The festive season is fast approaching and this bring with it new obstacles that the small business owner has to navigate. We are all to familiar with the gradual slowdown of trade around this time, and in some instances an increase in trade and it is prudent that the business owner takes steps to manage the cash flow during this period.
For the Majority of business, cash flow is already stretched and as is typical of the festive season this will likely be felt more sharply in the early part of the New Year. Therefore it makes good business sense to make provision to ensure that your business functions are as stable as the period allows.
Firstly, Planning ahead is always a good place to start. However it is all too apparent that the majority of small business owners know this well, but do not practice, strange, given that this event happens every year. In your planning process, it is useful, if the information allows, to review your last trading activities during the previous festive season. This allows for you as the business owner to gauge with some certainty what actions are required at this time. For example if your business has increased activities, hiring additional temp staff may aid your increased sales, whilst keeping your cost low.
Subsequently if there is a reduction in sales over this period, ensuring an effective collection process will aid in bringing in the required payments into the business to support your cash needs. In planning your cash flow needs through this period, establishing stand-by funding will provide the added benefit of bulking up your working capital to curb any fluctuations in your cash reserves.
Secondly, it is importance that your business ensures it can deliver on its promises during this period. With the gradual slowdown in trade, if you have suppliers of goods/materials, increasing your stock prior to this season will ensure your business is well stocked for your demand. However precaution must be taken to alleviate over-trading and having excessive stock which will limit your cash availability.
Further to the above actions, business payments and receipts due need to have been action prior to the break. With regards to payments, ensure all payments are actioned through electronic transfer or by posting of cheques will alleviate any late payments to suppliers. For receipt, all invoices for goods supplied or serviced rendered are dispatched early with an encouragement to your customers for prompt payment. For businesses that subsequently do not stop trade over this period, ensuring there are available staff to effect necessary action of payments or receipt.
Ultimately with the reduction on trading over this period (and before your break) use this period to reflect on the year’s trade, with specific emphasis on the fluctuation in your business cash flow and the causes of these fluctuations. This will go a long way to having an insight into the new year and building in processes and facilities to smoothen these periods through the cause of the coming year.
However it is important that you as the business owner take advantage to refreshing yourself and return with enthusiasm in the following year, ready to serve your customers.
