Entrepreneurs often find themselves showing up to work in January to find that the Holidays have turned out a lot more expensive than they originally expected. Not only did you have to deal with extra expenses like additional holiday pay, bonuses, holiday parties, and reduced output, you may also find that you’ve lost a few clients, or suffered a slump in sales.
Some of these issues might cause problems at other times of the year, but during the Holidays it’s common to suffer from multiple compounding cash flow issues that can ultimately break your budget. To help manage that, you’ll want to get your budget back on the rails in January as soon as possible, and plan on how to avoid the same situation next year.
Review the budget and make cuts
Budget cuts are as universally despised as they are effective. It’s a good idea to do a thorough budget review on a regular basis. You might go through this process more often depending on your business, but the beginning of the year is always a good time to straighten out any inefficiencies.
If the damage was relatively manageable, you might be able to make up for your entire budget shortfall simply by eliminating redundancies. In most cases, it’ll serve to limit the amount of financing you’ll need to make ends meet until future revenue can make up the difference.
Deal with holiday debt up front
If you weren’t financially prepared ahead of time, you may have used a credit card or other high-interest solution, or taken out a short term loan to cover cash flow shortages in December. That’s fine in a pinch, but you’ll want to pay this type of debt off, or refinance it at the earliest opportunity. It’s important to prioritise this in order to avoid unnecessary interest payments. Additionally, you’ll want to free up any assets that you might have used to secure those loans for future use.
Explore financing options
Depending on the type of business you run, and what your specific situation is, you might prefer any of a large variety of different financing options to deal with shortfalls. Let’s go over a few useful and popular solutions…
A generic business loan is a simple solution to a complex problem. Lump sum loans like these are ideal for solving several cashflow issues at once, since they’re not explicitly for one specific purpose, and the size of the loan can be adjusted to perfectly meet your needs. This makes them an excellent general solution when you need to cover a few one off expenses, pay creditors, and invest some capital in a growth opportunity on short notice.
Invoice financing or invoice factoring is another way to get access to funds on short notice, but it isn’t really a loan. Instead, you’ll exchange an outstanding invoice with your financial institution for most of its value. This way you can get an advance on a payment that would have come due at a later time. It’s an excellent solution for covering budget gaps without actually taking on debt, provided you have sufficient outstanding invoices to finance.
If you need to restock, a stock loan might work out better than a regular business loan. Unlike regular business loans, stock loans are usually secured against the stock that you buy with them. That means you don’t have to find other assets to secure the loan, so you can get access to funds even if you’re in a relatively tight financial situation.
If you do end up in a situation where you’re forced to pay a bill late due to poor planning, ensure that you can choose exactly which bill that will be. It’s critical to ensure, for example, that an automatic payment for a webinar service or a social media marketing platform doesn’t accidentally drain funds needed to keep employees paid and operations running. This kind of mitigation strategy needs to be kept updated, and is a critical way to protect your business’ overall health in the event of any kind of budget-breaking event.
The holidays can be a tough time for any business, but you don’t have to let it interfere with your success in the new year. Reviewing your financial options, approaching the problem strategically, and preparing for any serious setbacks in advance will go a long way in protecting you and ensuring that this year will be better.