The Five Most Common Problems Businesses Hit Over The Holiday Period
How are you looking this festive season?
While Covid travel restrictions have eased, businesses are experiencing continued challenges with rising fuel costs, interest rate hikes, supply chain issues, staff shortages and depressed demand for services or products. Despite this, according to ScotPacs SME Growth Index, SME confidence is growing and it’s important for businesses to be aware of the additional seasonal challenges ahead all of which can all be navigated with some careful planning.
Here’s ScotPacs top five traps to look out for before the festive season arrives.
- Slow debt turnover
The Xero Small Business Insights Special Report on cash flow revealed half of all payments made to small businesses are late, costing businesses $1.1 billion dollars a year in Australia. This tardiness becomes more pronounced over the holidays.
- 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 leave your cash flow crippled.
- Inventory Management
Inventory management already has its challenges with the ongoing global supply chain issues, it can become even more 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.
- 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.
- Review funding arrangements
With the cost of doing business, including sharp rises in fixed term effecting small businesses more than larger businesses lending according to the Reserve Bank of Australia, it’s a good time to investigate whether your funding arrangements will sustain you over the festive season.
The chances are that most small businesses will be impacted by at least one of these challenges.
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