Managing cash flow for the holiday season

Cash flow could be very tight for business owners this holiday season. Learn from what you did in the past, stay in touch with creditors, and be the squeaky wheel to help your company get paid faster.

For this “5 in Five” podcast, I spoke with Rieva Lesonsky, CEO of Small Business Currents and a widely respected journalist in the SMB market. Below are the questions and excerpts from her responses to how to manage cash flow for the holiday season.

Brian Moran: What’s the financial forecast for small business owners as they prepare for the upcoming holiday season?

Rieva Lesonsky: It will be tough. So many unknowns – consumer demand, inflation, rising interest rates, potential supply chain issues, and finding seasonal help (and paying them increased wages) are all potential issues—and BIG issues for small businesses that rely heavily on holiday sales to meet their annual goals.

Brian: What’s the first tip for business owners managing their cash flow for the upcoming holidays?

Rieva: Start by looking at what your business did in the 4th quarter of 2020 and 2021. There were a LOT of financial obstacles in those years. Which ones did you get past? Which ones tripped you up? Did you have minor or major cash flow issues—and how did you solve them? That’s what I would start with—looking at the last two years to set the tone for what my business can do in 2022.

Brian: What’s the second cash flow tip?

Rieva: I would then look to see if and how my relationships with my financial partners have changed in 2022. Do I still have access to credit, either a loan or line of credit should I need it? Should I try and establish a new relationship before the holidays? Business owners want to make sure they have at least two options of tapping into credit should they need it for the holidays.

Brian: Let’s say things start to get tight with cash flow. Receivables are slow and payables are always expected on time. What can a business owner do?

Rieva: If you know that your cash flow is going to get tighter, CALL your creditors! Tell them your situation and ask for a payment extension. Many creditors will work with you if they understand your situation. It’s when you DON’T call them that they start to get worried.

Brian: Any tips on getting paid faster (for businesses that extend credit)?

Rieva: Yes…BE THE SQUEAKY WHEEL. If you extend credit, and your terms are net 30, you need to call your customer on day 31 (or even day 25 to confirm that payment will be sent). A huge mistake made by business owners is that they let their customers take a net 30 relationship and make it net 60 or even net 90. You MUST stay on top of who owes you money…and get paid ASAP. If they don’t pay their bills, you should seriously consider refusing to sell them anything else until the bill is paid.

Brian: Last question – We don’t know for certain what the next 3-6 months looks like. We know it will get worse before it gets better. What advice would you give to business owners about making investment into their company—buying equipment to opening new locations—with regard to cash flow?

Rieva: DO YOUR HOMEWORK! Talk to your Accountant, Banker, and/or Financial Adviser to determine whether you can afford to make such an investment. It’s not a good deal if, six months after making it, you’re trying to unload or sell it.

Brian: Thanks Rieva.

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