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Australian small businesses are at risk of not having enough cash flow for the holiday season, an expert has warned.
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Invoice financing surges ahead of Christmas cash flow crunch: OptiPay
12 November 2024
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The upcoming holiday season is set to challenge small businesses with cash flow problems, many not having enough reserves to see them through.
Recent research by OptiPay revealed an 18 per cent increase in requests for invoice financing from small businesses ahead of increased orders and demand within the Christmas period.
OptiPay said the research aligned with data from CreditorWatch data which demonstrated that only 66 per cent of small business owners were satisfied with their current level of working capital.
A portion of unsatisfied SME owners had to lay off staff to adequately deal with cash flow and credit challenges, according to the research.
OptiPay CEO Angus Sedgwick said businesses would need to brace themselves heading into the busiest period of the year.
“For many Australian businesses we’re coming into the busiest time of the year for orders, particularly in the retail, hospitality, manufacturing and logistics industries,” he said.
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“For these businesses, it’s essential that they maximise profits and return on investment at this time of the year but we’re finding many simply don’t have the right cash flow strategies in place to cope with the holiday season.”
In preparation, Sedgwick recommended that small businesses begin preparing for the holiday season to ensure they would be able to see it through with no significant issues.
It was recommended that SMEs begin cash flow forecasting, funding, inventory management and cutting unnecessary expenses.
According to Sedgwick, it was vital for all businesses to realistically forecast cash needed in the holiday season.
“It is critical to recognise the difference between cash at the bank and sales revenue, because if your business is selling your goods or service on credit terms, the cash from those sales may not be realised at the bank for up to 90 days after the sale.”
Sedgwick also recommended that businesses reassess their traditional financing options, as bank loans, lines of credit or business credit cards were becoming harder to access in the challenging economic climate.
“As the holiday rush approaches, companies need to ensure they have the necessary funding in place to meet this increased demand and continue to provide first class service to their customers.”
“The Christmas cash flow crunch is real and there are some strategies that business owners should be thinking about now.”
Along with funding, SMEs would need to effectively manage their inventory to ensure an adequate amount of stock, or to ensure the ability to access more stock on short notice.
Sedgwick also reminded businesses that they could improve their cash flow by overhauling expenses by reducing outstanding invoices, negotiating better terms with suppliers and managing expenses more efficiently.
“The Christmas holiday period can be an exciting time for businesses and a lucrative one but it's vital that owners plan ahead and properly prepare for their funding needs.”
“You don’t want to find yourself in a Christmas cash flow crisis so make sure you’re one step ahead heading into the holiday season.”
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