The holiday season is a great time to reflect on the year and enjoy time with loved ones, but it can be the most stressful time of the year for SMEs. According to Meta’s latest “Global State of Small Business Report”, 25 per cent of small and medium enterprises (SMEs) expect to make over half of their annual revenue in the holiday trading season. However, despite SMEs' reliance on this busy time of year to secure revenue, common problems persist, and only half of SMEs plan for these potential disruptions. This article outlines some of the common problems that SMEs face throughout the holiday season, why they occur and what can be done to minimise and solve these issues. Keep reading to learn more.

current macroeconomic conditions are creating challenges

Inflation, rising interest rates, supply chain disruptions, and rising production costs are likely to persist, with the potential for a recession in 2023 becoming more likely. Recent interest rate rises have had far-reaching impacts on businesses, from increasing interest rates on their own debt to revenue decline and difficulties accessing capital. Further, supply chain disruptions can make it difficult for companies to get their products on time. Whether a business operates wholesale or direct to consumers, delays in receiving materials and inventory can lead to lost sales and the inability to deliver client projects. 

One of the best ways to address and minimise the impacts of interest rate rises and supply chain disruptions is to have a range of funding solutions in place. The structure of this funding will differ based on your business but may include trade finance facilities and credit lines to buy extra inventory. Other options include equipment finance if your business needs to upgrade or access extra equipment over the busy holiday season. The key with finance solutions for the holiday season is to secure the facility early and ideally before the business runs into any cash flow challenges. 

christmas can boost revenue, but it increases costs too

It’s estimated that Australians will spend $27.3 billion this holiday season. Equating to an average spend of $1,361, this will cover presents, food, alcohol, eating out and travel. While many businesses will enjoy the revenue boost that comes with Christmas trading, it also comes with added costs to fill the increase in demand. Some of the added costs that come with holiday trading include:

• Extra Staff: Whether you run a brick-and-mortar business or an eCommerce operation, some companies need additional support to fulfil orders and deliver products and services throughout the holiday season. With many of these positions being casual, the hourly rate is higher, and there are added payroll and administrative costs of having extra headcount over the holidays too.
• Holiday Pay: If your business operates on public holidays, you may also need to pay your staff public holiday rates, which can be a significant cost. 
• Inventory & Materials: With increasing demand comes the need to order materials and inventory ahead to cover the busy season. This requires upfront capital investment unless a business has the right funding facilities in place that allow it to organise extra inventory without sacrificing working capital. 

having a plan for SMEs to navigate the holidays is critical

If your business hasn’t planned ahead for the cost of extra staff, holiday pay, and inventory and materials, peak holiday trading can turn into a time of tight cash flow. The best way to minimise and eliminate cash flow and other problems throughout the holiday period is to plan ahead. This will help you get your business’s operational and financial affairs in order before the holidays so you have peace of mind knowing that the resources are available to get through the busy season successfully. 

The key things you should do to prepare for the holiday season are:

• Cash flow forecasting for the holiday period. To do this, use your reporting from previous holiday seasons and look at where shortfalls and surpluses occurred. Key items to analyse include revenue, staffing levels, inventory, and logistics (fulfilment, packing and sending supplies, and delivery services).
• Update your online and in-person (where applicable) channels to set expectations of delivery times and cut-offs for Christmas orders. This is important for both product and services-based businesses.
• Secure adequate working capital. Banks and other businesses often operate with reduced staff throughout the holiday season, so your usual contact may be unavailable. To avoid a cash flow crisis, get your working capital needs sorted before the peak holiday season.
• Plan a break and enjoy a rest. Over one in four SME owners hasn’t taken a break in at least four years. As part of your holiday season preparation, plan when you may be able to take some time to rest so that you can start the New Year refreshed. 

get the funding you need for the holiday season with moneytech’s finance solutions

The best time to secure finance for your business is before you need it. With Moneytech’s finance facilities, you can establish a range of finance options that will boost your working capital throughout the busy holiday season. These funding facilities can help you cover extra operating costs throughout the holiday season, such as staffing, additional inventory, logistics, and production and operation expenses. Further, having adequate funding in place before it’s a significant stressor will give you the peace of mind you need to deliver the best possible service to both loyal and new customers. 

Moneytech makes accessing the finance you need to operate and thrive throughout the busy holiday season. Contact us today, and one of our experts will be in touch to discuss your options.

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This article is for information purposes only and does not constitute financial advice. You should speak to a qualified finance professional about your unique situation before making any decisions about financial products.