For businesses in Geelong VIC, Christmas can be only part of the end-of-year cashflow story.
The weeks that follow can matter just as much.
Accommodation providers may be preparing for summer bookings.
Hospitality and event businesses may be looking ahead to functions and visitor activity.
Retailers and suppliers may be considering additional stock.
Transport businesses may expect more movements.
Trades and service businesses may have customers wanting work finished before the holiday period.
On 24 September, those busier weeks are still ahead.
That makes this the planning stage.
A business might already have encouraging bookings, enquiries or forward orders. But before those future customers generate cash, the business may need to spend money preparing to serve them.
The useful question is:
What will the business have to fund before Christmas and summer trading actually start producing the additional cash?
Forward bookings can create confidence before they create cash
A healthy booking calendar is positive.
It tells a business that future demand may be there.
But a booking and money in the bank are not necessarily the same thing.
Depending on the business, a customer may have paid only a deposit.
A commercial client may be invoiced later.
An event might not be paid in full until closer to the date.
A service might need to be delivered before the final amount is collected.
Meanwhile, the business may already be preparing.
Staff may need to be recruited.
Stock may need to be ordered.
Equipment may require servicing.
Suppliers may need deposits.
Marketing and other operating costs may rise.
That means the business can feel busy well before the corresponding cashflow improves.
Work out what preparation actually costs
Christmas and summer preparation can involve many small expenses rather than one enormous payment.
That can make the total easy to underestimate.
A hospitality business may need additional stock and staff.
An accommodation business may need maintenance, linen, supplies or casual employees.
An events business may commit to equipment, contractors or suppliers.
A retailer may increase inventory.
A transport operator may prepare vehicles for additional use.
A trade business may need materials for work scheduled before customers take holidays.
Individually, each commitment may look manageable.
Together, they can create a sizeable working capital requirement.
Rather than looking at each expense separately, total the additional commitments expected between now and the point where the stronger customer receipts begin.
Deposits help, but they may already have a job to do
Businesses taking forward bookings may receive deposits.
That can improve cashflow.
But it is important to remember what those deposits represent.
The business still has an obligation to deliver the future product, event, accommodation or service.
Some of that deposit may effectively be needed for the costs of delivery.
For example, an event business may receive a deposit months beforehand but later need to pay staff, suppliers and equipment providers.
An accommodation operator may hold deposits but still need to prepare the property and roster employees.
A strong deposit balance can therefore make the bank account look healthier than the amount of truly uncommitted cash.
When forecasting, separate money already connected to future customer obligations from genuinely available working capital.
Hospitality businesses may need staff before the busiest period
A business expecting stronger summer activity may need to recruit before demand reaches its peak.
That can be sensible.
Employees need time to be hired, trained and rostered.
But payroll begins as soon as people start working.
The additional customers may arrive later.
If another $6,000 of weekly payroll begins four weeks before the associated increase in sales, the business has already funded $24,000 before considering superannuation and other employment costs.
The decision may still make perfect commercial sense.
The important point is including that timing in the cashflow forecast.
Stock decisions should reflect what is actually expected to sell
Businesses preparing for Christmas can feel pressure to increase stock early.
That may be appropriate where suppliers have long lead times or where historical trading gives the business confidence about demand.
But additional inventory ties up cash.
Before increasing orders, look at what is already on hand and what has actually sold well during comparable periods.
A useful stock review can include:
current inventory levels
fast and slow-moving lines
supplier lead times
payment terms
confirmed customer orders or bookings
expected seasonal demand
margin
likely stock remaining after Christmas
The aim is not to avoid stocking for future demand.
It is to avoid tying up money in inventory simply because Christmas is approaching.
Geelong businesses may also need to think beyond Christmas Day
For many customer-facing businesses, the opportunity does not finish on 24 December.
The summer period can continue through January.
That changes the cashflow calculation.
A business might need enough stock or staffing capacity for several weeks, not just the immediate Christmas period.
An accommodation or hospitality operator may be preparing for bookings that continue after New Year.
A transport or tourism-related business could have additional operating costs across the same period.
That means the business should not exhaust its cash preparing for December if January is also expected to require additional working capital.
Transport operators can have costs rise immediately
A transport business expecting additional work later in the year may need to prepare before volumes change.
