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Managing Your Business Cashflow During Chinese New Year

Chinese New Year (CNY) is just around the corner.  Many businesses in Asia will have a planned shut down during this period.  Is your business ready for it?  It is crucial that your business has a plan in place to minimise any possible impact on operations.  Let us dig a little deeper into how business cashflow and other area might be affected by CNY and how you can go about managing it.

Below are the top 4 topics that you will need to be mindful of:

1.     Production slow down / Unable to secure inventory

If you rely on production from a country within Asia, especially China, your will definitely be affected by the CNY holiday as production will slow right down, most to a halt. 

Below is a high-level timeline of the 2021 CNY Holiday to give you a sense of when businesses will be closed and how it may affect your business.  It is best to reach out to your suppliers and business partners directly to obtain their CNY closure period as planned dates may differ between businesses.

  • Late January – Chinese suppliers begin to slow down production.
  • Early February – Employees of Chinese suppliers begin to leave for CNY holidays.
  • February 11 – All employees have left the factory.
  • February 12 – Chinese New Year.
  • Late February – Employees of Chinese suppliers start coming back to work.
  • March 4 – Most employees have returned. Production restarts again.
  • March 11 – Operations at Chinese suppliers are back to pre-holiday norms.

It is essential to work with your suppliers closely to ensure they can allocate to you the required inventory to support your sales and operations. Get ahead of schedule, perform your inventory forecast and get in touch with your suppliers as early as possible to ensure your business continues running smoothly over the CNY period.

2.     Logistical challenges

Even when you have managed to secure the order of your goods and inventory, you can expect shipping delays in Asia, both domestic and international shipping.  It all comes back to planning.  Ensure you build up enough inventory prior to the CNY period.   Speak to your shipper to understand how CNY may affect your shipment so that you can plan ahead of time.

3.     Missed payment cycle and late payment by your customer

If your customer’s payment cycle falls within the CNY period, your payment will most likely be delayed.  Perform a business cashflow forecast to ensure you have sufficient cash flow to tie you over the extended payment period.

Factoring could be a good funding option to help smoothen your business cashflow during this period.  You can opt to sell your outstanding customer invoices to the factor so that you can secure funds upfront rather than waiting for your customer to pay.  Your business can then use the funding to support your sales and operations in addition to having confidence in your cash flow.

4.     Reduction in staffing levels

Your business may also experience a reduction in staffing levels.  Many employees may choose to celebrate the festive season with their families or take a long holiday.  It is advisable to have all annual leave submitted by your employees in advance.  Also helpful is to provide a clear guideline of minimum staffing levels and how many people are allowed to take off during the CNY period to prevent any staff shortages.

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