Christmas shutdown cash flow: how to plan for a quiet January

Christmas shutdown cash flow catches out plenty of Australian businesses every year. Sales and customer payments slow from mid-December, while wages, holiday pay, rent, suppliers and tax keep coming. The businesses that handle it well start planning in November, while there is still time to act.

Map the gap week by week

Start with a simple weekly cash flow from the start of December to the end of February. For each week, list three things:

• Money coming in: customer payments you can realistically expect, remembering that many customers close too
• Money going out: wages, holiday pay, rent, loan repayments, suppliers and tax
• The bank balance you expect at the end of each week

The low point usually lands in mid to late January, after holiday pay has gone out and before trading has picked up. Knowing that number now gives you two months to do something about it.

If the forecast shows a shortfall, work backwards: how much you need, in which week, and what could cover it. Bringing invoices forward, delaying a non-urgent purchase or agreeing a supplier extension can each close part of the gap. Whatever is left is the amount to plan for now, rather than a guess made in January.

Wages, leave and the shutdown

Holiday pay often goes out in one hit, and it is easy to underestimate. If you plan to close, check what your modern award or enterprise agreement says about shutdowns, notice periods and directing employees to take leave. The Fair Work Ombudsman publishes guidance on annual closedowns.

Set aside wages, super and PAYG for the shutdown weeks in advance, in a separate account if that helps. Money that is already earmarked is much harder to spend by accident.

Talk to customers and suppliers early

• Invoice everything finished before the break, and send statements in early December
• Ask your larger customers when their accounts teams close and when they will process payments
• Agree any supplier extensions now, not when the invoice is already overdue
• Place January stock orders with delivery dates that match when you will actually need the goods

Seasonal businesses: the opposite problem

For retailers, hospitality and tourism, Christmas is the peak rather than the gap. The cash challenge comes earlier, because stock and staff have to be paid for before the sales arrive. Our worked example on stocking up for a seasonal peak walks through the numbers.

Then the January dip

Even peak-season businesses feel January. Stock bought for Christmas that did not sell is cash on the shelf, and supplier bills for it often land after the rush. Count what is left in the first week of the new year and plan your clearance before the next orders go in.

If the gap is bigger than your buffer

Cash reserves are the cheapest way through a slow month. When the gap is temporary and the business trades well for the rest of the year, short-term working capital can cover it.

GreyRok lends $5,000 to $500,000 over 3 to 12 months, assessed mainly on twelve months of business bank statements. Applying in November, rather than in the week before Christmas, gives you time to compare offers and to check that the repayments fit February and March as well as January.

This article is general information only and does not take into account your circumstances. GreyRok provides finance to businesses for business purposes only, subject to credit assessment and eligibility criteria.