The document provides 12 tips for managing cash flow during the Christmas season. It advises businesses to (1) secure enough working capital, (2) diversify large customers to mitigate risk if one fails, and (3) clearly communicate payment terms to customers to avoid late payments. It also recommends (4) promptly invoicing and prioritizing overdue accounts, (5) establishing an effective credit policy, and (6) preparing a 13-week rolling cash flow to anticipate trends. Additional tips include requesting staff leave early, having a realistic budget, maintaining efficiency, and being aware of tax due dates to avoid surprises.

1. THE 12
DAYS OF
CHRISTMAS
CASH FLOW
B A K E R A F F L E C K M O F F R E Y
01.

2. The 12 Days of Christmas Cash Flow
Christmas is just around the corner but the season is not always filled with joy for
business owners who have not prepared their cash flow for the Christmas season.
Unless you are in retail, hospitality or accommodation, this time of year can mean a
dry spell for sales leading to post-Christmas cash flow problems. Or if you are in
those industries, excessively busy periods can leave you flustered.
1. For the first tip of Christmas your capital gave to thee!
Since the Christmas shut down period sees the normal cycle of cash flow cease, it is
important to ensure you have secured enough working capital and are achieving
maximum turnover.
2. For the second tip of Christmas be wary of customer concentration risk.
As an SME you may have individual customers who represent a large portion of your
revenue. It is important to consider what would happen if one of those clients went
belly-up and how this could affect you. Put a contingency plan in place just in case
something happens to these clients.
3. For the third tip of Christmas make your messages clear, so your customers do not
fear.
Good communication is the corner stone of any good relationship and is even more
important when it comes to busy periods like Christmas. One of the most
uncomfortable things you can do in a business is to chase payments from clients. The
process can lead to nagging and customers can find themselves frustrated. Assign a
person in your workplace to give clients a call ahead of time (customer relations
specialists) to ensure they are on track for payment. Give them all the information
they need to make payments on time, as well as all trading terms and expectations,
so they can’t find last minute excuses.
4. For the fourth tip of Christmas your invoices gave to thee, on time payments from
debtors and overdue accounts as a priority (it’s a stretch but this sentence does
actually rhyme).
Ensure that you are invoicing promptly and then chasing overdue accounts as a
priority to ensure they don’t drag on your cash flow and lead to insolvencies in the
new year. Good communication from step 3 is a given. Just remember that your
debtors may also be affected with business shutting and delayed payments on
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3. their accounts, so being organised will help minimise this risk. Asking for accounts to
be fully or partly settled in advance will also identify problem payers and champions.
5. For the fifth tip of Christmas your bank did give to thee, an effective and efficient
credit policy.
Just be sure you have a good credit policy in place prior to Christmas to overcome any
unexpected losses or late payments. This will alleviate any extenuating pressure on
your cash flows should anything happen.
6. For the sixth tip of Christmas your planning gave to thou, a rolling 13-week cash
flow.
A great way to predict and react to trading and social trends is to prepare a rolling
13-week cash flow. Since this involves a three month forecast, you should be better
equipped to handle any peaks or troughs in your income. It may also point out any
warning signs a few months in advance giving you time to react accordingly. Most
failures occur from businesses not recognising trends and troughs which leave them
without enough of a buffer to cope during low periods.
7. For the seventh tip of Christmas your staff gave to thee, leave requests early so
you can plan accordingly.
Understandably, Christmas time means a lot of staff going away on family holidays
or annual leave. Be sure to set an early deadline (say 3-4 months in advance) for any
leave requests for the Christmas period to be submitted and review them carefully. Be
fair to as many employees as possible but also be firm when it comes to taking time
off during this period. Encourage an open dialogue about what would be the least
disruptive times to go away and negotiate with certain staff where applicable. Ensure
your staff know how important they are and try to empower them to be extra
productive leading up to Christmas to cover for possible deficits during the period.
Make sure they know how critical they are to the overall efficiency of the company.
8. For the eighth tip of Christmas your budget gave to thee, enough savings to buy a
tree.
Okay you might not be buying a tree, but having a realistic budget for this period will
prevent overspending and will prepare you to better manage your resources over this
time. Clearly outline what funds are available today, what is tied up, what is
owed and where you can get more. Look at the expenses that generate results and try
not to spend money during this time if it in not generating income.
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4. 9. For the ninth tip of Christmas small efficiencies and professionalism keep the
customers coming back. Being efficient at delivering your core services over this time
will create faith in your business as you are not crumbling under the pressure of the
season. Happy, trusting customers equal more and ongoing sales. This comes down to
planning and budgeting but helps to ensure you meet your bottom line. Be
professional when dealing with issues to avoid turning into the Grinch.
10. For the tenth tip of Christmas the ATO gave each year, tax and super that don’t
disappear. It is all too easy to overlook the payment of taxes like GST and
superannuation in the midst of all the public holidays and staff vacations. Be aware
of due dates and set aside funds to use for these causes. You do not want these
charges to come as a surprise.
11. For the eleventh tip of Christmas your borrowing gave to thee, moderate loans,
debtor finance and more money! Building business based on borrowing is not
uncommon but be reasonable when considering these options as they can quickly
become a long-term liability. Consider the borrowing terms carefully and whether
you will be able to cover these debts in the new year. Another option is to sell
portions of your debt to a debtor finance company. The company pays you
immediately and takes on responsibility for chasing up the payments. Not all
businesses will be seen as an acceptable risk for the finance company, and fees for
the service may be included too, so this option is not for everyone.
12. For the final tip of Christmas, Santa said to thee, “Close your eyes and breathe
deeply.” While this time is usually hectic for most businesses in one way or another,
it is important to keep a level head and make calm decisions. The main takeaway is to
be as prepared as possible by analysing trends and your internal finance so you can
make adjustments. Being prepared can be the difference between an SME going Ho!
Ho! Ho! and Oh no! No! No!
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Baker Affleck Moffrey is here to help you along
every step of the way. Our professional services can
help you budget and plan accordingly for the silly
season. We are already consulting with many of our
clients to combat the Christmas cash flow crunch.