As we head into the Christmas holiday season you are most likely looking forward to some relaxing times ahead, but one thing that should not be taking a break is your cash flow.

Invariably there will be a blowout in your personal spending over the Christmas period on food, presents and holidays, while the normal household bills keep rolling in.

It's much the same for businesses. It can be all too easy in the busy lead-up to Christmas to let chasing bad debts and invoicing clients take a back seat. But if you don't act now, you may not see any cash until February. Meanwhile your regular bills will still be coming in and wages will also need to be paid.

So what can you do to make the holiday season financially stress free?

Personal planning

As an individual, it all comes down to planning and budgeting. Watch what you spend and if you put purchases on credit, make sure you can pay it off in full come January.

It may be a little late to implement this year, but one smart way to keep an eye on your budget is to buy gifts for the following Christmas when the January or June sales come around, or stagger your buying throughout the year. That way you are not hit all at once with a big credit card bill straight after Christmas.

The key is to know your budget limitations and stick to them. The Government's MoneySmart website has a TrackMySPEND app where you can nominate a spending limit for different types of Christmas expenses and track your progress.i

Setting up a savings account at the start of the year and outing money away regularly can also mean you breeze through Christmas as the money is already there to spend. Alternatively, you might use periodic payments throughout the year to minimise your outgoings during the holiday season.

Perhaps you can streamline your gift giving by buying presents just for children or collectively nominating a maximum amount to be spent on each person. If you received gift vouchers during the year that you haven't used yet, why not use them to buy presents this year?

The holiday period can prove particularly difficult if you work on a commission basis, for yourself or casually. Taking time off for your own holiday may mean you will be without income at the very time your spending balloons. Again, look at how you can rearrange your finances so money is available to meet your needs during the downtime. This might include paying bills ahead of time while you have the money coming in.

Business cash flow

For small businesses, maintaining cash flow holds they key to successfully navigating the holiday period.

Ahead of Christmas, make sure you chase all outstanding debts. If your debtors don't pay before the holidays start, then it could be at least the end of January if not later before you get paid.

As well as outstanding debts, make sure all your current invoices go out before the holidays as well. If you don't bill now, you won't be billing for potentially six weeks and then you will have to wait even longer for payment.

One strategy might be to put in place easy payment methods for your debtors such as BPay and Paypal. The more options you give customers to pay, the more likely you will receive prompt payment.

Or perhaps offer a discount for early payment before the holiday period starts or reduce the terms say from 30 to 15 days.

It might also be worth considering using debtor financing if you have a major debt that you don't expect to be paid before Christmas. With this strategy, a debt financing company takes on your invoice and pays you up to 80 per cent of the outstanding amount immediately.

The balance minus fees is deposited into your bank account once your client has paid the amount in full. This will at least ensure that you get your money when you need it most.ii

To boost income, consider heavily marketing your product in the run-up to Christmas. The extra money may counter a quiet January.

Or if you have slow moving stock, why not discount it to raise funds? Check out your inventory levels and maybe consider cancelling your January delivery if sales will be low.

Begin with a budget

The take home message for everyone, individuals and businesses alike, is that managing your cashflow starts with a good budget. If you know the pattern of your annual expenditure and income, then you will be able to recognise the periods when you may struggle and plan accordingly.

And while you're at it, why not take the time to shop around for a better deal for your insurance, telecommunications or energy.

We all want the festive season to be jolly, but cashflow pressure can put unnecessary strain on the merriment. If you're still struggling with your Christmas finances, come have a chat with us about how we can help.

https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/mobile-apps/trackmyspend

ii https://au.comcapfactoring.com/articles/how-does-debtor-financing-work/