Will Christmas holidays be different this year?
In Australia and New Zealand we love our Christmas holiday period.
We’ll bask in the sun, swim at beaches and burn food outdoors. This while smugly watching our Northern Hemisphere neighbours sleepwalk through their cold dark winter.
That is unlikely to change this year.
What will be different this Christmas holiday period?
Cash flow. You can set your watch by it. Tight cash flow will be experienced by professional service firms – certainly in comparison to recent years.
Mid-December to late-January is always a long, lean cash period for many firms. Your clients are away, your staff are away, nobody has an incentive to pay you.
This is always the worst time of year for cash flow. WIP billed late-Nov to early-Dec rarely gets paid before late January. That combines with lower billing in late-Dec and Jan while everybody is on holiday. Every year it’s the same.
BUT … this year it will be worse.
So, what’s different this year? Cash is getting tighter (less liquidity) as we run into the last quarter of the year:
- No more COVID subsidies
- No more super “cheap” credit
- Increased inflation
- Declining business confidence
This Christmas holiday period will test some professional service firms and their cash flow. You still have bills to pay, but clients seem to stop paying you.
It is less than 70 business days until Christmas!
To help you plan for your Christmas period here are some tips:
- Issue new invoices earlier than you normally would – get billing fast! If you normally bill monthly start doing so fortnightly from October.
- Offer flexible payment options – including Fee Funding. Getting paid 100% upfront is preferable to carrying a client as a debtor for three months over the holidays.
- Consider offering an early payment discount.
- Prepare a three-monthly budget for the holiday period.
- Get some additional short-term resources on board to improve payment speed. Check out smartAR Outsourced Ledger Management for more information.
Again, it’s less than 70 business days until Christmas. If you have any concerns about cash flow what you do in the next hour might help your firm over the next six months.
Consider booking a call with our friendly team to explore options to help guide you over the holiday period.