Cash Flow Tips for Business Owners During the Holiday Season

The holiday season can be an exciting time for a skincare or beauty business. Clients may be booking treatments before holiday events, retail sales may increase, and we often spend more on marketing and inventory. At the same time, we're still dealing with regular payroll, rent, taxes, and other operating expenses.

All of that additional activity can put pressure on your cash flow. You may have a profitable business and plenty of sales, yet still find yourself short on cash because several large expenses happen to fall within the same few weeks.

The good news is that a little planning can make the situation much easier to manage.

Start by Listing Your Extra Holiday Expenses

Take a few minutes to think about expenses that are likely to be higher during the holiday season. Employee bonuses, seasonal help, additional inventory, holiday marketing, client gifts, employee gifts, and holiday events are all possibilities.

Some of these expenses may happen every year, but that doesn't mean they should be left out of your cash flow planning. Write them down along with the approximate amount and when you expect to pay them. Seeing everything together makes it easier to determine whether your business will have enough cash available when those payments come due.

Factor in Vacation and Holiday Closures

Your expenses don't stop just because your business is closed for a few days.

If you or your employees are taking time off, consider how that will affect your appointment availability and revenue. A spa or skincare business that normally sees 30 clients a week may generate considerably less revenue during a holiday week, while rent, software subscriptions, loan payments, and other expenses continue as usual.

This is particularly important if you are paying employees during periods when the business is closed or giving bonuses at the same time.

Collect Outstanding Payments

Before the holidays get too busy, take a look at your accounts receivable. Are there customers with unpaid invoices or outstanding balances?

Following up on overdue payments can bring additional cash into the business before you need it. If you provide services to other businesses, such as corporate skincare events or professional services, don't assume that an invoice will be paid simply because you sent it. A friendly reminder can make a meaningful difference to your cash flow.

Look Ahead at Your Upcoming Bills

Your bookkeeping can help you see what is coming before it becomes a problem. Review upcoming payroll, vendor bills, credit card payments, loan payments, taxes, and other significant expenses.

It's particularly useful to look at the timing of these payments. You may have enough money to cover all of your expenses for the next few months, but a cluster of large payments in the same week could temporarily create a cash shortage.

Knowing about that situation in advance gives you options. You might delay a nonessential purchase, collect outstanding invoices sooner, or simply make sure enough cash remains in the bank.

Be Careful With Holiday Inventory

If you sell skincare products, the holidays may be one of your busiest times for retail sales. That can make it tempting to place a large inventory order so you don't run out of popular products.

Before doing that, take a look at what you already have. Review your recent sales and current inventory levels to determine what you're actually likely to sell.

Too much inventory ties up cash that could be used elsewhere in the business. At the same time, running out of a popular product during your busiest selling period isn't ideal either. A little analysis may help you find a reasonable balance.

Remember Your Tax Obligations

Your bank balance can be misleading if some of that money needs to be set aside for taxes.

If you make estimated tax payments, have payroll tax obligations, or expect a significant tax bill after the end of the year, include those amounts in your cash flow planning. Your tax professional can help you estimate what you may owe and determine how much you should be setting aside.

It's much easier to prepare for a tax payment when you've been planning for it throughout the year than when you discover the money isn't available a few weeks before the deadline.

Create a Simple Cash Flow Forecast

You don't need complicated software to get started. Look at the next two or three months and estimate how much cash you expect to receive and how much you expect to spend.

Start with expected revenue, then account for payroll, rent, inventory, taxes, debt payments, and other expenses. If you see a month where your projected cash balance gets uncomfortably low, you'll have time to figure out why and make adjustments.

This type of planning can also help you make better decisions about purchases, hiring, promotions, and other business investments.

Give Yourself Some Breathing Room

The holiday season is busy enough without discovering halfway through December that your business doesn't have enough cash to cover everything that's coming due.

Reviewing your books, outstanding invoices, upcoming expenses, inventory, and tax obligations before the holiday rush gets underway can give you a much clearer picture of what to expect.

At Skincare Bookkeeper, we help skincare and beauty business owners keep their books organized and understand what's happening with their cash flow. If you'd like help getting your bookkeeping caught up or making sense of your numbers before the end of the year, we'd be happy to help.