The Christmas crush is almost here. As the dates tick down to the 25th of December consumers go crazy, rushing to buy all the presents they need for their friends and family. This can be a stressful time for business owners. There is a delicate balance across the business’ processes to ensure that the entire business can take advantage of the rush.
It is easier to cope well during stable, predictable times. But the second Christmas comes around, disruption ensues and that stability goes away. To help business owners keep their heads up high we have 5 tips for keeping your Christmas time great.
1. Overstocking on goods
It can be difficult to predict just how much stock you will need over Christmas. On one hand, you don’t want to run out, but you also don’t want to over-stock. If you have too much stock after Christmas you will be carrying a product that is out of season or there will be too much cash tied into difficult to sell stock.
Look for suppliers who can supply your products on short notice. Or, suppliers who will supply you on consignment. This will mean you are only paying for stock you actually sell. All of this will reduce the risk of having leftover, unsellable stock in the New Year.
2. Over the top discounts
Discounts over Black Friday, Cyber Monday, and Boxing Day can be very tempting. Everyone else is doing them, and they bring more customers through the doors. It makes them a no-brainer for many businesses, but it is important to think about what you can afford.
You should consider your profit margins before deciding on how much your products will be discounted. Remember, to make the same profit on a product during a discount you will need to sell much more of that product. For example, if you receive a gross profit margin of 30% but discount your product by 25% you will need an increase in sales volume of 500% to maintain the same position. It is easy for a business to trade bellow breakeven point, resulting in losses. Talk to your accountant about the best way to run discounts for your business.
3. Missing extra costs for hiring extra staff
Christmas can get expensive. You may need to hire more staff, deal with costs from leave, and down-time from public holidays. Add in extra costs from Christmas promotions and business costs are going to go up. While this is normal for Christmas, it is important to keep an eye on these costs to avoid a headache in the New Year.
Remember your tax and payment obligations, especially when bringing on new casual staff. Look for the Retail Award rate for casual staff to ensure you are paying the correct amount. Casual staff are also required to have a minimum 3-hour shift regardless of whether you send them home early.
4. The New Year cashflow crunch
Generally, the New Year has quieter trading as consumers recover from Christmas spending. This leads to a tight cashflow quarter for most businesses. Ensure that you have some cash put aside for the March quarter in order to provide a buffer.
5. Chase up unpaid invoices early
As the Christmas period ramps up you may find your clients, especially if they are other businesses, under increased cashflow pressures. Talk to clients with unpaid invoices as early as possible. Those who chase down unpaid invoices hard and early are more likely to get paid. As these businesses stretch their resources you don’t want to be at the bottom of the pile, unable to be paid.
Christmas is a great time of the year for our businesses and our personal lives. There is a lot going on all at once which can be easy to get caught up in. It is important that as the Christmas rush heats up to keep your head level and remain in control.
If you feel yourself losing control of your business this Christmas, you need to talk to your accountant. They will be able to advise you on the course of action you should take to improve stability and cashflow. For an accountant you can trust, talk to Link Advisors today.