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Are you ready for a Christmas cash flow crisis?

If you’re in the retail sector, it might be your busiest time of year. But for other sectors, the Christmas holiday period can be quiet. So how do you keep an eye on your cash flow?

The holiday season might be a great time to wind down but small businesses don’t want to see their cash flow take the same break. There are just as many expenses at this time of year as there are at any other time, so it’s important to ensure that SMBs are prepared for these eventualities.

David Cook from insurance broker and risk adviser Marsh explains: “Some companies may face up to a quarter of a year with cash flow shortages, seriously impacting not only long term planning but day-to-day operations. Depending on how serious the circumstances are, and the level of the shortfall, this can have drastic consequences on business survival.”

One way to be prepared is to set up options for payment of bills prior to the Christmas period. Cook advises that small businesses make sure their important expenses, such as insurance premiums, are covered prior to the busy holiday season. Insurance premium finance spreads premium payments over the year in the form of monthly payments which means that large deductions don’t need to be taken at one time, leaving cash flow more accessible.

“One of the biggest expenses for businesses outside of wages is their annual insurance premium. And, if this payment is due during the Christmas period, there is a danger that the premium may not be paid and the very real risk of being uninsured in the event of a claim,” says Cook.

Abby Practice Principal accountant Sid Edwards, also had some advice to share with SMBs about being prepared for cash flow shortages over Christmas.

“The most important point regarding managing cash flow over the holiday period is to plan ahead. Take account of your holiday pay requirements and plan for those expenses. Be aware of public holidays and the impact of penalty rates on your profitability. It is also important to check the number of trading days in December, which may be fewer than normal. The impact of this is likely to hit your business a month or two down the track when you collect December’s debtors.”

Edwards adds, “On the sales side, focus on customers that you need to secure before Christmas as the momentum in your sales pitch may be lost over the holiday break.”

“As with all business issues, smooth sailing through the Christmas period comes down to planning ahead.”

Rhiannon Sawyer

Rhiannon Sawyer

[NB: Rhiannon Sawyer no longer works for Dynamic Business]. Rhiannon Sawyer is the editor for Dynamic Business online. She also looks after online content for Dynamic Export. She loves writing business profiles and is fascinated by the growing world of homegrown online businesses and how so many people can make money in their pyjamas.

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