10 Cash Flow Tips for a Merry Christmas

The key to unlocking better cash flow is planning. So you’ve already made a great start by doing some research. Well done. Just as planning will help your cash flow, the surest way to predict the future is looking to the past. By reviewing previous Christmas trade periods, you can forecast for the months ahead. If you weren’t trading last Christmas, use another holiday period as a reference. Remember, even the smallest data source is better qualified than the best guess.

Start by reading our guide on how to manage holiday inventory, because ordering stock is a delicate balancing act. Too little and you won’t make it through the silly season. If you run out of stock you face the risk of angering and alienating customers and missing out on crucial sales, which will have a negative knock-on effect coming into the quieter months at the start of the year. But ordering too much stock or slow-moving stock can have a similarly devastating effect on your business. It ties up cash flow and can maximise stress as you rely on sales to free up cash flow – a degree more uncertain than waiting on debtors to pay invoices.

Using last Christmas trading period as a reference, forecast your expected stock levels and ensure balance between having enough stock to get your through summer without completely choking your cash flow.

Once you’ve ordered stock, it’s a good time to concentrate on planning your marketing initiatives to help boost sales. Once again, planning is crucial here. Instead of spamming customers with a mad rush of emails around Christmas, keep your marketing consistent and calculated. Plan some earlier marketing to keep your business top of mind for customers before they get tangled in tinsel. As Christmas approaches, lead with your product or service and remind them of the problem you’re solving, and how you can make their lives easier and better. If you can incentivise sales with a discount, it’s a great way to boost sales.

Christmas is a manic time of year. The year wraps up with a crazed boom of holidays, frantic shopping and parties, followed by January – the antithesis of the Christmas mania, and often a curse for cash flow. While everyone either enjoys an extended holiday until school goes back in February, or returns to work – most people tuck their wallets away. Knowing that going into Christmas, it’s best to treat it like a three month long trade period. If you plan your cash flow for three months, you’ll be less reliant on sales over Christmas and better prepared for the fluctuations in the early new year.

Your summer planning should include contingency for your January 28th Superannuation payment deadline, and your quarterly BAS statement for October, November, December, which is due February 28th. If you don’t plan ahead for these, it could leave your cash flow in tatters.

Dictate your payment terms wisely. Coming into Christmas it’s a good idea to change your payment terms to upfront payment wherever possible. If full upfront payment isn’t viable, at least partial upfront payment will help boost your cash flow. And now is an excellent time to chase any outstanding invoices. If you have any debtors delaying payment, kindly chase them up. Asking for upfront payment could be the difference between a merry Christmas, and a catastrophic muck-up like Funch experienced.

Alongside asking for upfront payment, you should shorten your payment terms to 14 days. This should be done with fair warning and clear communication so no debtors are caught off guard. Your goal is to make it easy for them to pay you, so clear communication is key. If you can, think about offering a discount for timely payment too. It’s a clever way of encouraging the type of behaviour you want – prompt or early payment. While you adjust your payment terms, tighten up on your follow up strategy too. When you send an invoice, add some calendar reminders to follow up with a 7-day reminder, 2-day reminder, and an overdue reminder phone call.

Aside from stock, think critically about any other expenses you can postpone for the new year. If it’s not critical to your sales and operations over the next three month, consider postponing the purchase to help your cash flow healthy. Think about whether that extra cash will better serve you and your business tied up in an asset, or on hand to feed cash flow.

If you have staff helping you this Christmas trade period, remember to keep them motivated and happy. That’s not to say you should go out and spend big on a staff Christmas party – not great for cash flow, and an external incentive. Internal incentives tend to work better and one great example is sales incentives – if you reach x number of sales, you’ll be rewarded with y. This can have a positive, motivating impact on your staff, and if they’re successful, it will have a positive impact on your sales and cash flow too.

If you’ve planned your inventory ordering, reviewed last year’s Christmas trade to forecast for this year, managed your staffing needs and incentives and set aside enough cash to cover your ATO requirements, and you’re still concerned about your cash flow, a short-term business loan could help.

While bank finance tends to be cheaper, you can expect wait times in excess of eight weeks, and even then it might be a curt rejection. Online business loan lenders – or fintechs – can be a useful alternative to access cash flow loans quickly. Not sure if a business loan is right for you?

Because we’re passionate about transparent and responsible lending, we’ve created two useful tools to help you make good business decisions. Use our Return on Investment Calculator to check whether a business loan could help your business grow. And you see the total cost of a loan, and your fortnightly repayments, upfront with our free Business Loan Calculator.

For general tips, see Cash Flow Management: Why Is It Crucial for Business Success? and What Is Cash Flow Finance?