The decorations are down, the holiday is over and the Christmas rush has subsided. Despite being hailed as a time for resolutions and fresh starts, January is known as being a slow business month for many SMEs.
Whether you’re a sole trader affected by a clients’ lack of spending power after Christmas or a company that loses out over the festive period, try out our 4 tips for cash flow survival…
Planning is key to avoiding cash flow blues in January. 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.
Chief Executive of Funding Options, Conrad Ford, has this advice,
“Create a financial forecast for 2017. A financial forecast should be firmly grounded in reality, ideally with three sets of figures that represent the best-case, middle ground and worst-case scenarios for your business in the New Year.”
“Tax is an expense that should always be factored in. VAT bills are due quarterly, and corporation tax is due annually, so you’ll want to be putting money aside every month to ensure you can meet these important obligations. If things haven’t gone to plan, many lenders offer funding for tax bills, so there are other options if you’ve been caught short.”
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 so be savvy to avoid the January blues. 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!
Turn a quiet time in sales or contracts into a busy period in planning and training. Productivity is the buzz word in 2017, following the government’s announcement of a National Productivity Investment Fund of £23 billion, so 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.
Conrad Ford of Funding Options says,
“Give yourself enough time to apply for funding before you need the money — rather than waiting until the last minute and suffering the stressful rush to get the deal done.”
“It’s a common cliché that cash flow is the ‘lifeblood’ of any business, it’s crucial to get this right. If you’re regularly reaching the limits of your working capital, it could be a sign that your cash flow management isn’t doing a good enough job. There are lots of ways to improve your cash flow, including negotiating new payment terms with your customers or spreading larger spending over time using a business loan.”