7 Tips for Maximizing Cash Flow this Holiday Season

Author: Caron Beesley | December 5, 2013

Holiday season retail sales have been rising steadily in recent years, and this year is no exception with the National Retail Federation forecasting sales to increase by 3.9 percent to $602 billion over last year’s 3.5 percent growth. However, with continued uncertainty in Washington and an economy still in recovery mode, small businesses are either nervous or cautiously optimistic about what the holidays will bring.

The holidays can be a financial roller coaster for small businesses thanks to large upfront investments in inventory, marketing, and staff, peaking revenues as the season hits full stride, followed by the inevitable drop off in the new year. How can you be sure you won’t incur cash flow issues during and after the holiday season? Here are a few simple things you can do now to avoid fiscal strife later.

1. Wrap Your Arms Around Your Financials
Now is not the time to neglect your books. Make sure you are preparing or getting regular, up-to-date financial reports. You’ll want to look at your cash flow projections (i.e. what’s coming in and what’s going out) and options for improving receivables. Keep an eye on these numbers throughout the holiday period. In addition, be on the lookout for signs that overhead expenses are growing faster than sales – if they are, you’ll need to reassess and look for places where you can cut costs or control outgoing cash. Check out our earlier blog Managing Financials for more tips on how to wrap your arms around your financials.

2. Expedite Your Invoicing and Collections to Bring in Cash Quickly
This one applies whether or not you’re busy over the holiday season. If you can, invoice for any goods or services sold well in advance of the holidays so that payments aren’t delayed or debts linger into next year. Review any outstanding payments from customers and chase payment.

3. Negotiate Flexible Payment Terms from Suppliers
Just as you want to expedite the flow of cash in, you should also consider negotiating extended payment terms from your suppliers. This is especially useful as you head into your busy season and incur most of your variable expenses (inventory, marketing, etc.). The trouble is you won’t see any immediate returns on those investments until your revenues kick in, so an extended payment plan can help ease the pain of these pre-season costs.

Similarly, don’t pay your suppliers until you have to or try seek a discount for early payment.

If your business is profitable and you have a good relationship with your suppliers, consider asking now for a line of credit before you actually need it – this will also give you more purchasing power and help you manage any potential lag in cash flow.

4. Review Inventory
Conduct a stock-taking exercise this month and make sure you have ample supplies of high-margin lines. Are there any slow moving or less profitable items that you can bundle as gift packages or buy-one-get-one free offers?

5. Get Help with Seasonal Financial Fluctuations
If you need help with pre-season capital expenses or overcoming short-term cash flow, there are a number of financing options available. At Fundbox, for example, we offer an invoice-financing solution tailored to your needs with business-friendly repayment terms that alleviates the need or hassle of applying for costly bank loans. Another option is a CAPLine Loan Program from the U.S. Small Business Administration (SBA). This financing program provides advances (up to $5 million) against anticipated inventory and accounts receivable to help businesses with seasonal sales fluctuations offers.

If you are going to seek help, do it early to ensure you have options and avoid a crisis down the line.

6. Review Your Pricing Strategy
It’s typical for retailers to raise prices as the holidays progress and products are in demand and, quite frankly, shoppers are too stressed to notice. You might want to consider offering discounts earlier in the season to draw early-bird shoppers in then increase them as the clock starts ticking later in December (notably around December 21 and 22 – the last weekend before Christmas). Keep your marketing engine running too, draw attention to your high-margin lines and think of ways to price and shift excess inventory.

7. Plan Your New Year Marketing Strategy
How will you attract new customers and keep existing customers coming back once the busy season is over? Now is the time to develop a plan to hit the road running and prevent cash flow issues once January arrives.

Use the holidays to capture customer emails (use raffles, surveys, and other sign-up incentives), plan your email calendar and social media content well in advance so that you have the tools to stay engaged with your customers all year long.

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