Christmas warning for SMEs ahead of annual slowdown

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:

  • Assess your cashflow and make arrangements now if you need support from your bank .If not possible, make alternative arrangements.
  • Get bills out as soon as possible to ensure businesses make payment before they close down.
  • Focus on completing current orders and billing them rather than getting new orders.
  • When ordering equipment and supplies, incorporate a clause that payment is not due until after mid-February.
  • Get on the phone and speak to customers whose accounts are overdue and get either payments or promises to pay.
  • Offer discounts on accounts which are paid a few days before Christmas.
  • Defer any purchases which can be held off until after Christmas.
  • Go through old and written-off accounts and refer them to a collection agency as soon as possible. Written off accounts can still be referred to a collection agency as long as they are less than six years old.

Roger Mendelson, CEO, Prushka

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