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The post-Christmas period is infamously difficult for Small to Medium Enterprise (SME) businesses. Typically, the stress put on SME’s during this period is induced by poor budgeting and planning.

There is overindulgence during the Christmas season which sees customers paying out significant sums of money for their respective festivities. As a result, businesses experiencing higher than normal sales in the lead up to Christmas, may then burn the company’s capital on a spending spree, leaving little to no cash reserves, for the slow down after the Christmas break.

For those in industries such as construction, where the entire industry shuts down for nearly the whole month of January, many companies may feel cashflow stress for months afterwards. Especially those companies who provide credit terms as they may feel the pinch right up until March, as an after-effect of their clients closing for the Christmas break.

Furthermore, wages and entitlements i.e. public holiday pay, annual leave and in some cases annual leave loading, still need to be paid during this period. Therefore, it is imperative that significant planning takes place to ensure that your company is able to meet its obligations. Sadly, for some businesses these complications can be the foundations to total failure i.e. insolvency. So, while Christmas is supposed to be a happy period, it can bring about the blues.

How to avoid the blues in your business this Christmas season:

Create a budget – don’t delay

Determining the Companies inflows and outflows will help companies to address any potential shortfalls and help to plan for them. For example, companies that have previously been through the Christmas period, it may be viable to review last year’s performance and use that data to help determine a projected cashflow.

For a new company, this may prove more difficult and conservatism may be necessary in order to maintain cashflow, at least in the first year.

Plan – Your receipts and payments

Retailers, e-stores and cafés typically get paid immediately. The issue then is more to do with control of the company’s finances i.e. discipline and budgeting. But, if you sell business to business and provide credit terms, cashflow issues may be present until March. It is imperative that companies send their invoices early and are proactive about chasing payments because your creditors will not wait, so why should you? Some options are for example:

Offer early payment discounts to customers to incentivise them to pay early.

Request longer time frames from your suppliers to get you through January.

Speak with an advisor

Don’t be an Ostrich with your head in the sand and fall into the trap of thinking if you don’t acknowledge it, then it doesn’t exist. Speaking with an advisor, at least initially, may just set you on the right track and provide you with the necessary tools to ensure that your company has the appropriate levels of cashflow for the Christmas period.