What makes or breaks Christmas?
What’s the secret to a successful Christmas season for businesses? While the cost of living has eased slightly over the past year, consumers are still feeling the pinch. For businesses, strategic planning is crucial to manage the volatility that comes with the festive season.
As the countdown to Christmas begins, businesses are in a race to make the most of every opportunity before the traditional holiday slowdown. Whether it’s a bustling or quiet period, the festive season often leads to disruption and instability for many businesses. This deviation from the norm can spell trouble if not managed carefully.
Compounding this disruption are ongoing cost of living pressures affecting consumers. Households with mortgages are feeling the squeeze, particularly as fixed-rate loans transition to higher variable rates. Despite some relief from energy subsidies and lower fuel prices, underlying inflation remains stubbornly above the Reserve Bank of Australia’s target. Services inflation, encompassing essentials like rent, insurance, and haircuts, hovers around 5%. With the RBA holding rates steady for now, consumers are seeking value for money before they open their wallets. Interestingly, a recent Roy Morgan poll suggests that Australians are inclined to spend big this Christmas. However, this increased spending could potentially delay future rate cuts, as some of it merely offsets inflation, requiring more expenditure to match last year’s levels.
For business, planning is the key to managing Christmas volatility.
The countdown to Christmas is on and we’re in the midst of a headlong rush to maximise any remaining opportunities before the Christmas lull. Busy period or not, Christmas causes a period of dislocation and volatility for most businesses. The result is that it is not ‘business as usual’ and for many, volatility can create problems.
Start your debtor follow up early
If you work with account customers, start your debtor follow up early. If your customers are under cashflow pressure, the Christmas period will only exacerbate it. The creditors that chase debt hard and early will get paid first. Don’t be the last supplier on the list; the bucket might be empty by then.
The Christmas cost hangover
Costs tend to go up over Christmas. More staff, lower efficiency, downtime from non-trading days, increased promotional costs, all mean that the cost of doing business increases. It’s great to get into the Christmas spirit as long as you don’t end up with a New Year hangover. Cost control is important.
Many businesses also bring in casual staff. It’s essential that you pay staff at the correct rates and meet your Superannuation Guarantee obligations.
New Year cashflow crunch
The New Year often leads into a quieter trading and tighter cashflow period. The March quarter is often the toughest cashflow quarter of the year. You will need a cash buffer. Don’t over commit yourself in the run up to the end of the year and start the New Year with a problem.