Cash flow must not take a break
AS WE head into the Christmas holiday season you are most likely looking forward to some relaxing times ahead, but one thing that should not be taking a break is your cash flow.
It can be all too easy in the busy lead-up to Christmas to let chasing bad debts and invoicing clients take a back seat. But if you don’t act now, you may not see any cash until February.
Meanwhile your regular bills will still be coming in and wages will also need to be paid.
So what can you do to make the holiday season financially stress free for your business?
Maintaining cash flow is key to successfully navigating the holiday period.
So ahead of Christmas, make sure you chase outstanding debts and all of your current invoices go out well before businesses close for the Christmas break.
One strategy might be to put in place easy payment methods for your debtors such as BPAY or Paypal.
The more options you give customers to pay, the more likely you will receive prompt payment.
You could also consider offering a discount for early payment before the holiday period starts or reduce your terms from 30 to 21 days.
If you have large debtors, don’t be afraid to communicate with them about the timing of their payments.
To boost income, consider rolling out a clever marketing campaign for your product in the run-up to Christmas.
The extra money may counter a quiet January.
If you have slow-moving stock, you may also need to think about discounting it to raise funds?
Always be careful not to discount too much or too often, or customers can become hesitant to pay full price, but a once off sale to move stock could be helpful.
Check out your inventory levels and maybe consider cancelling your January delivery if sales will be low.
The key to managing your cash flow is starting with a good budget.
If you know the pattern of your annual expenditure and income, then you will be able to recognise the periods when you may struggle and plan accordingly.
BMO accountant Tom Hall.