Christmas is coming – is your cash flow ready?
Christmas might still feel a little way off, but for many businesses, the decisions being made now will determine how comfortably they navigate the next few months.
Whether Christmas is your busiest or quietest time of year, the question is the same:
Do you know what the next few months will look like financially?
If Christmas is your busiest time of year…
Higher sales are great — but growth and increased activity also need to be funded.
Now is the time to consider:
Do you have enough cash available to purchase the inventory you need to meet expected sales demand?
When will you need to order and pay for that inventory — and when will the cash from sales actually arrive?
Will you need additional staff, overtime or casual resources, and have you mapped out what this will cost?
Are there supplier deposits, freight, marketing or other seasonal costs that need to be funded before the revenue arrives?
What happens if sales are stronger — or weaker — than expected?
Are you protecting your margins, or could increased sales actually create more pressure on cash flow?
Have you considered the impact of GST, PAYG, superannuation and other obligations falling due during or shortly after the busy period?
A profitable Christmas period can still create a cash flow problem if the timing of money in and money out isn't understood.
If Christmas is your quieter time of year…
The challenge is different — but planning is just as important.
Consider:
How much working capital will you need to carry the business through the quieter months?
Have you started reserving that cash now?
What are your fixed operating costs while revenue is lower?
Have you factored in annual leave, public holidays and other seasonal employment costs?
Are there tax, superannuation or supplier payments that will still need to be made despite lower revenue?
When do you realistically expect revenue and cash collections to return to normal?
What would happen if the quiet period lasted four weeks longer than expected?
Are there discretionary expenses, capital purchases or projects that should be brought forward, delayed or reconsidered?
The aim isn't to predict the future perfectly. It's to understand your options before you need them.
A good cash flow forecast allows you to see the pressure points ahead, model different scenarios and make decisions while you still have choices.
This is where I work with business owners to look beyond the P&L and understand the story behind the numbers — cash flow, working capital, staffing, margins, business drivers and the decisions that need to be made before they become urgent.
If you're not sure what Christmas and the summer period will mean for your cash position, now is a good time to find out.
Let's spend some time mapping out the next few months and identifying where the opportunities and pressure points are likely to be.
Arrange a conversation about preparing your business for the Christmas period.
0431 905 215
tamzin@businesswithpurpose.com.au
www.businesswithpurpose.com.au
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