FD Insight: Surviving Christmas

September 24th 2015 | Posted by phil scott

FD Insight: Surviving Christmas

It may only have just turned October, with plenty of shopping days left to stress about presents, but in corporate terms it’s already time to fire up plans to survive the Christmas period.

Staffing, cashflow, stock levels and many other issues become even more complex throughout December and beyond. Even if your own business isn’t directly affected by a festive bump in sales, you may still be part of a supply chain and vulnerable to knock-on effects.

At a recent FD Recruit – FD & CFO Conference on one late summer’s day, we discussed Christmas, its problems and their solutions, to gain the insight of some of the UK’s most successful finance directors.

Staffing and stock levels
Christmas affects the stock levels of most businesses dealing with goods. Some flourish over Christmas, meaning they need to increase orders in advance. Some have quieter spells during those same months, in which case it’s important to dial down your stock reorders.

This is where good stock control systems prove their worth. Invest in a decent system that helps predict future demand and manage ordering and is will also ensure the need for extra funds or storage space is known well in advance.

In addition, it’s important to communicate with suppliers to know their plans. It’s best to make sure that they can handle any increase in orders ahead of Christmas. Even if your product isn’t seasonal, it’s best not to be taken by surprise if they shut up shop for the holidays.

It’s also crucial to plan staffing levels well in advance. There will be individuals happy to work unsociable hours, especially if there is bonus pay involved, but others will prefer to take all the leave they’re entitled to. Plan rotas early to keep the workforce happy, and make contact with temp agencies early so that the groundwork is already laid should you need to call on them during busier times.

Cashflow conundrums
Cashflow is already a complex issue that sits at the heart of any company’s success or failure, and Christmas can be a time when this is strained the most.

Your balance can take a hit if you need to stock up on materials or goods ahead of Christmas, and if you’re staffing up for the rush that’s going to make a dent, too. Other businesses find that December and January are particularly quiet months for trade, which presents its own troubles.

If you have a bonus system in place for your staff, it’s likely they pay out around Christmas or the New Year, so this needs factoring in too.

To complicate matter further, these struggles are affecting your customers too. They may struggle to fulfil invoices, they may even shut down over Christmas when you call to chase them.

In an ideal world, you’ll plan ahead and build up cash reserves throughout the year. Where this isn’t possible, make sure your invoicing system is tight and you’re issuing your paperwork as soon as possible, then start reining in any overdue debt. Consider offering early payment discounts where payment due dates are likely to fall in the middle of the holidays when offices are closed.

Now might also be a time to consider invoice financing. Sure, they’re going to take their cut, but the pay-off is income when you most need it. Also try to have a friendly word with suppliers to see if they are willing to be a bit more flexible on terms, or maybe your bank can extend your overdraft facility.

If weather was predictable, bookies wouldn’t offer odds on events like the white Christmas.

You’ll need backup plans for heavy snow and other bad weather. If it hits, are you prepared for staff that can’t get to work? Materials that can’t arrive? Finished products that can’t leave? A postal system that’s already groaning under the weight of cards and presents? How about the effect of sub-zero temperatures on your premises and, for example, its heating and water pipes?

Christmas parties
On the one hand, they’re expensive and dropping free-flowing alcohol into the middle of office politics is your HR team’s worst nightmare.

On the other, they’re a great way to celebrate your team’s achievements. Your staff has worked hard for your cause all year and they deserve your appreciation, especially those that don’t work for commission or bonuses.

Recognition and appreciation are effective motivators. A good staff Christmas party raises morale and keeps staff loyal. Don’t think of it as merely an expense, consider it an investment.

Product returns
No-questions-asked returns on goods have become standard practice in recent years. Major retailers offer it, so most other business have to follow suit to remain competitive. The consequence is that sales totals can’t be inked, inventories finalised or cash redistributed until a month or so after the transaction.

If there is a Christmas rush on sales, this can become even more complex. Not only does it leave question marks over stock levels and cashflow in the weeks following Christmas – but you will need extra staff on hand to process the returns, and the logistics in place to handle the unwanted goods.