For many businesses, the festive season isn’t very jovial. The reasons are numerous, chief of which is terrible cash flows.
In fact it’s more like a cash halt. Retailers must stock up on Christmas items, additional staff must be employed and in other industries, the closure of one or more of their customers for extended periods means firstly, that there is no work and secondly, no payments will be forthcoming for weeks.
Reserves are like unicorns in the current economic environment and companies that haven’t reached the crucial 48 month mark, have not had a chance to build up much of anything except for experience and a customer or client base.
If this is you and even though the hour is late, there are still some remedies at your disposal to reduce the impact of the holidays on your business, and possibly even avoid it spilling over into January.
1. If you have a good relationship with your suppliers, ask for an extension on the repayment period on your account.
2. Pay only the minimum due on credit cards and other accounts, avoid paying early to get discounts during this period or any cash-strapped time.
3. Open accounts with suppliers if you have been paying cash.
4. Increase your overdraft facility if you have an excellent bank record.
5. If you have a large debtor book you could speak to anyone of the major banks about factoring or invoice discounting. Factoring can be very useful, not only do you generally get 80 % of your money upfront; you also gain a powerful partner who will administer your debtors for you.
6. Check your overheads, especially what you are paying your staff. Change to shifts if possible, instead of paying overtime.
7. Increase prices, especially if you have an established client base. Do an industry survey and make sure you are in between the highest and lowest prices for your product or service.
8. Consider value-added services to bolster cash income, for example: You could add a delivery service for an additional fee.
Written by small business strategist Michelle Schourie. Michelle@Knightshade.co.za
