Festive Finances: A Guide for SMEs

In the run-up to Christmas, businesses are more likely to experience cashflow issues, so it's important to ensure smooth management of your finances at this time of year.

The festive period is traditionally hectic, bringing with it fresh challenges for SMEs. Understanding the dynamics of Christmas accounting is essential to successfully survive the season.

Research shows SMEs tend to leave applications for funding until the eleventh hour - commonly giving themselves just one week to secure finance if needed.

This can lead to problems during the festive season, when underwriting decisions are considerably slower than at other times of year.

The need for extra funding is hampered by the delays, caused by employee holidays and a larger volume of applications.

Seasonal payment disruption

Unfortunately, the holiday period also sees an increase in late payments, which adversely impacts cashflow for SMEs.

Seasonal disruption causes a knock-on effect, leading to small businesses suffering a strain on resources and reduced operating capabilities as a consequence.

For businesses in e-commerce and retail sectors, this period is usually the busiest. SMEs must increase their stock to meet the large demand, capitalising on the seasonal spending boost. Ensuring cashflow into the business is therefore essential.

Planning ahead

Many businesses reflect on their situation in December and plan their budget for the coming year. This is a vital part of a company’s long-term growth and health.

The key is preparing for the new year and the increased financial pressure once the Christmas rush slows down again. This is why many SMEs choose to use the services of a professional small business accountant at this time of year.

Accountants can help to support a business throughout the festive season in many ways. Proactive SME accounting to anticipate surpluses or needs is the key.

Calculate your cashflow forecasts so there won’t be any nasty surprises, including analysing accounts receivable to organise the timely collection of any outstanding payments.

Inventory levels must be adjusted to match the anticipated festive demand, especially in the e-commerce and retail sectors.

A contingency fund should be set aside to cover unexpected opportunities or expenditure.

Planning for necessary year-end financial commitments and tax obligations is also imperative. Taking a proactive stance means any funding requirements can be addressed promptly.

Employing a professional accountant to help navigate the Christmas period permits you to concentrate on running your business at this hectic time, without having additional financial worries.

Succeeding during the festive period requires preparation and foresight, as it presents unique challenges.

Act early to secure funding, maintain operational stability, protect your cashflow and capitalise on opportunities for growth with the continuous support of a small business accountant.

New year challenges

This will also mean you’re ready to tackle any challenges to your finances that may occur in the new year.

Considering that SMEs, like larger businesses, have to give employees time off over Christmas and new year and still pay them, you need all the help you can get to make the most of your budget.

Remember, an accountant is not just for Christmas. Once the festive period is over, don’t leave your tax returns to the last minute and risk fines if they’re late. When filing your tax return for the financial year 2022 to 2023, the online deadline is 31^st January 2024. This is also a time when an accountant’s services will come in useful.