December Cash Flow Plan for Small Business: Build It in November

A December cash flow plan for a small business gets built in the first week of November, on the 13-week forecast, with four moves: put the bonus payroll on a real date as a real line, invoice December’s work by December 5 instead of December 20, add the January 15 estimate and January payroll taxes to the forecast, and size the line of credit to the deepest week. Do those four things now, and December is a plan. Wait until December, and it’s a scramble.

We run an accounting firm and this is the week we update every advisory client’s forecast for the holidays. The moves are the same for a landscaper, a law practice, and a restaurant. Here they are.

How do I plan cash flow for December?

Start from the 13-week forecast, which from the first week of November runs through the end of January. That’s the window that matters: it includes the last big payroll, the bonus run, the two dead weeks when customers stop paying, the January estimate, and the January payroll taxes, all in one view.

If you don’t have a 13-week forecast, build the simple version: a column for each week, a row for cash in, a row for cash out, a running balance at the bottom. Fill in what you know. The point of the exercise is to find the week where the balance goes lowest, and then to move things until that week is survivable.

The bonus payroll

Holiday bonuses are the biggest single cash-out of the year for many small businesses, and they’re usually not on any forecast because the owner hasn’t decided the amount yet. Put them on it anyway, this week, as a line with a date and a number.

The date matters as much as the amount. A bonus run on December 18 lands in the week when customer payments have already slowed and the regular payroll is also due. A bonus run on December 11, or a separate bonus payroll on December 4, moves the cash-out into a week when receivables are still arriving. Same money, different week, and the difference is whether the balance goes negative.

Remember that the bonus is payroll. Payroll taxes come with it, and depending on your deposit schedule, they’re due within days. Put the taxes on the same line.

When should I invoice in December to get paid before year end?

By December 5. Here’s the arithmetic on net-30 terms:

• An invoice sent December 5 is due January 4. The customer’s accounts payable person is back from the holidays, the check run is on, and the money arrives in the first week of January.
• An invoice sent December 20 is due January 19. But the AP person is out from December 22 to January 5, the invoice sits in a queue, and the payment arrives the third week of January, if then.

Two weeks of delay in sending becomes three or four weeks of delay in receiving, because of when the holidays fall. So December’s invoicing moves to the first week of the month. Bill everything that can be billed, including progress bills on work that’s still running. If your customers are on shorter terms, the same logic applies, just compressed.

January on the forecast

December cash problems are often January cash problems arriving early. Three January items belong on the forecast now:

1. The fourth-quarter estimate, due January 15, 2027. If it’s been built from closed books, it’s a known number. If not, use the safe harbor voucher as a placeholder and replace it when the real estimate is done in December.
2. January payroll taxes. The first payroll of the year, plus any year-end deposit on the December runs. Small employers on a monthly deposit schedule have the December liability due January 15 as well.
3. The fourth-quarter 941 and the annual unemployment return, and the state equivalents, at the end of January. Not large, but on the list.

Put all three on the forecast in the weeks they’re due. The January estimate landing in the same week as January payroll is the second-deepest week of the winter, right after the bonus week.

The line of credit

With the four items above on the forecast, the deepest week is visible. That’s the number the line of credit needs to cover, plus a margin for the customer who pays two weeks late.

If you have a line, confirm the available balance covers it, and draw before you need to, not on the day payroll is due. If you don’t have one, apply now. Banks close for the holidays too, and an application started December 15 doesn’t fund before January. A line sized to the deepest week, opened in November, is the difference between a December that’s fine and a December that involves a personal credit card.

How do I make sure I can cover holiday bonuses?

Treat the bonus run as the biggest cash-out week of the year and plan backward from it: invoice early so receivables land before it, choose a bonus date that doesn’t collide with regular payroll or the sales tax deposit, and have the line of credit in place before the bank’s holiday schedule starts. If the forecast says the bonus you had in mind takes the balance negative even after those moves, the answer is a smaller bonus, decided in November, not a larger problem discovered in December.

What a CFO does with this number

A fractional CFO runs the four moves in about an hour, from the forecast, in the first week of November. Bonus payroll placed on a date. Billing pulled forward to the first week. January’s estimate and taxes added as lines. Line of credit sized and confirmed. Then the forecast gets updated every week through January, because the customer who was going to pay on the 4th pays on the 11th, and the plan has to move with them.

The value isn’t the forecast. It’s that the owner walks into December knowing which week is the hard one and what’s already been done about it.

Where we come in

The 13-week forecast is updated weekly as part of our advisory tier, from books that are closed by the 10th, so the starting balance is real. The first week of November is when we run the four December moves with every client, and the December planning meeting adds the estimate at its real number. If you’ve had a December that ended on a credit card, reach out. We’ll build the forecast and show you the deepest week before it arrives.

Frequently asked questions

How do I plan December cash?
Put the bonus payroll, the January 15 estimate, and January payroll taxes on the 13-week forecast in early November and move what lands in a negative week.

When should I invoice in December?
By December 5; on net 30 that’s a January 4 deposit, while a December 20 invoice lands January 19.

How do I make sure bonuses are covered?
Treat the bonus run as the biggest cash-out week of the year and size the line of credit to it before the bank closes for the holidays.