The holiday season can be a boom for small businesses, but it also brings cashflow challenges. With increased demand, you’ll need to manage expenses for inventory, staffing and more. Here are some key tips to help you maintain a healthy cashflow during this busy time.
1. Review Past Performance
Look back at previous holiday seasons to spot sales trends and recurring expenses. This will help you anticipate demand and avoid surprises. Use this data to set realistic goals for this year.
2. Evaluate Current CashFlow
Check your current cash reserves and any outstanding invoices. Knowing where you stand now will help you identify potential cashflow gaps and prepare for upcoming expenses.
3. Set Clear Financial Goals
Define your financial goals for the holiday season, including sales targets and cash reserves. Having these benchmarks will guide your spending and ensure you’re not overextending your finances. Use the resources in step 6. Sales Forecasting on our Small Business Portal to help you.
4. Create a Holiday CashFlow Plan
A solid plan is crucial during the holiday season. The new year often leads into a quieter trading and tighter cashflow period. Create a detailed budget that covers all anticipated expenses, including inventory, marketing and additional staffing. Do not forget to allocate funds for unexpected costs like equipment repairs or last-minute promotional activities. Use the resources in step 5. Budgeting & Forecasting on our Small Business Portal to help you.
If you’re hosting Christmas parties or offering holiday gifts, ensure these are accounted for in your plan. To understand what the tax implications of your celebrations read our article on Christmas party tax deductions.
5. Manage Inventory and Expenses Wisely
Stocking up for the holidays is essential, but it is important to do so strategically. Purchase inventory in line with your sales forecasts to avoid overstocking, which can tie up your cash unnecessarily. Look for opportunities to take advantage of supplier discounts or bulk purchasing deals to save money. When it comes to holiday gifts, planning can help you manage costs more effectively.
Keep a close eye on your expenses. Identify any non-essential costs that can be reduced or postponed until after the holiday season. Many businesses also bring on casual staff. It is essential that you pay at the correct rate and meet your Superannuation Guarantee obligations.
6. Managing Cash Inflows
Consumers expect a bargain and can generally find one. If you choose to offer discounts, it is essential to know your profit margins to determine what you can afford to give away. A business with a 20% gross profit margin that offers a 15% discount, needs a 300% increase in sales volume simply to maintain the same position. Worst case scenario is that a business trades below its breakeven point and generates losses.
How well do you know your numbers to make these sorts of decisions? Think about how you can create value; it doesn’t have to be a direct discount. Contact your Financially Sorted Advisor for advice and use the resources in step 7. Pricing and Cost of Goods Sold on our Small Business Portal.
7. Prepare for Tax Obligations
Do not let tax deadlines catch you off guard during the holiday season. Set aside funds now for any upcoming tax payments to avoid last-minute cash shortages. Seek assistance from your Financially Sorted Accountant to understand any seasonal tax implications or benefits that might apply to your business.
8. Leverage Technology and Financial Tools
Use cashflow management software to keep track of your finances in real time. These tools can help you monitor cashflow, set up alerts for low balances and identify potential issues before they become problems. Having this information at your fingertips allows you to make informed decisions quickly.
Are your transactions all reconciled and up-to-date? Do you need help in the lead up to Christmas to ensure your financials are up-to-date to help you make these decisions? Your Financially Sorted Advisor can help.
9. Monitor and Adapt
Regularly review your cashflow throughout the holiday season. Schedule weekly check-ins to compare your actual performance against your forecast and make adjustments as needed. If you notice that sales are higher or lower than expected, be ready to adapt your strategy, whether that means adjusting your inventory orders or changing your marketing focus.
Conclusion
Effective cashflow management is vital for small businesses during the holiday season. By reviewing past performance, planning carefully, managing inventory and expenses, and staying on top of cash inflows and tax obligations, you can set your business up for a successful and stress-free holiday period. Start implementing these tips now to make the most of the season and ensure a strong financial finish to the year.
Visit our Small Business Portal and review steps 5., 6. and 7. to further support you in budgeting, forecasting and pricing. Our Small Busines Portal provides an extensive library of free resources to support you in developing and operating a small business.
We Can Help
Managing cashflow during the holiday season can be challenging. You do not have to do it alone. We are here to support you every step of the way. Whether you need assistance with budgeting, cashflow forecasting, understanding your tax obligations or reconciling your bank transactions, our team is ready to help you navigate the complexities of the holiday period. Reach out to us to discuss how we can tailor our services to meet your business’s needs and ensure a successful, stress-free holiday season.