buildings BCR Advisory
BCR Advisory Articles

Six steps to avoid Christmas insolvency

Six steps to avoid Christmas insolvency

Christmas can be a peak time for some small business owners, such as retailers, and a challenging time for others, such as manufacturers and service providers.

It is no coincidence that the number of insolvencies for certain industries rises in February and March each year after paying wages, finance commitments and rent through the Christmas period on the back of no revenue due to closure.

Many business owners run into a cash flow hole around February to March when their BAS commitments to the ATO and supplier payment fall due. In some cases this can mean the business is insolvent and the result is liquidation.

Here are six proactive steps a business owner can take to avoid Christmas insolvency.

1. Prepare a detailed cash flow forecast across the months of December to March to see where the shortfalls may hit. 

2. Don’t leave December invoicing until after Christmas and offer a discount for early payment.

3.  If December work is not complete and is expected to roll over into January, issue a progress claim invoice.

4.  Be diligent with debt collection during December to collect outstanding invoices from prior months. If a debt due in December is not collected, payment may be stretched out to February or March the following year.

5.  Use the full extent of supplier trading terms and negotiate temporary extensions if required.

6.  Submit an application with the bank, well in advance, for a seasonal extension of facilities.

As the old saying goes ‘Businesses don’t plan to fail…they fail to plan.’  By implementing the above steps, a business owner will provide themselves with the best chance of survival during the Christmas period.

Stephen James
Stephen James is the director of our Adelaide office. Stephen has over 17 years of corporate reconstruction and insolvency experience. He is involved in a wide range of insolvency trading engagements and complex insolvency litigation cases that have been successfully resolved.Stephen specialise in insolvency issues affecting the SME market.You can connect with Stephen via LinkedIn as Stephen James, BCR Advisory (SA).