Vehicles might require servicing.
Tyres may need replacing.
Additional drivers or subcontractors may need to be organised.
Then, once activity increases, fuel and wages rise almost immediately.
If the customer is another business paying on account, the revenue may take weeks to arrive.
The operator can therefore experience higher operating costs well before collecting the associated sales.
A forecast should convert expected additional work into a weekly cost.
How much more diesel?
How much additional payroll?
What maintenance is likely?
How quickly does the customer pay?
That gives a clearer view than simply looking at expected additional turnover.
Trades may be dealing with customers who want everything finished before the break
Trades and contractors can experience another version of the end-of-year cashflow gap.
Customers may want projects completed before businesses close or families take holidays.
That can result in several jobs overlapping through November and December.
Materials need to be purchased.
Employees and subcontractors need paying.
Vehicles need fuel.
But customer payments may depend on milestones, completion or invoice terms.
A busy calendar can therefore increase the amount of working capital tied up across several jobs at once.
Late September is still early enough to identify that possibility before every slot in the calendar is committed.
The last invoice before Christmas may become January cash
This is one of the most important timing issues to consider.
Suppose a B2B business completes work and raises a significant invoice in early December.
When will it actually be paid?
A 30-day invoice could already move into January.
Even an invoice technically due before Christmas might be affected if the customer closes, staff take leave or internal approval processes slow.
On 24 September, the business does not need to assume this will happen.
But it can test the possibility.
If a $100,000 customer payment expected in December instead arrives in January, what happens to the cashflow forecast?
If the business can still operate comfortably, the plan has some room.
If everything depends on that money arriving on one particular day, the business may need a larger buffer.
Professional and service businesses can have the same problem
Geelong has a broad business-services economy, and these businesses may have little or no physical inventory.
Their largest working capital commitment may be employees.
A consultant, agency, professional services firm or other B2B operator may perform work throughout November and December.
Staff are paid during that period.
Customers are invoiced.
The customer may then pay in January.
The business has effectively funded the work until that payment arrives.
This is why Christmas cashflow planning is not just for retailers and businesses buying stock.
A business selling time and expertise can have a substantial cashflow cycle too.
More bookings can require equipment before the revenue arrives
A business may also decide it needs additional equipment to handle expected activity.
That could include commercial equipment, vehicles, tools, kitchen equipment, technology or other business assets.
If the business uses cash for those assets, less money remains for stock, payroll and suppliers.
Depending on the asset and circumstances, asset finance may be worth comparing with paying cash so the business can assess the effect on overall liquidity.
The decision should not be made in isolation.
The important question is what the bank account is likely to look like after the asset has been purchased and the operating costs of the busier period begin.
Working capital finance should match the actual gap
There is no reason to assume every Geelong business preparing for Christmas or summer needs a business loan.
The first step is identifying where the cash becomes tied up.
For one business it may occur when stock is purchased.
Another may carry additional payroll.
A contractor might fund materials and subcontractors.
A B2B service business could be waiting for invoices.
A transport company may be funding fuel and drivers.
Once the actual gap is understood, relevant finance structures can be considered if they are needed.
Depending on the circumstances, that could involve a working capital facility, line of credit, trade finance, debtor finance, asset finance or another commercial structure.
Lender requirements and permitted uses vary.
Trade finance may be relevant where supplier purchases come first
For businesses purchasing eligible stock, inventory or supplies before the related customer revenue is collected, trade finance may be worth investigating.
Depending on the lender and transaction, facilities may assist with eligible domestic or overseas supplier purchases.
The commercial question is whether using a facility allows the business to preserve enough cash for wages and other expenses while inventory moves through the sales cycle.
Finance has a cost.
Using business cash has an opportunity cost as well.
Both sides should be considered.
Debtor finance may be relevant when the sale has already happened
For eligible B2B businesses, there can be another stage where money is tied up after the work is completed.
The customer has received the goods or services.
An invoice has been issued.
The business is simply waiting for payment.
Debtor or invoice finance may provide earlier access to part of the value of qualifying commercial receivables, depending on the business, customer and lender requirements.
This can be particularly relevant where an increase in end-of-year sales causes the debtor ledger to increase at the same time as other operating costs are rising.
