Despite being a hectic and joyful time, the holidays can create a situation for small business owners where they may find themselves in a cash flow crunch. There are many different reasons for this to occur, whether over-hiring, over-stocking inventory or simply higher expectations than originally projected, not having enough working capital on hand can severely limit the small business’s attempts to truly make the most out of the holiday shopping season.
While investing in staff, materials and inventory is crucial for small businesses around this time of year, it’s also equally important that owners ensure they have enough cash flow to make it through the end of the year. Without adequate capital, small businesses can find themselves unable to hire additional staff to pick up slack, purchase new inventory when goods sell out or even keep the lights on when the bills are due. Below are five ways small business owners can beat the holiday cash crunch.
- Budgets and targets
Chances are you already have an annual and perhaps a quarterly budget in place, but now is also a good time to create a daily budget as well. While there will always be unexpected fires that must be put out, small business owners can still ensure they’re spending money wisely throughout the day. This can create additional guidance when it’s time to make a tough decision. As Talk Business Magazine noted, understanding what is causing cash outflows to be greater than inflows is important for remedying the situation and maintaining adequate capital levels.
- Monitor stock
If sales are good this time of year, stock can be flying off the shelves. While the money customers spend on these goods can be used to restock sold-out inventory, not all supply chains will be able to accommodate the last-minute demands. It can be difficult to find that delicate balance between inventory and cash flow, since both aspects are reliant upon each other. However, with the right strategy and careful planning, small business owners around the country can ensure they’ve got enough product to sell throughout the holiday shopping season.
- Stricter invoicing
Some small business owners might wait until the end of the month or the end of the quarter to send out their invoices. While this might be useful during normal business cycles, it’s imperative that owners or managers invoice clients as soon as the work is completed. This speeds up the payment cycle and provides the the necessary funds when they’re most needed.
- Track sales
Many point-of-sale terminals can run reports highlighting which are the busiest sales day. This can be useful for determining when to pare back workers and when to staff up. As Entrepreneur noted, if Mondays between noon and six are historically the slowest times of the day, then the business doesn’t need to be fully staffed during this time period, otherwise workers can end up standing around while the store sits empty. Further, owners can also compare sales and expenses from the previous year to determine if inflows kept pace with outflows.
- Consider alternative lending
One of the easiest and quickest ways to ensure a small business has sufficient cash flow to outlast the holiday shopping season is by utilizing alternative financing. Whether the company has bad credit or no credit, taking advantage of alternative lending provides small businesses with the critical capital they need, when they need it most. With 24-hour service and a variety of loans and cash advance products to choose from, small business owners can benefit tremendously by going this route to beat the cash flow crunch during the holiday shopping season.