SMEs across Australia have signalled they are planning for growth in the next year, however, they should not be lulled into a false sense of security, and need to start planning for the Christmas slowdown now.
Although businesses are reporting high confidence levels in business conditions, as confirmed by several recent surveys and the Prushka Canary in the Coal Mine survey of almost 600 SMEs, the post-Christmas period is a dangerous time for SMEs.
Many business owners fail to prepare for the Christmas period when cash coming into the business dries up, yet the usual overheads remain and salary expenses will be much higher.
Our recent Canary in the Coal Mine Survey found almost half of respondents are planning for growth next year, but without a cash buffer in place for the slowdown, businesses can quickly run into trouble, or worse, collapse.
The survey indicated that only 22 per cent of respondents rely on banks for finance to see them through.
Most businesses won’t feel the pinch until late-February and early-March when the pressure is on but at this point it’s often too late. This period in February and March and even into April is what we call graveyard month as it is the most common time for businesses to collapse.
Too often SMEs make it to the graveyard month with the sudden realisation that the slowdown has caused cashflow to dry up in the summer heat.
SMEs are generally in a strong position at present, due to low external debt, coupled with high business confidence – it’s been a positive year for many SMEs across Australia. However, it’s never the time to relax. SMEs must act quickly to ensure they aren’t caught out in the New Year.
Here is a checklist to help small businesses protect themselves ahead of Christmas:
Roger Mendelson, CEO, Prushka