Are you looking forward to the Christmas break? Or are you, like the majority of small business owners, dreading the effect that the annual hiatus has on your company?

If you run a successful business, you should certainly enjoy a well-earned break: With suitable planning and a smart invoice finance plan, you could.

The problem for most SMEs isn’t that they haven’t made enough money to weather a couple of weeks of very low – or no – productivity. The problem is that with other businesses closed too, the festive season tends to become an extended holiday for bill payments.

This spells cash flow problems for any SME which relies on getting invoices paid on time to meet its own financial obligations. 

Why Christmas is a Cash Flow Catastrophe

Roger Mendelson, CEO of Prushka Fast Debt Recovery and principal of Mendelsons National Debt Collection Lawyers, [said in a recent blog about seasonal cash flow problems]“The period from late February to early March is what I call ‘graveyard month’, because typically it’s the most likely time a business will collapse. Most of these insolvencies are usually the result of cash flow drying up over the Christmas period, which has a flow-on effect for later in the year.”

This is because, other than those in retail and hospitality, most of your business-to-business companies will start to slow down in mid-December and are closed for operation until well into January. When they do get back, paying the bills is often ‘forgotten’ about for another week or three – especially if they are worried about their own cash flow.

Mendelson says this effect is then exacerbated because, at the start of the New Year, many businesses hold back on placing new orders while they assess the damage of their own Christmas slowdown. 

How to Plan your Christmas Cash Flow

According to Nina Hendy at business software firm MYOB, two-thirds of small business owners feel stressed during the holiday period because of cash flow problems in their business.

In order to safeguard your business and enjoy some much needed rest and relaxation, she recommends planning cash flow as much as possible; getting invoices in well before Christmas; dealing with late payers effectively; and running stock down.

Additionally, says Hendy, look for ways to implement a better approach next year by planning ahead.

Invoice Finance Can Help You Relax

When a disruptive but entirely predictable event like Christmas is on the horizon, this is doubly good advice for small business owners.

Proper planning, however, will only lead to more stress if you don’t have a plan as to how you will deal with cash flow shortfalls. This is where invoice finance comes in.

With invoice finance, you can put forward your outstanding invoices in your accounts receivable ledger and get up to 90% of the invoice value within 24 hours of the invoice/s being verified. With the balance (less a small fee), being received when your client pays – 30 to 90 days later. 

Such a funding solution is offered via a user-friendly real-time software platform provided by the likes of TIM Finance. This can be a great way to take planning a stage further by ensuring you always have a way of accessing the funds you need, both in the quiet and busy times of the year. 

With a flexible invoice discounting solution in place, you could get your outstanding invoices cashed, in time to pay staff and suppliers before Christmas and even after when January is traditionally a quiet period. Then you can put your feet up for a few weeks, happy in the knowledge that you did your bit to promote Christmas cheer.