“It’s almost Christmas!” — and that’s one simple phrase that can make people feel anything from elation to dread. Maybe you’re part of the Christmas cult, a grumbling Grinch, or an indifferent elf — but whatever your personal opinion of the yuletide festivities, for SMEs it usually means one of two things.
For some, it’s an extra-busy and stressful time. For others, Saint Nick’s main gift is a shutdown period, and December and January are slow months. Regardless of which camp you’re in, seasonal finances are something worth carefully considering.
We come bearing gifts
Even the most anti-Christmas boss is still likely to think about throwing a Christmas party for employees, as a reward for a year of hard work. But for many companies the costs can stack up, and you’re likely looking at £50-100 a head for even a simple event. Multiply that by a dozen or more employees and you’ve got a hefty bill on your hands — not an ideal thing to take into the New Year.
On the other hand, one expense many businesses choose to take on is sending out cards or gifts to clients. It could be a lavish hamper for your top customers, or just a simple card wishing them well over the holidays. Either way, it can be a good way to remind clients you exist, strengthen relationships, and if you’re lucky, encourage future business — but it’s another cost that needs to be planned.
One more seasonal expense is paying employee bonuses and incentives. UK businesses paid out over £40bn in bonuses last year according to the Office for National Statistics, and although the majority is likely down to large multinationals like banks and insurers, SMEs still represent a healthy chunk of that figure. As with the above, it could add up to a significant amount of cash, and you’ll need to be prepared before you fill your employees’ stockings with bonuses.
Christmas cashflow
Any business owner knows that keeping an eye on cashflow is essential practice. Maybe you have cashflow completely under control — in which case, keep it up! But it’s important to appreciate that Christmas is likely to be an anomaly on your balance sheet, with various expenses and incomes that are rather different to your average month.
For example, perhaps like many firms you’ll have an early payday, to help employees manage their own cashflow over the Christmas period. In that case, will you have enough money coming in early in December to do it? It’s worth keeping this in mind.
There are also a few bank holidays over Christmas and the New Year — combined with the shutdown period that many companies have, the result is a lot less working time (and fewer working days) in December and early January. Besides, it’s not called ‘party season’ for nothing, and it’s probably a reasonable assumption that even when people are at work, they might not be running at 100% productivity…
If your business trades on credit, it might take longer than usual to get invoices paid, which could have unexpected consequences. There are a few things you can do about this, but the obvious first steps are to send out reminders, keep in touch with your debtors, and act fast once an invoice is overdue. This is also a time of year where a flexible invoice finance facility might come in handy — to insulate your firm against any Christmas cashflow catastrophes.
Santa’s little helpers
So far I’ve mentioned a lot of the consequences that can occur when things slow down for Christmas. But there are many sectors that see an upswing in trade over the holidays — like logistics, retail, and hospitality to name just three. Christmas can be a time when seasonal businesses make enough to cover their costs well into the new year, and for many it would be disastrous not to take advantage of this winter boom.
Maybe you’ll need extra elves (seasonal staff), a new sleigh (equipment), or more carrots for your trusty reindeer (working capital to pay suppliers) — perhaps all of them. Whatever your ramp-up requires, this is a good time to think about short term finance like overdraft alternatives, equipment leases, or a cashflow loan, to help you maximise your takings and see in the New Year with a sack of Christmas income.
Mistletoe and fine
Hopefully I’ve given you a few things to think about, and you’re ready to confront Christmas whether it brings extra customers or a well-earned rest. There’s lots of finance products in the market that could help you make it to January, even if you only need them for a few weeks — or maybe it’s just a case of taking extra care with the balance sheet over the festive period, to be sure you can afford all those presents under the tree.
Whatever your plans, with the right finance plans in place, your biggest worries will be an expanding waistline, an overworked liver, or regrettable activities under the office party mistletoe — there’s no need to add a financial hangover to a real one. Merry Christmas!