Every December, I see the same pattern. The lights go up, the diaries slow down, and directors start to breathe again after a long year. The trouble is, while everyone is thinking about Christmas lunches and staff bonuses, few are thinking about the impact their festive decisions will have in January.
I call it the December Drift. It is when small financial choices get blurred by good intentions. You tell yourself that you will sort it all out after the holidays, but January arrives and the numbers no longer make sense.
I have worked with directors who faced liquidation in February simply because they relaxed too soon in December. So before you pour another glass of mulled wine, here are twelve common mistakes I see every year and how to avoid them.
1. Mixing Business and Personal Spending
It starts with something small, such as putting the Christmas lunch or a hotel stay on the company card. Then come the gifts, decorations, and family travel. Before long, personal spending is hidden in the company books, and if the business ever goes into liquidation, those transactions can be treated as an overdrawn director’s loan or even misfeasance.
Tip: Keep December personal spending completely separate. If in doubt, pay personally and keep the receipt.
2. Paying Family Before Creditors
Many directors want to help family members before the year ends. It feels generous, but if the company is struggling, those payments can be classed as preferences. Liquidators often look closely at transfers made to relatives or friends in the months leading up to insolvency.
Tip: If your company owes money, treat all creditors equally. Transparency matters more than generosity.
3. Taking a Festive Dividend
One of the most common mistakes I see is the December dividend. A director assumes the company is profitable, withdraws funds, and later discovers there were no distributable profits. The result is an unlawful dividend, which may have to be repaid personally.
Tip: Always check your management accounts before taking a dividend. Speak to your accountant and confirm that profits genuinely exist.
4. Ignoring the Taxman
The tax office does not take time off for Christmas. Missed filings or late payments in December can lead to penalties or even enforcement in January. Once a case is passed to enforcement, it becomes much harder to negotiate.
Tip: File on time even if you cannot pay in full. Communication buys time, silence does not.
5. Making Unrecorded Director Loans
December is when directors often top up the company’s funds from their own pockets. This is fine if it is properly recorded, but if not, it can become a point of dispute later. I once acted for a director who had personally paid company bills over Christmas but had no paperwork to prove it. The liquidator refused to accept the claim, and he lost thousands.
Tip: Always record and minute any money you lend to your company. Keep clear evidence of every transfer.
6. Buying Stock Without Checking Cashflow
The excitement of end-of-year trading can lead to over-ordering. I once saw a director fill a warehouse with stock in December, only to enter liquidation in March. The unsold goods were written off, and the supplier enforced the director’s personal guarantee.
Tip: Base decisions on cashflow, not optimism. Stock only what you can realistically sell and afford.
7. Forgetting About Staff Entitlements
Bonuses, holiday pay, and commissions can create hidden liabilities. If a company later collapses, these become claims against the estate. Some directors forget to record bonus discussions or assume that unused holiday days simply disappear. They do not.
Tip: Keep clear payroll and HR records before year-end. Make sure all staff entitlements are properly documented.
8. Letting the Books Slide
December is notorious for messy bookkeeping. With year-end parties and deadlines, receipts get lost, reconciliations are delayed, and VAT returns go unchecked. When the accounts are finally reviewed in January, errors multiply.
Tip: Set aside one morning before the holidays to reconcile everything. The clarity will save you stress in the New Year.
9. Forgetting About Personal Guarantees
It is easy to forget that your name might be on supplier or lease guarantees. I have had calls in January from shocked directors who assumed a company’s collapse ended their obligations. It rarely does.
Tip: Make a list of all guarantees you have signed. If the company is under pressure, speak to lenders before the default happens.
10. Ignoring Red Flags
When money gets tight, it is easy to tell yourself that things will improve next year. That optimism is understandable but dangerous. Missed payments, creditor pressure, and declining sales are warning signs that should never be ignored.
Tip: Take early advice while you still have options. Once a winding up petition arrives, your control over the situation is limited.
11. Avoiding Difficult Conversations
No one enjoys delivering bad news at Christmas, but silence causes far more damage than honesty. Many directors delay speaking to creditors, staff, or advisers because they do not want to ruin the festive mood. The result is a more painful conversation in January.
Tip: Communicate early and clearly. Most creditors prefer honesty to avoidance. A short conversation now may prevent legal action later.
12. Waiting Until January to Ask for Help
This is the mistake that hurts most. Every January I receive calls from directors who say they knew trouble was coming but waited until after Christmas to deal with it. By then, the options are fewer, and the pressure is higher.
Tip: If you are unsure about your position, ask for help before the year ends. A short conversation could save your business, your reputation, and your peace of mind.
Final Thoughts
Christmas should be a time for peace, not panic. The best gift you can give yourself and your family is the confidence that your affairs are in order. Spend a few quiet hours reviewing your accounts, checking your director’s loan balance, and confirming your tax deadlines.
If something does not look right, deal with it now. January will be easier, calmer, and more productive because of the actions you take today. At NBR , we help directors act early, protect their position, and move from uncertainty to control.
Disclaimer
This article is for informational purposes only and should not be considered legal advice. If you are facing an insolvency investigation or require legal support, please seek professional legal assistance. We offer a free one-hour consultation to discuss your case and explore potential challenges to ensure a fair process.
Navigate Business Recovery Limited cannot accept responsibility for any loss arising as a result of any person or organisation acting or refraining from acting on the information contained herein.
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