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Christmas Cash Flow Survival Guide

Article By Brent Charlton | | Accounting & Tax, Business Consulting

The Christmas New Year period is a time to down tools and enjoy time with family and friends, and maybe even a holiday. Sounds nice and will be nice if you the business owner does some forward planning. Planning so that you can focus your attention on fun and relaxation, rather than your cash balance.

Our 4 tips for managing your business cash flow this Christmas New Year.

Clear the decks: Pre-Christmas planning is all about finishing things. Completing work, filling final orders, and tying up loose ends allows you and your team to enjoy a well-deserved break knowing there isn’t anything unresolved waiting for your return. It also ensures anything that can be invoiced is invoiced before the break.

Know your outflows: The good thing about outflows is they are largely known predicable amounts. Map out those who need to be paid and when over December and early January, and don’t forget those loan repayments and direct debits. Knowing your outflows allows you to know how much cash you need to collect or have available over the break and into the new year.

Cash collection and reserves: Payment terms for pre-Christmas invoices are often forgotten, with funds coming in January rather than their due date. Therefore we need to be proactive with collections in the lead up to the break (a call and a commitment to pay) and have a conservative estimate of what will be collected. Additionally, a health cash reserve to cover any unfulfilled commitments may also be needed. Ultimately, you need to ensure the essentials are paid (i.e. staff and key suppliers), and accordingly have collections and/or reserves to meet those essential payments.

Don’t forget about January: The year can start slowly and business closure periods can vary from 2 to 3 weeks. This lag can also extend to your cash flow and invoicing. To give yourself the best start to the year, be proactive in planning work to come back to and get on top of those who are outside your payment terms.

Christmas should be a time to enjoy. With the right planning in advance, your break will be a time for relaxation and enjoyment, rather than worry.  If you need help with your Christmas New Year plan, contact your Altitude Adviser.