How to make sure your business is ready for Christmas

By Rob Mercer, Senior Regional Sales Director, Ashley Finance

Whether you love it or hate, Christmas is one of the most anticipated times of the year for both consumers and businesses alike. But while it’s usually a profitable period, the festive season also comes with a series of challenges, which can often prove financially testing for small businesses.

These challenges inevitably vary from sector to sector. For some – retailers, manufacturers, consumer goods companies, transport and logistics firms and many others – it is a peak period. But while this seems like a great thing on the surface, it actually throws up all sorts of issues to be dealt with by over-stretched management teams.

Considerably more stock or raw materials may be needed – which all needs to be purchased in advance before any sales money is generated. More staff are required too, meaning higher wage bills and in addition year-end bonuses may be payable to permanent members of the team. It’s a time of high running costs all round.

For those in other sectors, meanwhile, Christmas is a quiet time of year. Business gradually slows down through December, before there is something of a shutdown that can last right through to mid-January. These businesses won’t suffer in December – it’s at the end of January or into February when they will feel the absence of money coming through.

Then there are other factors that affect all small businesses alike, regardless of the sector they’re in. Some suppliers use the Christmas shutdown in business as an excuse to not pay outstanding bills or delay sending payments making them even later than usual. Finance offices close, and this means the festive season can have a negative impact on cash flow  with the knock-on effect of missed payments or late payment of invoices.

SME Publications/ SME XPO 2024

To top it all, the colder weather means that utility bills can make unpleasant reading, while for many companies quarterly rent bills are due after Christmas. Then there’s the matter of Self Assessment tax returns at the end of January which could apply to many company directors and sole traders on a personal level.

For many SMEs – when they eventually get to late January/February and the dust (and cash) has settled down – they’ll see that Christmas was a profitable time. It’s just getting there that’s the issue.

So, what can small business owners do to ease this tricky Christmas tale? My four key tips would be:

  • There’s no such thing as over planning – there’s really no substitute for making the effort to forecast cash flow as minutely as possible to see where the pinch points are going to come. Don’t just plan for the Christmas period either, look ahead to the inevitable New Year’s dip that’s to follow too
  • Anticipate late payments – build in a buffer that assumes you will have an indefinite higher proportion of late payments than normal during this period
  • Control all spending – what can you do to manage spend? Are there some things that are unnecessary or could be postponed until there is less cash pressure? If so, then put it on the backburner till February
  • Consider external funding – getting some finance in place could help to remove that stress and worry

In regards to finance, there are a number of options out there for business owners that need it. For example, invoice Finance is where a funding partner will advance you up to 90% of what you’re owed on the invoices you have issued, whereas a Business Loan provides an injection of cash for a short-term period. Both these options are fast, cost-effective and flexible, which can help with any cash flow concerns not just during the festive period, but all year-round.

In short, if you plan ahead and get help in place to aid the pressure of those inevitable late payments, your business should be financially equipped for Christmas and beyond.

SME Publications/ SME XPO 2024