Tackling your cashflow challenges this Christmas
Most of us look forward to Christmas as a time for fun, festivities and spending time with the family. If you’re a small business owner though, it’s not always the carefree holiday you might hope for.
Christmas can bring its own challenges for business owners, especially where cashflow is concerned. However, it doesn’t have to be that way. A bit of forward planning, preparation and contingency work should help you identify and tackle the challenges head on – leaving you free to enjoy the celebrations.
With that in mind, here are some of our top tips for a stress-free Christmas.
Identifying your Christmas cashflow challenges
Christmas is not a normal time of year for any business, and it’s likely that you will be affected by the season, regardless of your industry or sector.
For some businesses, it’s the busiest time of year and may add extra strains and demands that you’ll need to prepare for. You might need additional funding to pay seasonal workers, buy more stock, or to pay for additional office or warehouse space. For others, it’s the quietest time and business may grind to an almost complete stop. In this case, Christmas could lead to a dip in income during a time when staff – and the bills – still need to be paid.
It can help to sit down and prepare a Christmas forecast or budget, documenting what you know is coming in and what you know is going out. You could do this manually in a spreadsheet, or save time by using a software tool like Float to keep your forecast automatically up to date with your actuals from your accounting software.
Consider potential cashflow challenges such as additional staff/products/premises, having to pay workers earlier than normal, staff holidays, Bank Holidays, altered customer orders and late payment of invoices.
Once you have that information, you should be able to predict whether a cashflow problem is likely and consider how you can tackle it.
Solutions to Christmas cashflow challenges
Whether you need money to facilitate rising demand or to cover a period of reduced trading this Christmas, a short-term injection of cash may be the answer. There are many alternative finance options available from a thriving market of alternative lenders, all designed to meet your specific needs. Here are some of the main short-term funding options to help you get the ball rolling on a stress-free Christmas.
Short term loans
A loan needn’t be for life – it can be just for Christmas. You can get business loans that cover a much shorter term – as little as three months – which could provide just the boost you need to service seasonal demand or cover a dip in trading until things get back to normal. The variety of loans available is huge and includes products specifically for small businesses, loans that enable you to get the cash fast, and even products for those with bad credit.
Business overdraft alternatives
The traditional bank overdraft of previous years is now notoriously difficult to secure, but a revolving credit facility offers a great alternative. It works like an overdraft without the bank account, and means you can dip into the funds as and when you need.
The agreement comes with a credit limit, usually in line with a month’s worth of your business revenue. You can tap into it as required and once you’ve repaid some of it, you can draw down more funds, so it acts as a constant source of money that you can dip into as and when needed.
Invoice finance is a great way to release cash and improve cashflow all year round, but it can really come into its own during the Christmas period – a time when customers may be even slower to pay. It enables you to borrow money against your unpaid invoices, effectively releasing most of the tied-up cash earlier.
There are a few different kinds of invoice finance, but perhaps the most useful at Christmas time is the ‘selective’ variety, which allows you to choose specific invoices to advance while leaving the others to come in as normal. These ad hoc products mean you can get an advance on one or two large invoices, which may be enough to cover a short-term cashflow issue.
Business credit cards
You can use a business credit card to give you much-needed and quick access to cash in the short-term. Some products will let you borrow the money on an interest-free basis, provided you repay it within a certain period of time. As with all credit cards, interest rates can be high, and they may take a few weeks to set up, but like revolving credit facilities they’re a handy safety net to have in place — although the limit may be too low for some projects.
Some early planning and preparation can help you avoid the festive hangover this year. It may be that you need some external funding to help tackle Christmas’s cashflow challenges, but once this is in place it can ease some of the burden this festive season — leaving you free to focus on more important decisions, such as what time to take your Christmas Day nap.
- The small business funding landscape is changing
- Alternative finance options for business
- The best peer to peer lending sites for a business loan
- Best invoice financing providers for your business
- Crowdfunding options for business
- How to approach your bank for funding
Conrad Ford is Chief Executive of Funding Options, recently described by the Telegraph as “the matchmaking website for small businesses and lenders”. Funding Options has been selected by HM Treasury to help businesses find finance when they’re unsuccessful with the major banks, as part of the Bank Referral Scheme that launched in November 2016.