Here we are already through one month of 2018, hopefully refreshed from a few days off over holiday period. Resolutions may have been made and broken and hopefully some still remain.

The Post-Christmas Cash Flow Crunch

Many of us know the figure of speech: “You can’t have your cake and eat it too”. Obviously this means you can’t eat your cake and still retain the whole cake. Once the cake is eaten it is gone for good.

I was thinking about the cash flow crunch that many small businesses will be experiencing right now and thought there were many similarities between the Christmas cake and Christmas cash flow.

Pre-Christmas rush

It is tempting to try and put the frantic period leading up to Christmas – where many small businesses were rushing to deliver goods and services for clients ready for the big day – behind us. Add to that, the madness of Christmas shopping, family plans and the kids finishing school, it is no wonder many of us breathed a huge sigh of relief when our out-of-office was finally on.

Let’s take a breath, reflect on what’s happened, and focus on how to get back on track together.

Post-Christmas comedown

Over the years working with small businesses and running my own business, I have observed a common theme of a January/February cash flow crunch. For some it is an absolute crisis they may not survive, others it might invoke credit facilities to get through tough times. The reality is that both you and your clients are at risk of cash flow issues, even if you have pre-planned you cannot control your clients’ finances.



Reasons for a cash flow slow down

Non-billable time during the break

  • If you or your clients had a break, you likely did not bill, so not only January but also February cash flow will be affected.

Time – we know that small business owners lack time

  •  Perhaps you were too busy during the Christmas rush to prepare a cashflow forecast.

Additional Expenses

  • Things like additional holiday pay for staff on statutory holidays all add up.
  • Perhaps you hosted a Christmas function for staff and clients.
  • Maybe there was pressure to pay creditors prior to the Christmas period.

New Year Expenses

  • Government tax authorities require pre November and December compliance returns and payments in January.
  • Credit card payments might be due.



Solutions to improve your cash flow

Prepare a budget

  • This should be for the next three months based on expected sales and outgoing expenses.

Implement easier ways to pay

  • Offering the option for online payment at the same time as bookings firstly ensures you get paid, and also reduces the chances of a no-show.

Consider mobile payment devices

  • Keep your options open and ensure you always have a way to take payments. The ability to use an iPhone or iPad as a point of sale opens up a world of cashflow opportunities.

Communicate with suppliers

  • If you are going to have trouble paying your suppliers, communicate this and set up a payment plan. Better to do this than to find yourself on stop credit and unable to trade.

Save and prepare

  • Start putting away from funds each month towards next Christmas, it’s only 47 weeks away.

If these tips have proven to be helpful to you, it’s probably worth checking out our number one way to improve cash flow for small business.

Remember, if you do not have enough to cover your outgoings, please reach out to your accountant or bookkeeper to help work with your bank to alleviate the pressure. If you do not have an advisor check out Xero’s Advisor Directory.

Melanie joined Xero as NZ Head of Bookkeeping in 2016. Prior to that Melanie founded Bookkeeping and Beyond and Training and Beyond - both multi award winning businesses. Melanie founded the New Zealand Bookkeepers Association (NZBAI) in 2010 and was its President from 2011 until December 2016. The NZBAI is consulted upon by strategic government agencies and is the sole professional bookkeeping body in New Zealand. Melanie enjoys sharing her knowledge of bookkeeping with small businesses and individuals. A small business owner herself, Melanie works with many businesses and understands the pain points of small business, such as cash flow and having more time. Small business succession planning and developing exit strategies is of particular interest to Melanie. She sold her previous business, Bookkeeping and Beyond, in October 2016 so understands succession planning first hand.