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5 Christmas cash flow tips

Mark Chapman
15 December 2016 3 minute readShare
A piggy bank wearing a Santa hat, in front of a Christmas tree

Christmas comes but once a year, and that might well be once too often for many business owners, who can find the festive shutdown – and all the pre-shutdown celebrations – a big drag on their cash flow. These five tips will help soften the blow.

“Christmas is a poor excuse every 25th of December to pick a man's pockets.”  ― Charles Dickens, A Christmas Carol.

Think about it for a moment. For at least two weeks of the year, your business will shut down completely, so you might have no revenue at all coming in.

On top of that, you’ll still be paying your staff – who will likely be lying on a beach somewhere or sleeping off a hangover in the comfort of their home – and you might even have some additional staff costs through leave loading.

Meanwhile, all your suppliers will still need paying, the rent on your premises won’t pay itself and the utility companies will still expect payment for electricity and water.

And to rub salt in the wound, your staff will expect a Christmas party to end all Christmas parties, and for the last week or so before the shutdown they will go into autopilot in anticipation of their break.

A piggy bank wearing a Santa hat, in front of a Christmas treeSuddenly, Ebenezer Scrooge – who baulked at letting Bob Cratchit slip away early on Christmas Eve and insisted he get back to his desk pronto on Boxing Day – looks less like a figure of contempt and more like a management guru.

As with all business expenses, the key to surviving the festive binge is to keep a tight rein on your Christmas costs and manage your cash flow. Here are a few tips for doing just that:

1. Make sure you invoice before the festive shutdown

If you don’t want that cash flow drag to continue into the new year, make sure you invoice for all work done before the Christmas shutdown starts, preferably well before.

If you’re lucky, customers will pay before the shutdown; more likely they’ll action payment when they reopen in early January. Don’t delay sending invoices until the new year – that way you’re locking in several weeks of extra delay in getting paid.

2. Avoid big-ticket purchases

If you’re thinking of buying large items of plant or equipment for your business, avoid making the purchase until your cash flow stabilises in the new year.

You don’t want to be faced with a hefty bill for a new item that you can’t pay until your revenue picks up again.

3. Collect your debts

In relation to invoices already issued, try to get as much cash in before Christmas as possible.

With many customers’ accounting departments closing for between two and four weeks, you know you won’t be getting paid at any point in that period. So chase your debts now and chase them hard, with a view to leaving your debtors ledger as light as possible come mid-December.

4. Don’t overspend on gifts

If you’re giving gifts, there are a few things you need to decide:

  • How much are you prepared to spend?
  • Who is on your list? This could include staff, customers, suppliers and even key intermediaries like your bank manager or accountant.
  • How much do you want to spend per recipient?

Remember that giving gifts is all about building relationships, rewarding effort put in through the year just gone and building goodwill for the year ahead. Your festive indulgence now should lead directly to increased sales or productivity, or reduced costs in the year ahead.

Remember also that most gifts are tax-deductible, which helps with keeping costs under control. So don’t overspend, and only give gifts if you think your business will benefit in the long run!

5. Don’t raid the tax and super piggy bank

With so many public and staff holidays, not to mention long hours in the lead-up to Christmas, it can be easy to overlook the payment of taxes such as GST, as well as superannuation.

Mark Chapman, H&R BlockDon’t forget there is a BAS due in February (complete with GST payment) and a super guarantee payment due 28 January.

No matter how tight your cash flow, set aside adequate funds in a holding account, and don’t dip into it. The ATO does not make a friendly creditor!

Mark Chapman is the director of tax communications at H&R Block, and a former senior director of the ATO.

5 Christmas cash flow tips
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Mark Chapman

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