Nine Ways to Manage Cash Flow During the Holiday Season

Nine Ways to Manage Cash Flow During the Holiday Season

The holiday season, spanning December and January, can be a challenging period for small business owners in the trade & construction industries. This time often brings fluctuating cash flow, which can significantly impact your businesses financial stability.

It amazes me how business owners don't appear to learn from previous Christmas times and ensure that they always have solid cash flow during this period.

Use the below to assist you to manage your cash flow wisely this holiday season.

  1. Forecast and Budget

There is only one thing worse than experiencing poor cash flow and that is not knowing when you are going to have poor cash flow. It is important to have a forecast in place that can tell you what your expected bank balance will be at any date in the next 30 to 60 days. Map out your expected inflows from work based on completion, invoicing, and payment. You may wish to look at previous years' financial data during these months to understand trends. Identify your fixed costs (rent, salaries, utilities) and variable costs (materials, subcontractor fees). Considers potential income dips and increased expenses, such as holiday bonuses or seasonal marketing.

  1. Invoice Promptly and Follow Up

Ensure that all work done before the holiday period is invoiced promptly. Delayed billing leads to delayed payments. Ask for payment on completion where possible. Also, be proactive in following up on outstanding invoices.

  1. Manage Inventory Efficiently

For businesses that rely on inventory, efficient inventory management is crucial. If you are shutting your business for a period, be careful not to overstock, as this ties up cash.  If you are operating for most days over the break plan your purchases wisely to avoid unnecessary expenditure.

  1. Control Expenditures

Communicate with your team to ensure that only essential purchases are made over the next few weeks. Postpone non-essential purchases or investments until your cash flow stabilises. Evaluate every expense to ensure it's necessary and aligns with your cash flow plan. 

  1. Negotiate with Suppliers

Engage with your suppliers to negotiate better payment terms or discounts for early payments. Alternatively, you may be able to purchase more stock in bulk at a reduced rate if you are operating over the holiday. This can improve your gross margin.

  1. Access to Funding

Establish a line of credit or temporary increase in credit card limits in case of a cash flow shortfall. However, be cautious about taking on this debt. Use it only to fund the short term vs. fixing a flawed business model.

  1. Keep Communication Open with Clients

Maintain open communication with your clients. Inform them of any changes in your services or availability during the holiday season. Clear communication can lead to better customer relationships and potentially faster payments.

  1. Plan for the Unexpected

Lastly, always have a contingency plan. Unforeseen expenses can arise, and being prepared can make a significant difference. This might include setting aside a cash reserve or having a clear plan to reduce costs quickly if needed.

In wrapping up, managing cash flow during the holiday season requires careful preparation. By implementing these strategies, you will be able to navigate this challenging period and maintain financial stability.

If you would like support in implementing cash flow management strategies into your business, please chat with one of the team at PROTRADE United.

Written by Jon Mailer
CEO& Founder

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