6 Steps To Prevent A Christmas Cash Flow Crisis

6 Steps To Prevent A Christmas Cash Flow Crisis

The Overberg Business and Lifestyle Magazine

6 Steps To Prevent A Christmas Cash Flow Crisis

- Article by Ina Georgala

Family time, sea, sun, a braai or two - all part of the Christmas holiday season that we look forward to this time of the year. But while ordinary salary earners have a chance to relax with their families, most business owners and entrepreneurs spend their Christmas season watching their cash flow. 

Profits made in the Christmas season can literally shape the rest of your business year. A profitable season can generate the cash necessary to see you through the dry months of January and February and even fund necessary future expansion and development. But an unprofitable Christmas can also ruin a business when the cash runs dry… Cash in also means cash out. Traditionally, the retail and hospitality industries ramp up activity to take advantage of the so-called “golden months” of October to December, when they can generate between 20 to 40 percent of their annual sales. This means taking on more staff, longer trading hours and ordering in more stock. Other businesses will slow down activity over the holiday period, with some retaining a skeleton staff to provide basic services only or closing down altogether for the week between Christmas and New Year. Unfortunately, both ramping up and slowing down can create havoc with a business' cash flow. So before you find yourself caught up in a cash flow crunch because of Christmas, try our easy 6-step guide for a cash flush Christmas and a prosperous New Year.


Use the months before Christmas to set up a weekly cash flow plan for the holiday season. Compare incomings and outgoings from previous Christmas periods, including the dry months of January and February. An accurate cash flow forecast will help you budget correctly. Don't get so carried away that you over-invest in products or material that you might have to carry until business picks up again. There are always hidden costs associated with overstocking such as storage, staffing and transport that can bite into your cash flow reserves later. Pace your payments to avoid huge chunks of cash going out in January when cash reserves are low.


Many customers slow down payments during the Christmas period, so get on top of your invoicing to customers big and small before December. Communicate with customers who have outstanding invoices as to when you expect payment as well as your arrangements for payment over the Christmas period. If a customer is unable to pay the full invoice, agree on a payment plan. A part payment is much better than a debt that remains on the books until February the next year. You can even offer incentives on outstanding invoices such as early payment discounts for December only. Use the same strategy to protect your cash flow by agreeing extended payment terms with all your large suppliers before the Christmas period starts.


The weeks between Christmas and New Year up to the start of the school year count amongst the most unproductive of the year. Turn the quiet period to your advantage with activities that will help your business long term. This is the time to go through your inventory list and review pricing, catch up on administration (particularly your debtors book and those pesky tax forms), review all costs related to your business and start investigating potential new customers, products and suppliers. You will be able to hit the business year running while the competition is still dealing with the post-Christmas blues!


Start shopping around for financial institutions that provide business support like business loans, business credit cards and invoice finance and have these measures in place before December. That way you will not be caught short if you need short-term financing to tide you over in the lean months of January and February. 


Ideally, all businesses should ring fence some of their profits throughout the year to build up a cash flow kitty that will see them through leaner months. A good objective is to have enough cash on hand to cover at least 3 months' operating costs. Having a cash reserve like this really helps in the long run as it can be used to fund any business expansions the next year.


Fact: No-one can run an effective business on an empty battery. Keep in mind that an inability to switch off from your business has a negative impact on your relationships with dear ones - as well as on your business. 

Plan some downtime even if Christmas is the busiest time of the year for you. Schedule a quick coffee hour early in the morning where you can connect with family and friends. If you run your business from home, agree on set office times during the day when you can catch up on e-mails and business calls - then spend the rest of the time fully engaged with family and friends. You will have a much more relaxed Christmas period - as well as a more prosperous New Year!

6 Steps To Prevent A Christmas Cash Flow Crisis

Ina Georgala

The Overberg Business and Lifestyle Magazine represents the interests of business owners in the Overberg by providing them with a platform to effectively advertise and promote their businesses. Based in Struisbaai, the team have extensive experience in project management, events, profiling, tourism ...

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