How to avoid the Christmas Cashflow Crunch [2022 edition]

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.

With the additional financial pressures in the world right now, public data is showing that late payments are on the rise.

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 your plan is a really simple way for managing:

  • your expected incoming income
  • your expected outgoings

Your plan should cover the next few months into 2023.

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 free downloadable spreadsheet from our cashflow blog and plan your cashflow over Christmas and beyond.


Look at your payment dates for suppliers and tax

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.

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 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)

It’s important to be on top of who owes you and how much. If you sell on credit, you may give your customers 14 days to pay, for example.

There is often a ‘lag’ in payments around Christmas and the new year in the small business world. 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! Sadly, this is faaar worse now!

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 2023

Your personal tax return is due on the last day of January 2023, 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.

If you can’t pay, you can ask HM Revenue & Customs for time to pay. These ‘time to pay’ arrangements are available on most business taxes. Again, make sure you get in your request early so an agreement can be reached before the due date.

Do this now: File your tax return early. You still won’t have to pay any tax due / on account until 31st January 2023. 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.


Consider prepayments and deposits

One way to support the Christmas cash pinch can be to draw some money into the business in advance.

If you can raise a pre-sale event, or an ‘early bird deal’ on your product or service to encourage customers to pay now ahead of Christmas, this can really help.

Obviously, you will still need to carefully plan the period after Christmas to ensure you still have the money to deliver the service, but this strategy can really work in the short term.


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.