How to avoid the Christmas Cashflow Crunch

Kirsty Young Budgeting, Business Tips

The winter months can be a worrying time for many business owners.

Depending on your business, managing the cash coming in and at the same time juggling what needs to go out can become a real challenge.

Add to this the difficulties the pandemic has brought over the last 18+months, and your short-term future could look bleak.

The good news is that with careful planning, some of these ‘cliff edges’ can be avoided. So, here are our top tips and professional thoughts on avoiding cashflow issues this winter for your business.


Create a general plan

Make time to create a plan for how your cash will look over the coming months. Ensure you plan in a really simple way for:

  • your expected incoming income
  • your expected outgoings

Your plan should cover the next few months into 2022.

Use our free download able spreadsheet free downloadable spreadsheet from our cashflow blog to help you do this. Planning your cashflow can help you spot where problems might occur in the future, and allow you to work out how you might deal with them.

Do this now: Download our Heelan Associates cashflow spreadsheet and plan your cashflow over Christmas and beyond.


Look at your payment dates for suppliers and tax

Now, we don’t want you to become part of someone else’s cashflow problem by not paying other businesses, but you can review your due dates.

You may usually pay bills early, including:

  • your tax
  • PAYE deducted from your team’s wages
  • a key supplier, way before their invoices are actually due

However, if your cashflow is tight or unpredictable, now might be the time to just pay ‘on time’ over the festive period. It’s always nice to be known for being a quick payer, so if you need to do this, it might be worth informing key suppliers with an email. You can always disguise it as a policy such as “We’re giving our finances team a well-deserved break over the festive period, so we’ll be dealing with bills in due date order in early 2022.”

Do this now: Review the actual dates you need to pay your tax and bills by, rather than when you normally might. Consider paying right on time, rather than early.


Consider credit cards or overdrafts if required

If your cashflow planning reveals that you need might some short-term lending, consider using your company credit cards or arranging an overdraft.

These are short term solutions that can help get over a small crunch point. Credit cards, for example, often allow you to purchase in the month, then you have another period to pay in which there is no interest charged. This can be a powerful solution for a short-term issue. However, make sure you have also planned to pay back the credit cards before the interest charges kick in.

Do this now: Identify potential sources of funding and arrange funding before you need it. Remember that banks will be closed over the holidays too, (and may have staffing issues too) so extending an overdraft may take a few days longer than usual.


Do your Credit Control early (a.k.a chasing Money)

If you sell on credit, you may give your customers 14 days to pay, for example. It’s important to be on top of who owes you how much. There is often a ‘lag’ in payments around Christmas and the new year in the small business world, as everyone starts to unwind around the 20th December and don’t really return to work mentally until after the New Year. This can impact on when you get paid.

History and experience also shows as we approach this period, money can be tight for a lot of people. A study by Xero showed in 2019 (pre COVID) that the average amount of money owed to small business at any one time was £23,260! That’s potentially the equivalent of a years’ salary for one of your staff!

Do this now: Diarise to regularly chase these invoices. Personal notes and emails where possible/appropriate tend to have the best impact.


Your personal tax deadline is 31st Jan 2022

Your personal tax return is due on the last day of January 2022, and any personal tax you have to pay is also due for payment on that date. So, you will need to prepare your tax return now to understand what your liability is in January.

Last year ,we had COVID19 business support measures that allowed you to delay the tax due if it was under £30,000. You also had the option be able to spread the tax due over 12 months in equal instalments.

Sadly, this option no longer exists, but you can still ask HM Revenue & Customs for time to pay. These ‘time to pay’ arrangements are available on most business taxes. Again, make sure you out in your request early so an agreement can be reached before the due date.

Do this now: File your tax return early. You won’t have to pay any tax due / on account until 31st January 2022. If you cannot pay your bill (or any tax debt), don’t stick your head in the sand. Go to HMRC Difficulties Paying and see how you can spread your payments out with a Time To Pay arrangement.


Bounce Back Loan repayment

If you took a Bounce Back Loan during the lockdowns, you are probably repaying this already.

There are now a few ways to make the repayments much lower under the ‘Pay as You Grow’ scheme. You can (with a few conditions):

  • Spread the loan over 10 years, making repayments smaller each month.
  • Ask for interest-free payments for 6 months. You can do this 3 times over the lifespan of the loan.
  • Ask for a payment break for 6 months, but you need to have paid 6 months’ worth first.

All of the above are arranged via your lender.

Do this now: If you need to spread your payments, get in touch with your bank before Christmas if possible and if not, as soon after 4th January as possible.


And finally…. look at your payment terms

This is likely not an immediate fix, but you should consider it for the slightly longer term. Giving your customers a little less time to pay, for example, may give you sufficient “wriggle room” in future.

If you give customers credit, consider:

  • Tweaking your T&Cs to ask for more money up front
  • Adding a card facility to take deposits or earlier payments
  • Taking direct debits
  • Removing barriers for people paying you, such as online payment options

Do this now: Give some thought to how your customers pay you. Don’t become a credit facility and let your business suffer as a result. Late payment is a massive issue in the small business world, and no business customer or client will be surprised if you need to change your payment terms to mitigate this.


I’m still worried about my seasonal cashflow

If you don’t have an accountant, or feel you aren’t making the most of cashflow improvement options with your current accountant, we’d love a chat about how we can help. Contact us now so we can discuss taking action before Christmas if required.