The holiday season can be a challenging time for small businesses in New Zealand. Business operations are usually slow during this time as companies and employees get into the holiday spirit. Many offices even close for a few weeks in celebration of Christmas and New Year.
Unless your business belongs to the retail sector, this slowdown can cause a rather huge dent on your sales. If you are not prepared, you may end up facing serious cash flow issues by the time January rolls in.
Fortunately, there are many steps you can take to protect your business and ensure you remain cash flow positive throughout the holiday season. Here are our top tips:
1. Get your debts paid early
Businesses often begin slowing down by mid-December, so it’s important that you collect all receivables before this time. Invoice promptly for any projects you complete in November and December. Otherwise, you might end up waiting until late January for your payment. Also, review your debtors’ ledger and collect on all outstanding debts as soon as possible. This way, you will have enough funds to keep you afloat during the holiday season.
2. Carefully check the credit of new clients
Although your small business will need all the sales you can get this season, it’s still important that you are careful about who you’re extending credit to. Strictly follow your credit policies and procedures, especially when doing business with new customers.
Such policies include requiring new clients to submit credit applications and conducting credit checks. This way, you can avoid accumulating bad debt and make sure you remain cash flow positive throughout the holiday season.
3. Avoid large expenses
If the Christmas and New Year period is typically a slow sales month for your small business, then you will need to control your spending during this time as well. Create a realistic budget for the month of December and January, and make sure you stick to it.
More importantly, avoid any large expenses during this period. If possible, postpone them to other times in the year when you have more sales and cash to spend.
4. Consider offering discounts
If your business remains open throughout the holiday season, it’s a good idea to offer discounts on jobs and projects that you accept during this period. This way, more clients will be motivated to do business with you. Plus, you can use the extra sales to boost your cash flow in January and February.
5. Look for other sources of finance
Another great way to secure your cash flow during the slow holiday trading period is to use alternative funding sources. Consider using short-term financing tools to supplement your cash on hand. One such option is invoice financing, a method that allows small businesses to borrow capital from their unpaid invoices.
Armed with these tips, you will no longer have to spend the holidays worrying about your accounts. You can finally relax and take comfort in knowing that your business remains cash flow positive as it welcomes the New Year.