Australian small and medium-sized enterprises (SMEs) are facing a major juggling act as they prepare for the windfall of the fast-approaching holiday season, including the Black Friday, Cyber Monday and Boxing Day sales.

Seasonal stock must often be paid for sooner than it is sold, tying up working capital and creating cash flow pressures.

Holding more stock comes with higher costs for storage, insurance and handling, as well as the risks that the stock will be damaged, become obsolete or not be sold.

There are also indirect costs associated with having money tied up in inventory, such as interest on loans and opportunity costs.

The challenge is forecasting what kind of sales season they can expect and how much inventory they will need.

The Westpac–Melbourne Institute Consumer Sentiment Index declined 3.1% to 95.4 in September from 98.5 in August.

The Index is still 2.5% above its July level and 5.9% above the low seen following the tariff-related turmoil in April but Westpac economists say it is firmly back in “cautiously pessimistic” territory overall.

They note that finances continue to improve but consumers have renewed concerns about the economic outlook and are a little less confident about further rate cuts.

Bargain hunters shift the timing

Retailers are more optimistic. According to the 14th edition of Deloitte’s annual Retail Holiday Report, 84% of retailers expect stronger sales this year, up from 51% in 2024. But while one in three shoppers plan to spend more, many will look to stretch their dollars further by bargain hunting during November sales events or turning to Chinese online marketplaces, a growing competitive threat for Australian retailers.

Deloitte consumer products and retail partner Damien Cork says: “Australian shoppers remain price-sensitive and on the lookout for a deal. While most plan to maintain or increase spending, only 15% say they feel financially confident.

“Retailers hoping to make the most of the all-important holiday trading period will be leaning into the marquee November sales events of Click Frenzy, Black Friday and Cyber Monday, when value-conscious consumers are increasingly getting their shopping done. For the first time since this survey began, retailers expect to generate 50% of their holiday revenue through this period. So, with this impending spike, retailers and their wholesalers need to be prepared with stock on hand.

The SME juggling act

In addition to changing shopping patterns, many SMEs are constantly juggling other expenses that affect cash flow, including paying staff, rent or mortgages and keeping up with their tax obligations.

Making the situation worse is that many SMEs are struggling with cost pressures. In ScotPac’s September 2025 SME Growth Index, 82% of SMEs said wage inflation remains their most pressing cost concern alongside fuel, compliance and insurance.

The survey found that electricity costs have surged 51% over the past 18 months, now consuming 7.5% of total SME cost bases. Worryingly, 22% of SMEs owe the Australian Taxation Office (ATO) money and 72% have stopped hiring new staff to mitigate insolvency risk.

So, if cash flow keeps you up at night, you are not alone.

CommBank research, released earlier this year, found that nearly 80% of Australian SMEs had experienced cash flow issues over the previous year.

The most common factors affecting their cash flow were declining revenue (35%), low cash reserves (30%) and seasonal fluctuations (27%).

The CommBank research found that more than a quarter of Australian SMEs (27%) dipped into personal savings or didn’t pay themselves a salary, or both, in the last year because of cash flow struggles.

Encouragingly, most (85%) used one or more specific strategies to manage cash flow, such as reviewing or decreasing expenses (34%), maintaining a cash reserve (27%), finding additional revenue streams (26%) and increasing sales and/or pricing (25%).

Taking action

So, what’s the general advice to SMEs facing cash flow challenges at this time of year?

The first step is to forecast your cash requirements between now and the festive season as well as your cash outflows over November, December, January and February. Include projected sales, supplier lead times, deposit schedules, payroll and ATO payments. Don’t forget to add additional festive season costs like the extra sales staff needed and marketing spend.

This forecast should expose timing gaps that you will need to take care of.

Next up, consider staggering and prioritising your stock orders. Order high-margin and fast-turning stock first. Try to negotiate smaller minimum order quantities with suppliers of slow movers that are still important to stock.

Also, ask suppliers for extended payment terms, partial deposits or consignment arrangements. Emphasise your long-term relationships with them and repeat business when negotiating.

Look to cut costs wherever possible and eliminate or minimise any non-essential business expenses until your cash inflow picks up again after Christmas.

Use discounts to clear out older inventory, making room for Christmas stock. Plus, consider capitalising early on holiday season sales by taking pre-order and layby-style deposits.

Another strategy is to investigate the many working-capital solutions available. These could include Invoice Finance where you sell unpaid invoices to get cash now, and Trade Finance to close the cash flow gap between sales and the procurement of materials or stock you need, domestically or internationally.

You might also benefit from applying for a Line of Credit to secure access to funds when you need them, an SME business loan or Asset Finance (which funds the plant, equipment and vehicles your business needs to grow).

Further, you could start tightening credit to slow-paying customers and chase aged receivables now.

Also investigate incentivising earlier customer payments – for example, with discounts – and proactive ways to secure prompt payment from customers. These could include using automated invoicing systems, invoicing straight after delivery and providing multiple types of payment options (credit card, EFT, direct debit, PayPal and BNPL).

Start being proactive in how you protect your cash flow now and innovative in how you prepare!