Tips for SMEs on managing cash flow at Christmas

Staff holidays, early payroll, bonuses, long payment terms from retailers and staff overtime all pile extra pressure on SMEs over the Christmas period and affect cash flow. A study by Santander Corporate & Commercial has revealed that almost one in six small businesses in the UK are “very” concerned about effectively managing cash flow over the next 12 months, with a further 27 per cent claiming to feel “quite” concerned.

Here are our tips for managing cash flow this Christmas…

Get organised

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.

Pace your spending

It’s easy to get carried away investing back into your business when times are good, however this can make life difficult in quiet periods. Anticipate the lean months and budget appropriately. Christmas can be a particularly demanding time with staff bonuses and parties to pay for. For a start, you could spread staff bonuses over two payments and have a low budget party in the office. Most staff would rather have a modest Christmas celebration and keep their jobs in the New Year!

Communicate with customers

Speak to customers about when you are expecting them to pay you over the Christmas period. Be clear about working hours and delivery times to avoid confusion. It won’t make you popular, but you may have to consider penalties for larger businesses that are out to protect their own cash flow – be clear and up front about this.

Boost productivity

Turn a quiet time in sales or contracts into a busy period in planning and training. Take advantage of the peace and quiet. Set targets, conduct staff reviews, catch up on admin and source new suppliers. Then, when business picks up again, you’re ready to take full advantage.

Get extra funding

You could approach your bank for additional funding over the post-Christmas period or you could use a specialist finance company tailored to helping smaller businesses access working capital. There are many options that can quickly boost cash flow such as business loans, invoice finance or merchant cash advances.

Lucy Liddiard