Overindulged this Christmas? Four ways to rid your business of the credit hangover…
The beginning and end of the calendar year represent two extremes of the human condition.
In December, we celebrate extravagantly and in January, we redeem ourselves with healthy living – we cleanse, detox and resolve to cut down on spending.
This of course has an adverse effect on the small business community who are also in the process of recovering from the excess of the Christmas trade. It has an impact on cashflow and works against a small business owner at this time of year.
You know you can detox your body but ever considered detoxing your business?
Here are four strategies to help your business recover from the Christmas excess…
Budget, budget, budget & plan, plan, plan
Plan ahead – it’s simple advice that often falls on deaf ears.
January is the time to plan annual expenditures and develop a budget. Review your books and take note of any peaks and troughs, they’re likely to repeat themselves and don’t forget to include a buffer for any problems or emergencies that may arise this year.
Change your payment procedures
One of the most common causes of working capital concerns are late payments. When your customers are slow to pay (or don’t seem to want to pay at all), the business will suffer.
There are a number of simple procedural changes you can implement to improve cash flow:
- Invoice early – every day you delay is one more day you won’t be paid for your work.
- Incentivise – consider incentivising customers who pay on time. This could help ensure you receive payments when you need them. Assess the situation, consider what is common practice in your industry e.g. are competitors offering discounts? If so, then it makes sense to do it too.
- Don’t be too proactive – pay your bills when they are due and not before. By proactively paying bills when they come in, you’re tying up your cash flow unnecessarily.
If you’re not already doing these things, start today. You can review all of your policies and procedures while you’re at it.
Ask an alternative lender
Even good financial management and planning is not enough at this time of year and businesses may need a short term injection of finance to recover from the excess of Christmas.
There are a number of alternative financing options available to small business owners, here are just a few:
- A bank overdraft – is a really easy way for a small business to access credit to manage working capital. The interest rates on a bank overdraft are generally about one to two per cent more than the standard interest rate.
- Short term business loans – these generally come with a fixed interest rate. Nowadays, alternative lending platforms like Spotcap, offer an unsecured line of credit, which means you don’t need property or assets to borrow against.
- Factoring or advances – a financial transaction where a company can sell invoices to a third party to meet its immediate working capital needs.
- Trade Creditor – often suppliers will offer a trade credit facility or a loan when you place bulk orders from that company. The supplier will generally conduct an extensive review of your company’s credit history before providing the loan so a good financial history is required.
Look after yourself
The beginning of the year can be a stressful period, particularly if you have resolved to give up caffeine, so look after yourself.
Get enough sleep, exercise and eat well – simple but important advice that will do wonders for you and your business.
Need financial assistance for your business? Spotcap provides unsecured short term loans to help support small business growth.
Originally published January 8 2017 , updated April 28 2017