Small businesses are being warned of a slow start to the school year as consumers reduce their spending, resulting from a culmination of Christmas debt and back-to-school expenses, which impacts their hip pockets.
Roger Mendelson, CEO of Prushka Fast Debt Recovery, says small businesses should expect withheld or reduced income this February as consumers try to recover from overspending at Christmas.
“Many householders go into the month of February trying to pay off maxed-out credit cards, Christmas bills and unanticipated back-to-school costs,” he said.
“Many consumers just don’t have cash to spare at this time and this has a flow-on effect for businesses which can expect a slump in sales for February and March.”
Despite back-to-school expenses only impacting consumers, Mendelson says SMEs often feel the side effects as consumers realise how much they spent over the holiday period and try to wind back their spending.”
“Most SMEs don’t account for this February slowdown, which results in what I call ‘Graveyard Month’; the period from late February to early March, which is the most common time for businesses to collapse,” he said.
Australian Securities and Investment Commission figures show more than 1,600 businesses entered external administration in February and March last year.
Mendelson warns businesses that don’t make adequate efforts now to secure their cashflow could find themselves in turmoil by the end of the month.
“Many years ago, banks would often play a vital role in smoothing cashflow during this time by providing unsecured loans. Today, this is no longer the case. The banks aren’t interested,” he said.
Mendelson advises SMEs not to ignore the possibility of slowdown, but to adequately budget for it across the month of February. He also advises SMEs to put a budgeting plan in place as early as possible, so that B2B costs do not go unpaid.
He offers the following advice to SMEs:
Inside Small Business