered by your holiday expectations will give you a better picture of what might happen.

If it looks like there’ll be a shortfall after you crunch the numbers—either because your outgoings will rise or you know you’ll find it hard to chase payment—consider shoring up some cash to cover the gap, or look at your finance options. Lending services are popular at this time of year: think credit cards, overdrafts, line of credit and debtor finance for larger requirements.

4. Review your current situation

If you’re slowing down, the end-of-year period is a perfect time to take stock of the effectiveness of your credit policies. If you ramp up during this time, you may wish to start this process before things get busy.

Like Santa, you need to have a list of who has been naughty or nice and check it twice. Perform your regular debtor checks, that is, track who has paid you on time and get vigilant about slow-paying debtors. What can you do to improve your cashflow?

5. Plan for a Happy New Year

Put the answer to that question into a plan. You may wish to rewrite your credit policy, change your credit terms or start negotiating longer payment terms with your suppliers. Identify whether obtaining finance may solve some of your problems, or whether you need a better accounts receivable process—then you’ll have a happy new year.

—Rob Lamers is the Head of Debtor Finance at Oxford Funding, a debtor finance specialist owned by the Bendigo and Adelaide Bank Group.

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