No Surprises This Christmas
Written on the 11 November 2013
Boom time or down time, every business needs to manage the Christmas period. Managing the holiday season well can make a big difference to how your business is positioned in the New Year. Here are our top tips:
The scrooge approach to outstanding debtors
Put extra effort into following up debtors. The closer we get to Christmas the more difficult it will be to collect the debt. If you leave these debtors until January, it will be almost impossible to collect the cash. Traditionally, February is one of the worst cash flow months for business. If you are not successful now, it might be some time before you actually get paid.
Staffing is a major cost for many businesses and can run as high as 70% of expenditure. It’s essential that you review your staff rosters and only have the staff available who are absolutely necessary to manage anticipated trading levels. Encourage staff to take their holidays over this period so that they are available during peak trading periods. You can’t assume that it will be obvious to everyone who works in the business that a slow trading period equals less staff required. Many team members will have an expectation of continuity if you have not said anything.
And yes, a business can enforce a temporary close down. You can require staff to take leave during a down time but you cannot force them to take unpaid leave. So, take a look now to see if any staff will not have enough leave to cover a forced close down. If they don’t, you need to ensure your leave policy allows for team members to go into negative leave.
Even very large businesses often have too much cash tied up in inventory. Keep your cash as liquid as possible and don’t tie it up unnecessarily in stock. Drive down stock in the lead up to Christmas and only order the bare minimum to meet your requirements over the holiday season. But don’t forget to plan for your New Year requirements to ensure that your suppliers have the stock you need available when you need it in the New Year. The number one reason why most Australian’s buy online is because they could not find what they needed when they visited a retailer or supplier.
Discount only if you have to
A business with a 30% gross profit margin that offers a 25% discount requires a 500% increase in sales volume just to maintain the same position. In almost all cases that’s just not going to happen. The result generally is the business will be trading below its break-even point and generating losses. Most SMEs simply can’t survive for any period of time trading at a loss. You have to compete but think very carefully about what it is you are offering the market.