A guide to managing your business finances over the festive season

The Christmas season can be a hectic time for businesses. Whether you are racing to get projects across the line before closing or preparing for an onslaught of seasonal custom, there is an ever-growing list of tasks that need your attention.

With an already overloaded to-do list, it can be easy for any business owner to overlook potential issues looming on the horizon. This is why December/January is the most ominous time of the year for small businesses. 

Between shutdown periods, annual leave and increased spending, your business’s finances can quickly slip into the red, but there are a few simple steps you can take to help ensure you start the New Year in good financial health. 

1. Be mindful of closing periods.

As any chartered accountant will tell you, businesses must always keep an eye on their cash flow, especially over Christmas. If most of your clients close their doors at this time of year, it is essential to be ahead of the curve in terms of invoicing.

If you have a client who regularly pays a week late, and their invoice is due the week before Christmas, you may find yourself waiting until mid-January before receiving payment. Multiply this by a handful of clients, and you will quickly find yourself in negative cash flow. Keep closing periods in mind when creating your invoices, and adjust due dates to ensure timely payment.

Businesses wanting to further increase the likelihood of being paid before Christmas should ensure they have automated reminders within their Xero account. Some even have success offering an incentive, such as a 5% discount for early payments.   

2. Keep your Xero account up-to-date.

Just as it’s important to get paid promptly, you should also prioritise paying your suppliers and contractors on time. You have spent valuable time building relationships with your external connections, so don’t risk undoing your efforts by putting them in an uncomfortable financial position. 

As suppliers prepare to shut their doors and contractors request their end-of-year payments, ensure you have revenue ready to settle those invoices. By following the advice laid out in Tip #1, you will be well-positioned to balance your accounts without risking negative cash flow. 

3. Set a budget and stick to it.

In terms of spending, Christmas can be one of the most expensive times of the year for a business. If you haven’t already, now is the time to sit down and work out a budget for the festive season. Consider your expected income and expenses, including Christmas bonuses, extra staff costs, and increased stock levels. Then, when you have ascertained what your budget looks like for the period, stick to it.

While we generally encourage clients not to rely on credit, if you do use credit cards to finance your Christmas spending, be mindful of the interest rates and ensure any balances are paid early in the New Year.

Ake Accounting, financial managers and chartered accountants

The Christmas season is a busy time for small businesses, and managing finances can be challenging. If you don’t have the resources, capacity or time to tackle it on your own, Ake Accounting can help.

We offer a range of services, from bookkeeping and tax preparation to financial planning and advice. We understand the pressures businesses face at this time of year, and our team of experts can provide the guidance and support you need to stay on top of your finances.

Like many businesses, we too will be closing from the 24th of December until the 8th of January - allowing us all to reset for 2023. 

If you would like clarity on the financial position of your business leading into 2023. Contact Ake Accounting today to discuss how we can help.