How to overcome summer holiday cash flow challenges

26/07/2022

School’s out for summer. Whilst many will be looking forward to spending sunny days with their families, for small business owners the prospect of the next six weeks or so can be daunting.

Regardless of whether your business sees sales peak over the summer months or they slow right down, the summer holidays can be difficult – especially when it comes to cash flow.

Here, we explore some of the biggest challenges small businesses face during summer holiday season and offer some practical solutions to help you overcome them.

Staff holidays

With staff taking more time off to look after their children or go on holiday, the summer months can significantly stretch internal resources. Also, particularly during good weather and high-profile sporting events, the temptation is there for some to take an impromptu day off.

If you have too many people off at once, not only can it become difficult to stay on top of everything, your remaining employees could start to feel overstretched – which could dampen morale and negatively impact the quality of your product or service.

If you’re not already, make sure you’re aware of when key staff are away and get holiday calendars up to date. This will ensure you’re best prepared to work around their absences, plan cover where it’s going to be required and make provisions to ensure disruption is kept to a minimum.

For some roles, it may be that hiring temporary staff will be worthwhile, while some elements could be outsourced.

Customer holidays

It’s not just your own staff that will be taking a break this summer; some of your customers will be too. As a result, invoice payments could be delayed, which can put increased pressure on your cash flow.

First and foremost, ensure you have adequate credit control resource throughout the summer, as absences in this area can harm your business if there’s no-one available to keep on top of customer payments and escalate where they’re missed.

Secondly, contact customers before invoices are due to ensure they remain front of mind and will be paid. If the person in charge of paying you is away, find out who is dealing with payments in their absence and update your records. This is good credit control practice anyway, but it can be even more important and effective during the holiday season.

For more credit control tips, check out this in-depth guide from our sister company, Hilton-Baird Collection Services.

Fluctuations in sales

Many businesses will see the summer impact sales – either positively or negatively. Either way, this can place a greater strain on cash flow than usual.

Where sales fall and less money is coming into the business, paying salaries, utility bills and many fixed costs, for instance, can be more difficult. Where sales increase, more money is required to fulfil those orders – particularly when supplying goods on credit terms, with suppliers needing to be paid long before invoices are due.

So it’s important to have a firm handle on your company’s finances and cash flow position to identify any potential issues before they occur. Cash flow forecasting can be extremely helpful in this regard. Should a shortfall exist, explore whether an external finance facility such as a loan or invoice finance facility could help you manage it.

And be mindful of overtrading. This occurs where a business takes on too many orders without having the required funds to fulfil them, and is a leading cause of cash flow problems and business failure. This can be exacerbated where a customer goes out of business before they pay you, so ensure you’re vetting and credit checking customers before accepting their orders, and consider credit insurance as a means to safeguard your cash flow against the risk of non-payment.

Quieter periods

If your business typically sees activity slow down during the summer months, staff can become unmotivated or bored.

So think about whether you could use the time to invest in some additional training to top up your employees’ skills, or perhaps run a few team building exercises to encourage staff to work together more efficiently.

Similarly, it could be a great time to embark on a major project – one that could make your business more efficient going forward, like a new CRM or marketing platform, accounting system, a new website or a new order management system.

Although the summer can represent a challenging time for businesses, with careful management it could be a fantastic opportunity to set your business and staff up for the future.

If your business would benefit from a new funding facility to help you navigate the summer months, contact us on 0800 9774833 or request a call back to discover the options available.