While many of us wonder if the run up to Christmas could get any longer, proper preparation can make the period truly relaxing.
This is particularly true for your business’s cashflow. Many companies, especially those experiencing their first Christmas period, can be caught completely unaware by the impact that Christmas can have on their cashflow. However, there’s still time to ensure this doesn’t happen, as long as you start planning now and follow a few simple rules.
Who is taking responsibility?
If you’re a one-person business, then it’s up to you to ensure your cashflow position is secure over Christmas. However, if your business has a dedicated finance department, they need to know sooner rather than later what you expect of them. Start by outlining exactly what the issues might be and get to work on ironing them out now.
You should always keep good records of your debtors and creditors but around Christmas it’s particularly important to have this in order. You should identify your largest outstanding invoices and begin chasing them. Don’t be afraid to say that you’re chasing because Christmas is approaching. If your customers haven’t realised that Christmas might be a difficult period for cashflow, you’ll be reminding them about their own situation.
Christmas opening hours
The main reason that businesses experience cashflow problems at Christmas is that this period is unlike the rest of the year. Having three bank holidays in quick succession means that, at the very least, more people will be taking holiday and less work will be done. Many companies will be shutting down completely and may not have any point of contact available until the New Year. Are you aware what your customers’ Christmas plans are and do they know about yours?
It’s important to consider who will be responsible for chasing invoices over the Christmas period too. If your finance staff are all away over Christmas this could disrupt cashflow, so make sure someone is always available to answer queries, even if this is done from home. You can also help to ensure problems don’t occur by not raising invoices that are due to be paid between Christmas and New Year.
Ensure spending isn’t the problem
Just as chasing your debts sooner rather than later will help you to avoid a cashflow crisis, controlling your own spending is also important. Cashflow forecasts and management accounting are always important and at Christmas this is especially true. As well as outlining which outstanding invoices need chasing, you should also identify what extra costs occur at Christmas. Are you paying your staff early as a result of the bank holidays? Is there the extra expense of a Christmas party to consider?
It may also be beneficial to leave aside some contingency in your budget, just in case all that hard work chasing invoices doesn’t pay off.
Expect the worst and you’ll probably be able to leave work at Christmas in a relaxed mood, confident that you can return and hit the ground running in the New Year.