How are you looking this festive season?

We understand that the last 18 months have been tough. Thankfully, there have been encouraging signs in recent months. The latest ABS business Indicators for the June quarter revealed company gross operating profits rose 7.1 per cent.

We highlight several challenges still ahead for businesses over the upcoming holiday season, which can all be navigated with careful planning.

Here’s our top five traps to look out for before the festive season arrives.

1. Slow debt turnover

The NAB’s Supporting Economic Recovery report revealed that large companies owe small businesses a total of $115 billion in late payments each year. This tardiness becomes more pronounced over the holidays.

2. Overtrading risks  

The temptation to increase stock levels is high if you sell goods over the holiday period. If you end up with excess stock it could end up being out of season and leaving your cash flow crippled.

3. Lending restrictions  

The Australian Banking Association has released new statistics showing more than 57,000 customers have received financial assistance, including over 30,000 home and business loan repayment deferrals. Any lending restrictions that come as a result during the holiday period will significantly impact SMEs.

4. Inventory Management

Inventory management can become difficult for everyone involved during the holiday season, including manufacturers, suppliers, retailers, and even employees. This is because the holidays are a busy time, and consumer demand fluctuates constantly.

5. Christmas sale culture 

It is essential to know your profit margins before discounting stock for sales (or if the market forces you to do so). For example, when a company offers a discount of 25 per cent, its gross profit margin is 30 per cent, and it requires a 5000 per cent increase in sales volume to maintain that margin.

The chances are that most small businesses will be impacted by at least one of these Christmas period challenges. Make sure you give yourself the best chance of ending 2021 on a high note by utilising our cash flow forecast tool to help predict expenses and manage your finances with ease.

We can’t wait to keep you up to date with the latest tips and trends, so look out for more insights delivered posts in the weeks ahead.