Preparing for the holiday part I: Checking your cash flow.

Oct 06 2019 | Contributing writer Gene Marks, small business expert, CPA, and PayPal ambassador

Your successful holiday season will depend on one thing: cash. To make everything work - marketing, investments, hiring, processes - you'll want to make sure there’s cash available to fund these activities. Start tackling the items below to make sure you're well financed through the holidays.
Revisit your lines of credit and make sure you have reserves.
Use prior years as your benchmark. Revisit your lines of credit and decide whether it's at a sufficient level. Consider all your funding options, including alternative funding.

Forecast your cash needs through the end of the year.
Meet with your accountant and prepare a holiday forecast. Using last year's sales as a guide, estimate this year's sales, costs, and both your variable and fixed expenses. Look at your beginning cash and with this forecast, roll it forward to the very end of the holidays to make sure cash flow is positive. Things you want to budget for include: shipping, seasonal help, additional inventory, marketing, and even miscellaneous holiday costs like store decorations.

Confirm credit terms and negotiate discounts with your suppliers.
The more credit you can get from your suppliers, the easier your cash demands will be at the height of the holidays. Confirm what those terms are in writing so there's no argument. Ask for volume discounts or discounts if you pay early.

Nail down your shipping costs and policies.
Talk to all of your shipping providers and agree on rates before the season starts. Be prepared to explain these rates to your customers.

Estimate the timing of your inventory purchases.
Look at your last year's inventory and revisit any mistakes you made. Talk to your supplier about delivery times. Do your best to only stock your necessary, best-selling items. Estimate the amount of inventory based on prior years purchases and this year’s forecast.

Don't forget to pay your taxes and consider other one-time expenses.
Think hard about any one-time expenditures that may have a big impact on your cash flow during that time. Consider debt payments, extraordinary purchases, estimated income taxes,  higher sales taxes and employee bonuses.

Work with an outside financial adviser or CPA to check your numbers.
Don't do this in a vacuum. Have someone else independently review your lines of credit, credit terms, shipping costs, inventory plans and cash flow forecasts. Pay an expert for a few hours of their time to catch anything that you might not be thinking about.
The content of this article is provided for informational purposes only. You should always obtain independent business, tax, financial, and legal advice before making any business decision.