Top cash flow tips on how to get through festive season shutdown

Many businesses will struggle to get through the festive season shutdown due to rising costs, inflation and issues with late payers. The festive season is always a difficult for businesses that close down over Christmas and the new year. Unlike the retail sector, which generates some 30% of its annual revenue during this period, many other sectors close down.

Businesses within the manufacturing industry, labour hire sector, and many others down tools for up to six weeks. This presents significant cash flow challenges for many businesses. On top of this, an increasing number of businesses are also experiencing issues getting paid, which is adding to this year’s end-of-year stress. The latest data released by CreditorWatch shows that trade payment defaults have risen to their highest level since October 2020.

How can businesses manage cash flow this Christmas?

Payment defaults are now up by fifty-three percent year on year. Court actions, another key indicator of business insolvency, are also up by fifty-two percent compared to last year. Businesses need to ensure they are taking urgent action to manage cash flow to support their enterprises through this year’s festive season. There are key things businesses can do. Here some are tips on how to manage cash flow during the festive season shutdown period.

Improve cash flow

Businesses need to find ways to unlock funds. Accessing cash upfront for customer invoices and outsourcing debtor management through facilities such as Invoice Finance is a quick way to get funds in the door. Invoice Finance is one of the fastest growing finance products in the country because it provides cash upfront to businesses for the invoices they generate.

At Earlypay, this is one of our biggest areas of enquiry and fastest growing areas of business. There are no bank loans required or extensive trading history needed. In fact, it is available to businesses of virtually any size or age – even young businesses with no trading history, or businesses with Australian Taxation Office debt or credit score issues. Business owners do not need to put up their home as collateral because the invoices are used as collateral.

For businesses that use Xero or MYOB, we are able to integrate their accounts with our user-friendly platform, enabling easy follow-up with their clients for payment. Our new Low Doc Invoice Finance product provides businesses with pre-approval in as little as two hours.

Outsource debtor management

Outsourcing debtor management takes the emotion out of doing business and it also ultimately frees up businesses to focus on more important income-generating activities.

One of the other benefits of Invoice Finance is that businesses can also hand over debtor management to the financial organisation providing the Invoice Finance facility, which relieves the burden of chasing payments from customers and clients. The cost is also negligible.

Debtor management professionals are experienced at getting money in the door and also specialised in doing so in a manner that does not jeopardise important client relationships.

Generate income from unused capital

Businesses have under-utilised capital sitting around. Whether it be storerooms, warehouses, machinery or other equipment, there are lots of ways businesses can generate income from these assets. Businesses are always looking for storage space for short and medium-term rent to locate excess stock or other items, or to hire or purchase second-hand equipment.

By working through your assets, you may find ways in which you can translate your idle capital into income to help you through the shutdown period. While Uber has disrupted the taxi, hospitality and food delivery, it has also introduced uberisation to the broader market – accessing products and services on demand for specific purposes or periods of time. 

This is a concept which should be embraced through on-demand style online platforms to generate income whereever possible from idle assets. While businesses may be shutting down over the festive period, there are still ways to generate income and manage cash flow to assist to get through this period. It just requires creative thinking and positive action.

Lee Trego is the Head of Growth at Earlypay.

Lee Trego, Head of Growth at Earlypay