Customer payment behaviour matters more than the terms printed on the invoice
A customer may officially have 30-day terms.
That does not mean they always pay on day 30.
When preparing the forecast, look at what customers actually do.
If a major commercial customer usually pays in 38 days, use 38 days.
If another consistently takes longer, allow for that.
This becomes increasingly important as invoices approach the Christmas and New Year period.
A realistic payment forecast is more useful than an optimistic one.
Do not use every available dollar preparing for the busiest scenario
The strongest forecast may not happen.
Demand might increase later.
A booking could be cancelled.
Weather could affect some businesses.
A customer may postpone work.
A supplier could be delayed.
This is why the business should consider the amount of cash it wants to preserve as a buffer.
Preparation should give the business more capacity to respond to customers.
It should not leave it with so little available working capital that one unexpected expense creates a problem.
Think about January before deciding what can be spent now
For Geelong businesses benefiting from summer activity, January may be an important trading month.
For others, January may temporarily slow.
Either way, it belongs in the forecast.
December supplier accounts may become due.
Payroll continues.
Rent continues.
Finance repayments continue.
Tax commitments remain.
Some Christmas stock may remain unsold.
Some commercial invoices may still be outstanding.
If the business plans only until Christmas Eve, it may underestimate how long the additional working capital needs to last.
24 September is still about preparation, not urgency
At this stage, businesses have time to refine the plan.
They can review forward bookings.
Check stock.
Speak with suppliers.
Plan staffing.
Follow up debtors.
Review existing facilities.
Assess equipment requirements.
Look at January.
If finance may be required, there is time to understand the options before the need becomes urgent.
And if the forecast shows existing resources are sufficient, the business can move forward with greater clarity.
What information can help with an early cashflow review?
If a business believes additional finance may eventually be required, useful information can include recent business bank statements, current turnover, financial statements or management accounts, existing bookings or contracts, stock requirements, expected payroll, supplier terms, debtor and creditor ledgers, existing finance commitments, ATO position, the amount potentially required and the expected source of repayment.
Requirements vary between lenders and finance structures.
The purpose of gathering the information now is to understand the position, not to assume an application must be submitted.
Five questions Geelong businesses may ask while planning ahead
Is 24 September too early to start planning Christmas and summer cashflow?
No. Where businesses expect stock, staffing, supplier or operating requirements to increase later in the year, late September can be a useful stage to estimate those costs before commitments become fixed.
Can finance help a business prepare for a stronger summer trading period?
Potentially. Depending on the circumstances, working capital finance may be considered for eligible stock, payroll, suppliers and other business operating costs. Lender requirements vary.
What if we already have strong forward bookings?
Forward bookings can provide useful visibility, but the business should still calculate what needs to be spent before the booking revenue is fully collected.
What if our commercial customers will not pay until January?
That timing should be included in the forecast. For eligible B2B businesses with qualifying receivables, debtor or invoice finance may also be worth considering.
Should we use our own cash to prepare for Christmas and summer?
That depends on the amount available, known commitments, how long the money may be tied up and the operating buffer the business wants to preserve. The impact on January should also be considered.
Prepare for the customers without assuming their cash has already arrived
For businesses across Geelong VIC, Christmas and summer can create opportunities in hospitality, accommodation, retail, transport, trades, events, professional services and many other sectors.
The opportunities are different.
The cashflow question is often similar.
What does the business need to spend before the customer revenue arrives?
Thrive Broking can help Geelong businesses review that timing and compare working capital, trade finance, debtor finance, asset finance and other commercial funding options across our lender panel where appropriate.
On 24 September, the objective is not to treat the summer trading period as though it has already begun.
It is to understand what preparing for it could cost, how long the business may need to carry that cost and whether enough working capital will remain for the rest of the operation.
A Broker’s Observation
A strong summer booking calendar can look very reassuring.
But I would still ask what has to happen financially between today and the day those customers arrive.
Does the business need another employee?
More stock?
A vehicle repair?
Supplier deposits?
Equipment?
And how much of the future revenue has actually been collected?
Future customers are valuable.
Future revenue is valuable.
But neither pays a bill today unless the cash has already reached the business.
The purpose of planning in September is to make sure the business can comfortably fund the journey from “we expect to be busy” to “the money from that busy period is now in the bank.”