How to ease cash flow challenges at Christmas

Online Christmas shopping

Christmas can be challenging for many reasons. You may have to host your mother-in-law for a week or think of something to buy a notoriously fussy teenager.

It’s typically a time of great stress, but for a small business owner, Christmas can be a cash flow nightmare.

Lots of small businesses face some unique challenges at Christmas. For some, there is extra stock to buy, seasonal workers to pay, and more warehouse space to rent. For others, trade might die off completely, leaving you with no income to cover the outgoings. In both cases, forward planning is the key to business stability.

Budget for Christmas

Unless this is your first year of trading, you should have a good idea of how Christmas is going to pan out. It may not be as busy as last year, or it may be busier, but nevertheless, it is sensible to sit down and plan your budget. Make a note of what bills are due over the festive holiday and in the New Year. Think about how much cash you need to pay the bills, suppliers, and employees.

Do you need extra cash to purchase seasonal stock? If so, see if you can negotiate a longer credit period with suppliers, so you have time to sell the stock before you pay your invoice.

Do you have bills due or staff salaries to pay prior to the festive break? If so, look at ways to ease your cash flow burden in the short-term.

Talk to Your Small Business Advisor



The most obvious solution is to extend your overdraft at the bank. Most banks will be sympathetic to the pressures of the festive season. So long as you have a good relationship with your small business advisor, organising an overdraft or extending an existing one shouldn’t be too difficult.

Another option is to utilise a business credit card for short-term spending. This strategy is OK for paying bills or suppliers, but it won’t work if you have staff salaries to pay.

Alternatively, invoice factoring could help if you have some large outstanding customer invoices.

Take Out a Short-Term Loan

If you only need the cash for a few weeks, consider the merits of short-term loans – look at the Cash Lady short term loans as a good example of what is available to small businesses and individuals. The great thing about short-term loans is that you don’t need to fill out a long application form, and a dubious credit rating is unlikely to affect your ability to qualify for a loan. Many new businesses have zero credit history, which makes it difficult to qualify for a bank loan or business credit card. Short-term lenders don’t use the same lending criteria, so your lack of credit history is not a problem.

The cash will be in your bank account within a couple of hours or less, which is useful if you are under pressure to pay a bill or buy new stock to fill a gap in your inventory.

Don’t let Santa creep up on you without warning. With some advanced planning, Christmas cash flow challenges can easily be avoided this year.