Tips to manage your Cash flow during the season

Tips to conquer Cash Flow crises during the holiday season.

A constant element through all of the challenges of business, is the need to manage cash flow. Staff holidays, early payroll, bonuses, long payment terms from retailers and staff overtime all pile extra pressure on businesses over the Christmas period and affect cash flow.  Some Retail businesses prepare for a great shopping event by spending a copious amount of money for Christmas to boost sales. That is the reason for many retailers to be fallen into a cash crunch – a situation where you do not have enough cash to operate efficiently.

What is cash flow?

Cash flow is the amount of money coming in and out of your business in a month.

  • Cash is going in when customers make purchases. If your clients don’t pay at the time of purchase, your cash flow will come from the collections of receivables.
  • Cash is moving out of your business in the form of payment for various expenses, such as rental fees, utility bills, tax payments, loan re-payments, etc.

Why cash flow management is important?

Cash flow is considered the lifeblood of any business. You should focus on managing the cash flow because it;

  • Ensures that you are making a profit – a top priority of any business.
  • Don’t have to purchase products on credit.
  • Never run out of cash in your brick-and-mortar stores.
  • Helps you become financially stable and develop sustainably.


That being said, how do you improve seasonal cash flow? Some things seem obvious – like saving money while sales are up – but this guide gives you Five other ways to improve your cash flow in your business, some of which you might not have considered before. Let’s dive in…

  1. The first step? Get your basics right.

Planning is key to avoiding cash-flow blues. If you predict your business is likely to be affected by slow sales or late payments, then start planning early.

Don’t bury your head in the sand but face up to what you think the worst-case scenario could be, to ensure you have the funds to cover unexpected bills or absent staff. Estimate the amount of money you expect to flow in and out of your business this Christmas. This should help you stay on track.

  1. Encourage the cash to flow faster.

There’s a bad practice which many businesses have resorted to. That is, believing you can build better relationships with the way you invoice. When you’re not sending invoices out on time or not chase payments from key clients when your invoices are due to be paid, you are practically providing a better cash flow for someone else’s business, than you’re delivering for your own.

Get into the habit of turnkey invoicing – sending out invoices as soon as possible in the purchase cycle. Then think about offering more than one payment option, or adapt some new ideas to motivate them, such as;

  • Could you offer a discount for early settlement?
  • Could you set up discounts on purchases for part-payment upfront?
  • Would some customers be attracted by seasonal offers in exchange for early payment?

In all cases, be firm and clear in your expectations for settlement. Unfortunately, some small businesses struggle to follow this through if they have large, enterprise-sized clients. Don’t hesitate to follow through on customers that do not pay their invoices on time, and remember that you’re in business to make money.

  1. Take count of your inventory, regularly.

Inventory can tie up your cash flow. Make sure that you keep track of unsold products and stock the right items.

Holding more inventory clearly appears as a negative amount in your cash flow statement. Not only do you have to spend on a high holding cost, but also your cash flow is tied up on the obsolete or near-expired items.

Therefore, it’s highly recommended that you offer sales promotions on items with a bigger holding cost or items reaching expiry soon. Swiftly sell out and free up your cash flow by offering buy-one get-one free, reward vouchers and coupons, etc.

On the other hand, you can apply demand forecasting; a technique for an ideal order quantity. The method is based on historical sales data, such as sales on last year’s Christmas, to formulate an estimate of current customer demand. 

Once you have taken count of your stock, review your stock requirements to smooth-sail in to the next year;

  • Do you have enough stock to launch you into the new year?
  • Do any of your suppliers have a long annual shut-down you need to consider, that might interrupt your ability to source stock?
  • Is there any stock you anticipate needing, that could take longer to receive than usual, that perhaps should be ordered now?
  1. Stay within your budget.

Christmas is one of the biggest and most significant shopping events of the year. No doubt that you want to take advantage of this holiday to attract customers and climb the sales ladder. However, you should not burn a hole in your pocket. Start by drawing a budget based on the expected revenue. There is a simple rule that you must earn more money than you spend.

To maintain a healthy cash flow, you should identify “needs” and “wants” to balance your financial status.

If you go through your bank statements, you might see a wide range of unnecessary expenses, such as travel costs, fancy meals, subscriptions you no longer need etc. Take these in to account when you prepare your Christmas budget.

  1. Make Bookkeeping a priority.

Year-end break period can be a tough time to navigate; some employees may have gone on leave, while some of your biggest clients may have closed for a break. No matter the circumstances, make it a priority to keep the bookkeeping up to date. Being able to access current data of your business means you can maintain an understanding of your business position and cash availability.

In closing, Cash flow problems are often cited as a factor in business failures. The year-end break period generally comes with increased expenses and managing a healthy cash flow can be crucial to ensuring you stay successful over the next year.

If you have any questions or concerns about your businesses cash flow, simply call us on +44 2070973767.


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